Study Notes for CFA® Level II – Corporate Issuers – offered by AnalystPrep

Study Notes for CFA® Level II – Corporate Issuers – offered by AnalystPrep

Reading 18: Analysis of Dividends and Share Repurchases

-a. Describe the expected effect of regular cash dividends, extra cash dividends, liquidating dividends, stock dividends, stock splits, and reverse stock splits on shareholders’ wealth and a company’s financial ratios;

-b. Compare theories of dividend policy and explain implications of each for share value given a description of a corporate dividend action;

-c. Describe the types of information(signals) that dividend initiations, increases, decreases, and omissions may convey;

-d. Explain how agency costs may affect a company’s payout policy;

-e. Explain factors that affect dividend policy in practice;

-f. Calculate and interpret the effective tax rate on a given currency unit of corporate earnings under double taxation, dividend imputation, and split-rate tax systems;

-g. Compare stable dividend with constant dividend payout ratio, and calculate the dividend under each policy;

-h. Compare share repurchase methods;

-i. Calculate and compare the effect of a share repurchase on earnings per share when 1) the repurchase is financed by the company’s surplus cash and 2) the company uses debt to finance the repurchase;

-j. Calculate the effect of a share repurchase on book value per share;

-k. Explain the choice between paying cash dividends and repurchasing share;

-l. Describe broad trends in corporate payout policies;

-m. Calculate and interpret dividend coverage ratios based on 1) Net income and 2) Free cash flow;

-n. Identify characteristics of companies that may not be able to sustain their cash dividend;

Reading 19: Environmental, Social, and Governance (ESG) Considerations in Investment Analysis

-a. Describe global variations in ownership structures and the possible effects of these variations on corporate governance policies and practices;

-b. Evaluate the effectiveness of a company’s corporate governance policies and practices;

-c. Describe how ESG-related risk exposures and investment opportunities may be identified and evaluated;

-d. Evaluate ESG risk exposures and investment opportunities related to a company;

Reading 20: Cost of Capital: Advanced Topics

-a. Explain top-down and bottom-up factors that impact the cost of capital;

-b. Compare methods used to estimate the cost of debt;

-c. Explain historical and forward-looking approaches to estimating an equity risk premium;

-d. Compare methods used to estimate the required return on equity;

-e. Estimate the cost of debt or required return on equity for a public and a private company;

-f. Evaluate a company’s capital structure and cost of capital relative to peers;

Reading 21: Corporate Restructuring

-a. Explain types of corporate restructurings and issuers’ motivations for pursuing them;

-b. Explain the initial evaluation of a corporate restructuring.;

-c. Demonstrate valuation methods for, and interpret valuations of, companies involved in corporate restructuring;

-d. Demonstrate how corporate restructurings affect an issuer’s EPS, net debt, EBITDA ratio, and weighted average cost of capital;

-e. Evaluate corporate investment actions, including equity investments, joint ventures, and acquisitions;

-f. Evaluate corporate divestment actions, including sales and spin offs;

-g. Evaluate cost and balance sheet restructuring;

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    Daniel Glyn
    Daniel Glyn
    2021-03-24
    I have finished my FRM1 thanks to AnalystPrep. And now using AnalystPrep for my FRM2 preparation. Professor Forjan is brilliant. He gives such good explanations and analogies. And more than anything makes learning fun. A big thank you to Analystprep and Professor Forjan. 5 stars all the way!
    michael walshe
    michael walshe
    2021-03-18
    Professor James' videos are excellent for understanding the underlying theories behind financial engineering / financial analysis. The AnalystPrep videos were better than any of the others that I searched through on YouTube for providing a clear explanation of some concepts, such as Portfolio theory, CAPM, and Arbitrage Pricing theory. Watching these cleared up many of the unclarities I had in my head. Highly recommended.
    Nyka Smith
    Nyka Smith
    2021-02-18
    Every concept is very well explained by Nilay Arun. kudos to you man!
    Badr Moubile
    Badr Moubile
    2021-02-13
    Very helpfull!
    Agustin Olcese
    Agustin Olcese
    2021-01-27
    Excellent explantions, very clear!
    Jaak Jay
    Jaak Jay
    2021-01-14
    Awesome content, kudos to Prof.James Frojan
    sindhushree reddy
    sindhushree reddy
    2021-01-07
    Crisp and short ppt of Frm chapters and great explanation with examples.