Equity Investments

CFA Level I — Exam Weight: 11-14%

6

Modules

32

Concepts

16

Formulas

14

Quiz Questions

Modules in Equity Investments

6 learning modules covering 11-14% of the CFA Level I exam.

1

Market Organization and Structure

7 concepts 3 formulas 3 questions
2

Security Market Indexes

4 concepts 2 formulas 2 questions
3

Market Efficiency

6 concepts 2 questions
4

Overview of Equity Securities

5 concepts 3 formulas 2 questions
5

Company Analysis: Past and Present

4 concepts 2 formulas 1 questions
6

Equity Valuation: Concepts and Basic Tools

6 concepts 6 formulas 4 questions

Key Formulas

9 essential formulas for Equity Investments.

DDM (Gordon Growth)

V₀ = D₁ / (r - g)

Constant growth dividend model

Required Return (DDM)

r = (D₁/P₀) + g

Dividend yield + growth rate

Price-to-Earnings

P/E = Price / EPS

Leading P/E uses forecasted EPS

Justified P/E (Leading)

P/E = (1-b) / (r-g)

b = retention ratio, g = b × ROE

Sustainable Growth

g = ROE × b

b = retention ratio = 1 - payout

PEG Ratio

PEG = (P/E) / g

P/E relative to growth rate

Price-to-Book

P/B = Price / Book Value per Share

P/B < 1 may signal undervaluation

Enterprise Value

EV = Market Cap + Debt - Cash

Total value of the firm

EV/EBITDA

EV / EBITDA

Cross-capital structure comparison

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