1. Quantitative Methods (8-12% weight)

1.1 Time Value of Money — core formulas

The Time Value of Money (TVM) principle says that a dollar today is worth more than a dollar tomorrow because of its earning capacity. The two fundamental formulas are FV = PV × (1 + r)n and PV = FV / (1 + r)n.

1.2 Statistics and probability distributions

Level I tests the Normal distribution intensively. Memorise: 68% of observations within ±1σ, 95% within ±1.96σ, 99% within ±2.58σ. The Standard Normal Z-score is z = (X − μ) / σ. The Lognormal is used for asset prices (bounded below by zero). The Student-t replaces Normal when n < 30 or σ unknown.

2. Economics (8-12% weight)

2.1 Microeconomics — elasticity and market structures

The price elasticity of demand is EP = (%ΔQD) / (%ΔP). Demand is elastic if |E_P| > 1 (luxury goods), unitary if = 1, inelastic if < 1 (necessities, addictive goods). The four canonical market structures are perfect competition, monopolistic competition, oligopoly and monopoly, distinguished by number of firms, product differentiation, barriers to entry and pricing power.

2.2 Macroeconomics — GDP, monetary and fiscal policy

GDP can be measured three ways: expenditure (C + I + G + NX), income (compensation + rents + interest + profits + indirect taxes − subsidies + depreciation) and output (sum of value added). Monetary policy is conducted by central banks (Fed, ECB, BoE, Bank of Canada) through open-market operations, discount rate, reserve requirements and forward guidance. Fiscal policy involves taxation and government spending controlled by Treasury / Ministry of Finance.

"Monetary policy is considered expansionary when the policy rate is below the neutral rate, and contractionary when above."
Source: CFA Institute, 2026 Curriculum, Economics Reading 14 — cfainstitute.org

3. Financial Statement Analysis — IFRS vs US GAAP (13-17%)

FRA is the largest single topic. The three primary statements are the Income Statement (P&L), the Balance Sheet (Statement of Financial Position) and the Cash Flow Statement (CFS). A fourth statement, the Statement of Changes in Equity, is mandatory under both IFRS (IAS 1) and US GAAP (ASC 220).

3.1 Major IFRS vs US GAAP differences (high-yield)

4. Key takeaways

• TVM = backbone of finance: PV/FV/PMT/EAR — practice 100+ problems
• Normal: 68/95/99 rule; z-score = (X-μ)/σ
• 4 market structures: perfect comp → monopoly
• GDP = C + I + G + NX
• IFRS bans LIFO; IFRS allows impairment reversals; IFRS allows PP&E revaluation
• R&D: research always expensed; development capitalised under IFRS only

For further reading

• IFRS Foundation — List of Standards
• FASB Concepts Statements (US GAAP)
• Federal Reserve — Monetary Policy
• Schweser FRA QuickSheet · Mary Buffett Warren Buffett & the Interpretation of Financial Statements

7. Quantitative Methods — deeper dive

7.1 Probability concepts

Three key distributions are tested intensively at L1: Binomial, Normal, and Lognormal. The Binomial models a fixed number of independent trials each with two outcomes (success/failure). Used in event-study analysis (e.g., probability of n stocks beating earnings in a portfolio of N). The Lognormal is the canonical model for asset prices: ln(St/S0) is normally distributed.

7.2 Sampling and estimation

The Central Limit Theorem states that the sample mean of a random sample of size n drawn from any population with mean μ and variance σ² will be approximately normally distributed with mean μ and variance σ²/n, provided n ≥ 30. This justifies the use of z-tests on large samples even when the underlying population is non-normal.

Standard error of the sample mean: SE = σ / √n. Confidence interval: x̄ ± zα/2 × SE. For example, a 95% CI on a sample of 100 observations with sample std dev 15: SE = 15/10 = 1.5; CI = x̄ ± 1.96 × 1.5 = x̄ ± 2.94.

7.3 Hypothesis testing — the four steps

1. State the hypothesis: H₀ (null) vs H₁ (alternative). Example: H₀: μ = 0; H₁: μ ≠ 0 (two-tailed).
2. Identify the test statistic: z (large sample known σ), t (small sample or σ unknown), F (variance ratio), χ² (variance test).
3. Compute the statistic: t = (x̄ − μ₀) / (s/√n) for the one-sample t-test.
4. Compare to critical value or compute p-value: reject H₀ if |t| > t_critical or p < α.

8. Economics — supply and demand mechanics

8.1 Elasticity decomposition

Demand elasticity is decomposed into three components: (a) income elasticity (E_I = %ΔQ/%ΔI), (b) cross-price elasticity (E_XY = %ΔQ_X/%ΔP_Y), (c) own-price elasticity. Goods with negative cross-price elasticity are complements (cars and petrol); positive cross-price are substitutes (Coke and Pepsi). Negative income elasticity indicates an inferior good (e.g., second-hand clothing in rich economies).

8.2 Market structures comparative table

8.3 Business cycle phases

The four-phase business cycle includes expansion, peak, contraction, trough. Leading indicators (housing permits, stock prices, average weekly hours, S&P 500) anticipate the next phase. Lagging indicators (CPI, average duration of unemployment, prime rate) confirm a phase that has already occurred. Coincident indicators (industrial production, retail sales, employment) move with the cycle.

9. Financial Reporting & Analysis — advanced consolidation

9.1 The Income Statement structure

Under IFRS, expenses can be classified by nature (raw materials, salaries, depreciation, energy) or by function (COGS, selling, general, administrative). US GAAP requires function-based. The income statement walks from Revenue → Gross Profit → Operating Income (EBIT) → Pre-tax Income → Net Income → Comprehensive Income.

9.2 Discontinued operations and extraordinary items

Both IFRS (IFRS 5) and US GAAP (ASC 205-20) require discontinued operations to be reported net of tax, below the line. US GAAP no longer permits extraordinary items (eliminated in 2015 by ASU 2015-01). IFRS has never recognised extraordinary items as a separate category.

9.3 Earnings Per Share (EPS)

Basic EPS = (Net Income − Preferred Dividends) / Weighted Average Common Shares Outstanding. Diluted EPS adjusts for the if-converted method (convertible preferreds + convertible bonds) and the treasury stock method (warrants + options). A dilutive security is only included if it reduces EPS — anti-dilutive securities are excluded.

9.4 Cash Flow Statement reconciliation

CFO under the indirect method starts from Net Income, adds back non-cash charges (depreciation, amortisation, stock comp), adjusts for changes in working capital (A/R, inventory, A/P, accruals), and adds gains/losses on sales of fixed assets. The direct method shows cash inflows from customers minus cash outflows to suppliers, employees, taxes, interest. Both methods produce identical CFO.

10. Regional perspective: Francophone Africa & OHADA

Les pays d Afrique francophone appliquent en grande partie le Système Comptable OHADA (SYSCOHADA), révisé en 2017 pour converger vers les IFRS. SYSCOHADA est obligatoire pour toutes les entreprises de 17 pays membres (CEMAC + UEMOA + Comores). Les grandes entreprises cotées doivent aussi publier des comptes en IFRS. Au Cameroun, la Bourse des Valeurs Mobilières de l Afrique Centrale (BVMAC) à Douala impose les IFRS pour les sociétés cotées.

Les principales différences SYSCOHADA / IFRS :

11. Case study chiffré — Computing ratios from a balance sheet

Société "Bantu Cement SA" (Yaoundé, FCFA millions, FY2025) :

• Total assets : 285 000
• Current assets : 87 000 (inventory 32 000, A/R 28 000, cash 27 000)
• Total liabilities : 165 000 (current 62 000, long-term 103 000)
• Equity : 120 000
• Revenue : 198 000
• Cost of goods sold : 142 000
• Operating income : 28 000
• Net income : 14 500

12. Self-test quiz (5 MCQ)