Understand what the CFA exam asks you to do
The CFA Program consists of three computer-based exam levels sat at test centres. The exams are built largely from vignette-based item sets and discrete questions, although the format varies by level. Questions test whether you can apply curriculum concepts to realistic investment scenarios. Topics include quantitative methods, financial reporting and analysis, economics, corporate issuers, equity, fixed income, derivatives, alternative investments, portfolio management, and ethics.
That means preparation is not just learning formulas or recalling definitions. You need to identify what a question is asking, select the relevant information from a vignette, perform accurate calculations and explain what the result means. Time pressure makes prioritisation important: an elaborate calculation that does not answer the question can cost time without earning credit.
Check the official CFA Institute website for the details that apply to your level, including its exam format, curriculum, topic information, registration and policies. Do not assume that a practice question’s format or a study schedule applies equally to all three levels.
A useful practice examiner strip in MySummaries puts the habits to rehearse beside the material:
Treat these as preparation priorities, not a statement of the exam’s official marking scheme. For each question, make your working readable, state units and signs, and connect the result to the decision the prompt requests.
Start with a board built from your curriculum material
Use your own curriculum readings, notes, slides and question reviews to make revision boards. Organise each board around a defined learning area rather than trying to put the whole programme on one screen. A board might cover FCFF valuation, fixed-income duration, or the application of an ethics standard. Keep formulas with their assumptions and interpretation; a formula without conditions is easy to misuse.
Here is a board on FCFF valuation in MySummaries, with a small worked example to make the relationships concrete:
- FCFF = EBIT × (1 − tax rate) + D&A − capital expenditure − increase in net working capital
- Use an increase in working capital as a cash outflow
- Equity value = enterprise value − market value of debt + cash and cash equivalents
- Divide equity value by shares outstanding for value per share
| Input | Value ($m) |
|---|---|
| EBIT | 120 |
| Tax rate | 25% |
| D&A / capex / increase in NWC | 10 / 25 / 5 |
- State whether the result is enterprise or equity value
- Test sensitivity to WACC and growth; do not imply a precise value is certain
For a constant-growth perpetuity, EV = next-period FCFF ÷ (WACC − g), provided WACC > g and the assumptions are appropriate.
The arithmetic in the board gives NOPAT of $90 million and FCFF of $70 million: $90 million + $10 million − $25 million − $5 million. Those figures are an example, not a forecast. In a question, use the supplied tax rate and working-capital information, and be alert to whether the prompt gives current-period or next-period cash flow.
Build a short core checklist for each topic
Once the board is organised, make a compact “must not miss” checklist. It should capture the steps most likely to prevent a wrong answer: the formula, definitions of its inputs, sign conventions, conditions for using it, and the interpretation. Keep it short enough to review before attempting questions. If it becomes a second set of full notes, it is too long.
For FCFF, the MySummaries core checklist could read:
Use the checklist as a retrieval prompt, not as a substitute for solving. Before looking at it, try to write the formula and explain each term from memory. Then compare your answer and correct any sign, unit or definition error.
Practise calculations as marked responses
Work through questions in the style and format relevant to your level, using official information to check what applies. For calculation practice, write the method as well as the result. A useful sequence is: identify the requested output; select the relevant facts; show the formula; substitute values with units; calculate; then state what the answer represents. If the question asks for a recommendation, interpret the result against the facts rather than stopping at a number.
A marked practice response in MySummaries can show how a small omission changes the answer:
A company reports EBIT of $120m, a tax rate of 25%, D&A of $10m, capital expenditure of $25m and an increase in net working capital of $5m. Calculate FCFF and show your workings.
3/4NOPAT = 120 × (1 − 0.25) = $90m. FCFF = 90 + 10 − 25 = $75m. Including the working-capital increase would lower FCFF.
The candidate calculates NOPAT correctly, applies the D&A and capex adjustments, and identifies the direction of the working-capital effect. The stated FCFF does not include the $5m increase in net working capital.
Missed
−Subtract the $5m increase in net working capital; the correct FCFF is $70m, not $75m.
−State the exact size of the overstatement caused by omitting that cash outflow: $5m.
Model answerNOPAT = EBIT × (1 − tax rate) = $120m × 0.75 = $90m. FCFF = NOPAT + D&A − capital expenditure − increase in net working capital. Therefore FCFF = $90m + $10m − $25m − $5m = $70m. Omitting the working-capital increase would overstate FCFF by $5m.
That is a MySummaries paper, filled with CFA material. Yours is written from your own notes. Start free
Keep an error log by cause, not just by topic. Record whether the problem was a forgotten formula, a sign error, a misread command word, an incorrect definition, or an interpretation that went beyond the vignette. Rework the question later without consulting the solution. If the same error recurs, revise the relevant board and create a short retrieval prompt for it.
Study the curriculum in a repeatable cycle
Apply the same cycle across the curriculum areas: learn, retrieve, practise, review. The balance changes with your results, but each part has a job.
Quantitative methods and financial reporting and analysis
For quantitative methods, learn what each method estimates and what its inputs mean before memorising notation. Practise selecting the appropriate method from the wording and facts supplied. Check units and signs at every step. In financial reporting and analysis, connect accounting treatments and ratios to what they imply about performance, position or cash flow. Keep definitions precise and avoid treating a ratio as a conclusion without explaining the evidence behind it.
Economics and corporate issuers
For economics, make boards that link a change in an input or policy to its effect on the scenario. Practise explaining the direction of the effect and the conditions under which it follows. For corporate issuers, connect financing and investment decisions to their assumptions and consequences. When the question supplies a constraint or objective, use it to prioritise rather than writing everything you know about the topic.
Equity, fixed income, derivatives and alternatives
These areas reward careful selection of the relevant model. For equity, distinguish the value being estimated and check the cash-flow and discount-rate assumptions. For fixed income, practise interpreting interest-rate risk measures in context. For derivatives, identify the position and payoff before discussing its purpose or risk. For alternatives, learn the particular characteristics and risks in your curriculum material, then apply only those relevant to the vignette. Across all four, practise calculations with tidy workings and an interpretation that answers the prompt.
Portfolio management and ethics
Portfolio management questions often require you to connect an investor’s circumstances and objectives to a defensible decision. Extract the relevant constraints before proposing an action. In ethics, make the applicable CFA Standards a regular part of question practice: identify the issue, apply the relevant standard to the facts, and state an appropriate course of action. Do not make assumptions about missing facts. Where an ethical issue changes the investment decision or process, explain that connection.
Use audio for targeted review
Audio is useful when you need another pass over a relationship, definition or worked method while away from your desk. It should supplement active practice, not replace it. Choose one narrow board section, listen, and then pause to reproduce the formula or explain the concept without the recording. If you cannot do that, return to the source notes and then attempt a question.
A MySummaries lecture generated from the FCFF board might explain both the calculation and its limits:
Transcript · tap any word to jump there
Start with operating profit after tax. In this example, EBIT is $120 million and the tax rate is 25%, so NOPAT is $90 million. Add back $10 million of depreciation and amortisation, then subtract $25 million of capital expenditure and the $5 million increase in net working capital. The result is FCFF of $70 million. The working-capital increase is a use of cash, so it reduces free cash flow.
To move from cash flow to value, be precise about the period. A constant-growth perpetuity uses next-period FCFF divided by WACC minus the growth rate. If $70 million is current-period FCFF, next-period FCFF at 2% growth is $71.4 million. At an 8% WACC, the illustrative enterprise value is $1,190 million. That result depends on the growth and discount-rate assumptions; it is not an equity value. For equity value, make the debt-and-cash bridge, then divide by shares if the question asks for value per share.
After listening, say the calculation aloud without the script and explain why the $1,190 million result is enterprise value. Then change one input in your own practice question and recalculate. This checks that you understand the relationships rather than recognising a memorised example.
Make revision respond to evidence
Do not divide all your time evenly between topics by habit. Use practice results to decide what to revisit, while checking the official curriculum information for the coverage relevant to your level. A topic with repeated calculation errors may need a formula-and-units drill; a topic with accurate calculations but weak conclusions may need more practice interpreting results. Ethics errors call for applying standards to facts, not merely rereading definitions.
At the end of a practice session, write down one specific correction and one next action. For example: “I omitted the increase in net working capital; next session I will solve three cash-flow bridges and check each sign.” Return to that action in a later session and verify that the correction holds on a new question. This turns general review into a repeatable method.
How MySummaries helps
Build boards from your own CFA study materials, then use the same board to generate retrieval cards, marked written practice and examiner-voice audio. The aim is to keep the source material, practice errors and next revision task connected. See MySummaries to start building a study board.