For external stakeholders, financial statement analysis plays a major role in their economic decisions related to the company. Analysts examine the past and current performance of companies to form expectations about their future performance and to identify risks to this performance.

## Introduction to Financial Statement Analysis

“Introduction to Financial Statement Analysis” is a Level I reading for the CFA Program. It covers the following learning outcomes.

## Using a Time Line to Solve Time Value of Money Problems

When solving time value of money problems, it can sometimes be helpful to establish a time line.

## Future and Present Values of Money

calculate and interpret the future value (FV) and present value

(PV) of a single sum of money, an ordinary annuity, an annuity

due, a perpetuity (PV only), and a series of unequal cash flows;

## The Time Value of Money at Different Compounding Frequencies

The frequency of compounding can have a considerable effect on the ending value for an investor.

## The Effective Annual Interest Rate

The more frequently a given rate is compounded, the higher the ending value for the investor.

## Interest Rates as Compensation for Risk

In aggregate, interest rates are set by supply and demand in the markets. In this context, r can be viewed as a real, risk-free interest rate plus compensation for four specific risks.

## Interpreting Interest Rates

An interest rate (r) is the rate of return that equates the value of different cash flows on different dates.

## The Time Value of Money

“The Time Value of Money” is a reading in the Level I curriculum for the CFA Program. It covers the following learning outcomes.

## Investment Constraints

An investment plan must consider both investment objectives and investment constraints. Major constraints include liquidity, time horizon, tax concerns, legal and regulatory concerns and unique circumstances.