The Chartered Financial Analyst (CFA) is an international professional designation offered by the CFA Institute, awarded upon successful completion of three exams. It is a prestigious title in the finance and investment industries and should at least be considered by anyone interested in a career in corporate finance. The CFA is an interesting undertaking in some cases, while in other cases it is more advisable to pursue a Master of Business Administration (MBA) or even a Chartered Alternative Investment Analyst (CAIA) designation.
Obtaining the CFA designation is not easy, and the time, effort and money required for the designation is considerable. It takes more than four years and less than $5,000 to pass the tests. However, note that your employer may cover the costs or reimburse you after you pass the exams.
Corporate Finance in CFA Exams
The CFA is divided into three levels, often referred to simply as L1, L2 and L3. In 2022, 8-12% of the first exam covered corporate finance topics. The second exam varies from year to year, but business finance topics typically cover 5-10% of the exam. The third tier often gets no focus on corporate finance.
Portfolio management, equity research and hedge funds
As a general qualification, the CFA designation never hurts. However, some parts of the program are more applicable to careers in corporate finance than others. Corporate finance is a somewhat nebulous term, but CFA exams cover typical areas in the field, such as working capital management, budgeting, leverage, foreign exchange, and all related research.
The CFA Institute has self-reporting data of its charterholders through 2021. At that time, there were over 167,000 charterholders. Twenty-five percent of global CFA professionals were portfolio managers, the most common occupation. The second most reported role was research analyst with 12% globally, followed by consulting with 10%.
Hedge fund analysts often perform similar tasks to equity researchers for large fund managers, and a CFA designation can help credentials for a professional trying to get into the buy side of investing. This may or may not be considered business finance, depending on where the job is. For example, corporate finance in the United States is often synonymous with financial planning, accounting, and analysis. However, in the UK, corporate finance extends further to the business of investment banking or hedge funds.
Does your employer hold a charter?
Whether or not you pursue a CFA may depend on the company you want to work for. Suppose you want to work for a multi-billion dollar corporation or even a multinational with a large treasury department. If the company treasurer is a CFA charter holder, which is more likely for larger companies, the CFA is potentially useful. Having this designation on your resume should help you deal with non-CFA candidates for career advancement, and the training involved in preparing for the CFA exam should help with advanced functions, such as foreign exchange trading or international equity research, which larger companies tend to need. .
The CFA curriculum is broad and not particularly deep. For many specialized professions, such as business accounting or capital finance, a more specific degree or designation might be more useful. For many corporate finance jobs, it might be best to have a master’s degree in finance.
If you are starting
Many Fortune 500 finance and investment companies use the MBA as a filter for applicants. The MBA has higher costs and generally takes more total time than the CFA. Additionally, the total number and range of opportunities for young professionals with an MBA is much larger than for those with a CFA.
What roles in corporate finance apply to the CFA?
There are many roles in corporate finance that a CFA helps prepare a candidate for, including research analysts, equity analysts, portfolio managers, chief financial officers, and corporate financial analysts.
What corporate finance topics does the CFA cover?
The CFA covers a variety of corporate finance topics such as budgeting, leverage, portfolio management, working capital management, and foreign exchange.
What are the main activities of corporate finance?
Broadly speaking, corporate finance focuses on activities that help maximize shareholder value in the short and long term. Capital investment, taxation and supervision of capital investment decisions are some of the activities that fall under corporate finance.
What part of the CFA exam covers corporate finance?
At Levels I and II of the CFA exams, corporate finance increased from 8 to 12 percent of the total. There are no business finance questions for the Level III exam.
In the Level II exam, for example, corporate finance questions will cover capital budgeting, corporate governance, capital structure, and mergers and acquisitions, among others.