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CFA Level I Exam · Company Analysis: Past, Present, and Future

Company Analysis Framework and Business Model for CFA Level 1

Updated 7 October 2026 · Fact-checked

Company analysis studies a firm's past results, present position and likely future to support valuation. Analysts start with the business model: what the firm sells, to whom, how it earns money and why it wins. They then link products, markets and competitive position to financial results and to forecasts.

Understand Company Analysis Framework and Business Model

A company analysis answers one question: what is this business worth, and why? To answer it, you need to understand how the business makes money before you touch a spreadsheet. Numbers describe the past. The business model explains why the numbers look the way they do and whether they will continue.

The analysis has three time frames. Past: how the company performed in revenue, margins, returns and cash flow. Present: its current position in products, markets, customers and competitors. Future: forecasts of revenue, costs, capital needs and risk, which feed a valuation.

The business model describes how a company creates, delivers and captures value. Analysts ask: What is the value proposition? Who are the customers? What are the revenue sources (product sales, subscriptions, fees, advertising)? What are the main costs and assets? Which markets does it serve, and in what geography?

Competitive position asks whether the firm can defend its profits. Sources of advantage include cost leadership, differentiation, scale, brand, switching costs and network effects. Analysts judge this using the industry structure and the firm's strategy, and then check whether margins and returns on capital support the story.

The output is usually a research report. Typical elements are a company description, industry overview, investment thesis, financial analysis, forecasts, valuation, risks, and governance and ESG factors. On the exam, questions test whether you can match a fact or an element to its role in the analysis.

Key formulas to remember

Three time frames of analysis
Past performance + Present position + Future outlook = basis for valuation
Past uses financial statements, present uses business and competitive review, future uses forecasts.
Business model questions
Who are the customers? What is sold? How is revenue earned? What are the costs? Why can the firm win?
Use this checklist to classify any description in a vignette.
Typical elements of a company analysis report
Company description → industry → thesis → financials → forecasts → valuation → risks → governance/ESG
Order varies by report. The exam tests the content of each element, not a fixed order.
Link between strategy and results
Competitive advantage → sustained margins and returns above peers
A claimed advantage should show up in financial results over time. If it does not, question it.

How to solve Company Analysis Framework and Business Model questions

Use this method on any question about the company analysis framework or business model.

  1. 1Identify what is being asked: the business model, the competitive position, or an element of the report.
  2. 2Pick out the facts in the stem: products, customers, revenue sources, markets, costs.
  3. 3Classify each fact: value proposition, revenue model, cost structure, market or competitive factor.
  4. 4Decide which time frame applies: past results, present position or future forecast.
  5. 5Check the link: does the claim about strategy fit the financial evidence given?
  6. 6Eliminate the two options that mismatch the element, confuse past with future, or overstate certainty.
  7. 7Choose the option that is specific and consistent with the stem.

Quickest way: Classify and match

When to use it: Use when you have about 90 seconds and the question asks which part of the analysis a fact belongs to.

  1. Underline the key noun in the stem: customers, pricing, margins, forecast, risk.
  2. Label it: business model, competitive position, financial history, forecast or risk.
  3. Cross out options that belong to a different label.
  4. Of the remaining option(s), pick the one that is consistent with the evidence in the stem, not a general statement.

Common mistakes in Company Analysis Framework and Business Model

  • Treating the business model as the same as the financial statements.

    Candidates jump to ratios because they are familiar.

    Fix: Remember that the model explains how value is created. Statements show the results. Use both, in that order.

  • Assuming a competitive advantage lasts forever.

    A strong brand or market share looks permanent.

    Fix: Ask what could erode it: new entrants, technology, regulation. Forecasts should reflect fading advantage where relevant.

  • Confusing market size with the company's position.

    A large market sounds attractive.

    Fix: Separate industry attractiveness from the firm's share, cost position and differentiation.

  • Ignoring revenue quality, such as recurring versus one-off sales.

    Candidates look only at total revenue growth.

    Fix: Note the source, customer concentration and repeatability of revenue before extrapolating.

  • Treating a research report as only a valuation number.

    Candidates focus on the target price.

    Fix: Remember that the thesis, risks, and governance and ESG factors are core elements that support the valuation.

Worked examples

Example 1

A software firm sells annual subscriptions to large banks. Customers rarely switch because moving data to a rival is costly and slow. Which feature of the firm is most likely to support stable future revenue? A. Low current inventory B. High switching costs C. Large number of product patents filed last year

Show the solution
  1. The stem describes a subscription revenue model with customers who rarely switch.
  2. The reason given is the cost and time to move data. That is a switching cost.
  3. Switching costs are a source of competitive advantage that makes revenue recurring and more predictable.
  4. Option A is irrelevant to a software subscription firm. Option C is not mentioned in the stem and patents do not explain customer retention here.

Answer: B. High switching costs

Example 2

An analyst writes: 'The company's operating margin has exceeded peers for eight years, which supports our view that its cost leadership is durable.' Which part of the company analysis is the analyst performing? A. Linking past results to competitive position B. Estimating the terminal value C. Describing the ownership structure

Show the solution
  1. The statement uses eight years of margin history, which is past performance.
  2. It compares margins with peers, which is an assessment of competitive position.
  3. It then draws a conclusion about cost leadership. This ties history to strategy.
  4. Terminal value is a valuation step and is not mentioned. Ownership structure is not discussed.

Answer: A. Linking past results to competitive position

Exam tips

  • Expect short vignettes that describe a business and ask you to name the feature, such as switching costs, scale or a revenue model.
  • Match the fact to the correct element of the analysis before looking at options. This removes two options quickly.
  • Be wary of options that claim an advantage is permanent or guaranteed.
  • Where the stem gives both a strategy claim and financial data, choose the option consistent with both.

Practice questions from Company Analysis: Past, Present, and Future

Company Analysis Framework and Business Model in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Company Analysis Framework and Business Model: frequently asked questions

What are the main elements of a company analysis?

They are the company and business model description, industry and competitive position, past financial performance, forecasts, valuation, risks, and governance and ESG factors. Together they support an investment thesis. The exam tests what each element contributes.

How do I analyse a company's business model?

Ask who the customers are, what is sold, how revenue is earned, what the main costs are, and why the firm can win. Then check if the financial results back up the story. Look at the durability of the advantage as well.

What is the difference between past, present and future in company analysis?

Past is historical financial performance. Present is the current business, market and competitive position. Future is the forecast of revenue, margins and cash flows used in valuation.

Do I need to calculate anything for this topic?

Mostly no. It is a conceptual topic, and questions ask you to classify facts and judge consistency. Calculations appear in the related financial analysis and valuation topics.