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CFA Level I · CFA Level I Exam · Introduction to Equity Valuation

An analyst values a company by examining its industry structure, competitive position and strategy before building any forecasts. This work is best described as part of:

This is best described as understanding the business. Industry analysis, competitive position and strategy provide the basis for realistic forecasts, and they occur before the analyst selects a model or applies the valuation to make a recommendation.

  1. Aunderstanding the businessCorrect
  2. Bselecting the valuation model
  3. Capplying the valuation conclusions

Explanation

Assessing industry prospects, competitive position and corporate strategy is the business-understanding step, which precedes forecasting. Model selection comes after it. Applying conclusions is the final step, where the analyst makes recommendations.

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