Overview of Equity Securities - Module 4 – EQUITY – CFA® Level I 2025

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2025 Prep Packages for the CFA® Program exam offered by FinQuiz Pro (notes, summaries, question bank, mock exams, and formula sheet):

Level I: https://www.finquiz.com/cfa/level-1/
Level II: https://www.finquiz.com/cfa/level-2/
Level III: https://www.finquiz.com/cfa/level-3/

Discover the fundamentals of Equity Securities and why they’re pivotal for CFA® Level 1 success. In this detailed session, we break down the ownership structure of common and preferred shares, explaining key terms like voting rights, dividends, and callable/putable features. Learn how private equity differs from public equity, explore international equities via ADRs and GDRs, and grasp crucial concepts like risk/return characteristics and return on equity (ROE). We also delve into the significance of cost of equity, capital structure, and WACC (Weighted Average Cost of Capital). Whether you’re examining price appreciation, dividend income, or looking to master equity valuation, this lecture offers real-world examples and actionable insights. Plus, see how FinQuiz can sharpen your exam prep with Battle Ready Summaries, formula sheets, and mock exams—all designed to streamline your learning and maximize your exam performance.

Chapter 1: Introduction to Equity Securities
00:00:00 – 00:02:00
• Welcome and overview of today’s lecture
• Relevance of equity securities in the CFA Level 1 journey
• Brief analogy (owning part of a coffee shop)

Chapter 2: Understanding Equity Ownership
00:02:00 – 00:04:00
• What equity securities represent (partial ownership)
• Ownership rights such as voting and dividends
• Contrast to debt instruments

Chapter 3: Risk, Volatility & Market Valuation Basics
00:04:00 – 00:07:00
• Discussion of the risk–return trade‑off in equities
• Example of volatility (e.g., Tesla’s stock swings)
• Introduction to using market cap (share price × shares outstanding) as a valuation gauge (e.g., equity market cap vs. GDP)

Chapter 4: Equity Characteristics & Resource Plug
00:07:00 – 00:09:00
• Transition into key equity features
• Quick plug for Finn Quiz’s smart summaries, formula sheets, and mock exams
• Preparing to dive deeper into the mechanics of equity

Chapter 5: Common Shares – Ownership, Voting & Features
00:09:00 – 00:16:00
• Detailed explanation of common shares
• Voting rights, annual (or proxy) voting processes, and possible class differences (e.g., Class A/B/C shares)
• Discussion of dividend payments and the residual claim in liquidation
• Brief look at callable and putable common share features

Chapter 6: Preferred Shares – Stability & Dividend Priority
00:16:00 – 00:20:00
• What makes preferred shares different from common shares
• Their role as a “middle child” between equity and debt
• Fixed dividends, cumulative vs. non‑cumulative dividends, and limited voting rights
• How preferred shareholders get paid first (but still behind debt holders)

Chapter 7: Private Equity & Global Equity Investing
00:20:00 – 00:26:00
• Switching gears to discuss private equity
• Differences between private (non‑listed) and public equity
• Key trade‑offs of private equity such as illiquidity vs. reduced disclosure requirements
• Overview of global investing in equity: non‑domestic equity, direct investing, and depository receipts (GDRs, ADRs)

Chapter 8: Risk and Return Characteristics of Equity Investments
00:26:00 – 00:32:00
• How equity returns are generated: price appreciation and dividend income
• Impact of foreign exchange (for international stocks) and reinvested dividends
• Volatility as a measure of risk (using examples and standard deviation)

Chapter 9: Valuation Metrics: ROE, Cost of Equity & WACC
00:32:00 – 00:38:00
• Explaining why companies issue equity and how it ties into corporate financing
• Overview of key valuation metrics (price‑to‑book, return on equity)
• Introduction to cost of equity and the weighted average cost of capital (WACC)
• Mention of tools like the DuPont formula for dissecting ROE

Chapter 10: Summary & Final Takeaways
00:38:00 – 00:44:05
• Recap of the importance of understanding equity securities
• Key points regarding ownership, risk‑return trade‑offs, and valuation
• Final encouragement and reminders to review Finn Quiz resources for CFA exam prep
• Closing remarks