What is a key aspect of corporate finance that Level I covers?

Capital budgeting is a fundamental aspect of corporate finance addressed in Level I of the CFA curriculum. This concept involves the process that companies use to evaluate potential major projects or investments. It includes the assessment of cash flows, understanding the time value of money, and determining the feasibility and profitability of investing in long-term assets.

Capital budgeting techniques, such as Net Present Value (NPV), Internal Rate of Return (IRR), and Payback Period, are crucial for making informed decisions about which projects to undertake or reject based on their potential to increase the company's value over time. This foundational knowledge is vital for financial analysts and investment professionals since it directly influences organizational growth and sustainability.

In contrast, while derivative pricing, advanced financial modeling, and hedge fund strategies are important topics within the broader finance field, they are more specialized and typically covered in later levels of the CFA program or different financial certifications. Their complexities and technicalities require a deeper understanding of finance than is expected at the Level I stage.