In this article, I’ll discuss how to approach quantitative (quant) and qualitative (qual) analysis per each of the CPA Canada Common Final Exam (CFE) Days:
CFE Day 1
You’ll face Strategic (ST) and Operational (Op) issues.
For ST, you’re required to analyze quantitatively and qualitatively. Follow the steps below for quants:
- Start with excel: write appendix title, purpose, conclusion
- Choose the right “technique” (ie, tool for the job). Eg, if it’s valuation, choose between asset-based, transaction-based and market-based (multiples). Use case facts to determine the right technique (eg, if “capitalization rate” given, then it’s transaction-based CCF valuation technique).
- Apply the template (horizontal, vertical, top-down, etc. I provide templates in my CFE Review course)
- Show support for calculations
- Summarize the analysis in the memo
- Write 2-3 assumptions in the memo
Follow the steps below for qual:
- Use Word, format in bullet list
- Write 4-5 Pros and 4-5 Cons
- Write a balanced analysis, including both pros and cons
- Integrate AT LEAST 4-5 situational analysis factors in EACH issue
For OP, the requirds are mostly qual-based. They have to do with minor issues, eg board issues, performance issues, ethical issues and so on. You still need to integrate 4-5 times overall in the operational issues. The format varies based on the type of issue. To get good at OP issues, practice with sample cases and debrief from the solutions.
CFE Day 2
The quants come into play at MA requireds. Follow the same approach as with Day 1, but this time go into more depth in your analysis. If there are uncertainties, perform sensitivity analysis. If there are multiple scenarios, address all of them. It’s easy to lose track of time with MA quants, so it’s important that you budget your time and move on when the time is up. Passing Days 2/3 Level 2 requires depth in FR or MA, so if you focus on getting Cs in FR, you’ll pass with RCs on MA.
There is no qual in Day 2 unless you are taking Finance, PM or Tax. See below for discussion on how to address these.
CFE Day 3
The quants can be tested as part of MA, Finance, S&G or Tax. The challenge with Day 3 is time, so the goal is to write a quick analysis in Excel and summarize in the memo. Don’t write assumptions, don’t write detailed explanations nor detailed conclusions. You’ll have about 7-10 minutes to do the quants, so move quickly. Getting RC in all quants in Day 3 is enough to pass the CFE Days 2/3.
The qual can be tested as part of Finance, S&G or Tax. There can be different requireds but generally “pro/con” format is applied to S&G, “bullet list” format is applied to Tax, and “bullet list/table” format is applied to Finance. For example, if the Fiannce AO asks you to discuss the financing sources, create a table with 3 columns: financing source, pros, and cons, and discuss in each row each of the options (eg. see TinyCo case from CFE 2019 Day 3). More detailed examples are available in my CFE Review course.