Comprehensive CSC Exam 1 cheat sheet: Canadian markets and regulation basics, fixed income and equity math, derivatives payoff intuition, financial statements, financing and listing, and glossary support.
Use this as your market-foundations decision pack alongside the CSC Exam 1 guide, the Study Plan, the FAQ, the Resources, and CSC Exam 1 practice on Finance Prep.
| If the stem sounds like… | Think… |
|---|---|
| new issue, exchange, ATS, dealer, listing | market-structure context first |
| inflation, rates, central bank, business cycle | economy lens before product choice |
| coupon, yield, accrued interest, premium or discount | fixed-income pricing logic |
| option, futures, strike, payoff | direction and breakeven before jargon |
| If you mainly need… | Better first instinct |
|---|---|
| the first market-and-product half of the regular CSC route | CSC Exam 1 |
| the second analysis-and-portfolio half | CSC Exam 2 |
| a shorter mutual-fund foundation | IFC |
| Term | What it means | Why it matters |
|---|---|---|
| Bid / Ask | best buy / best sell price | spread = implicit trading cost |
| Market order | fill now at best available | price uncertainty |
| Limit order | price control | fill not guaranteed |
| Stop / stop-limit | trigger-based order | gaps can surprise you |
| Liquidity | ease of trading | low liquidity → wide spreads |
What it tells you: The approximate purchasing-power return after inflation.
Symbols (what they mean):
Exam note: This is an approximation; the exact relationship is \(1+r_{real}=\frac{1+r_{nom}}{1+\pi}\).
| Goal / context | Common security focus | Key exam trap |
|---|---|---|
| Short horizon / cash management | T‑bills, money market instruments, short bonds | quote/yield language and reinvestment risk |
| Income focus | bonds, preferred shares | price–yield directionality and call risk |
| Growth / ownership | common shares | corporate actions and valuation language |
| Hedge / leverage | options, forwards/futures | payoff direction, premium vs intrinsic, margin concepts |
| Issuer raising capital | new issues (debt/equity) | primary vs secondary + prospectus/underwriting basics |
Bond price (present value)
\[ P=\sum_{t=1}^{n}\frac{C}{(1+r)^t}+\frac{F}{(1+r)^n} \]What it tells you: A bond’s price equals the present value of its coupons plus the present value of principal.
Symbols (what they mean):
How it’s tested (CSC level):
Common pitfalls:
Current yield
\[ CY=\frac{\text{Annual coupon}}{\text{Market price}} \]What it tells you: Income yield today (coupon income divided by current price), ignoring capital gains/losses.
What it is NOT: Current yield is not YTM; it ignores pull-to-par and reinvestment assumptions.
Common pitfall: Using face value in the denominator instead of market price.
Approximate YTM (exam-friendly)
\[ YTM \approx \frac{C+\frac{F-P}{n}}{\frac{F+P}{2}} \]What it tells you: A quick approximation of yield to maturity that blends income (coupon) and capital gain/loss from price moving toward par.
Symbols (what they mean):
How it’s tested: Identify whether YTM should be higher/lower than coupon based on discount vs premium and time to maturity.
Common pitfalls:
Duration intuition (small-rate change approximation)
\[ \frac{\Delta P}{P}\approx -D_{\text{mod}}\cdot \Delta y \]What it tells you: Approximate percentage price change for a small yield change.
Symbols (what they mean):
Exam takeaway: Longer duration → larger price move for the same yield change.
Simple total return
\[ TR=\frac{V_1-V_0+I}{V_0} \]What it tells you: Total return = price/value change plus income, relative to the start value.
Symbols (what they mean):
Common pitfalls: forgetting income \(I\) and using \(V_1\) in the denominator.
Dividend yield
\[ \text{Dividend yield}=\frac{\text{Annual dividend per share}}{\text{Price per share}} \]What it tells you: The stock’s annual dividend income as a percent of today’s price.
Exam cue: Yield can rise because dividend rises or price falls—don’t confuse “high yield” with “low risk.”
Earnings per share (basic idea)
\[ EPS=\frac{\text{Net income - preferred dividends}}{\text{Weighted average common shares}} \]What it tells you: Profit attributable to common shareholders per share (conceptual per-share earnings power).
Common pitfalls: ignoring preferred dividends or comparing EPS across firms without context (different share counts, one-time items).
P/E (intuition)
\[ P/E=\frac{\text{Price per share}}{\text{Earnings per share}} \]What it tells you: A valuation multiple—how much investors are paying per unit of earnings.
Exam cue: High P/E can imply high growth expectations (or overpricing); low P/E can imply risk or undervaluation—interpret with context.
Breakevens (long positions)
\[ \text{Long call BE}=K+P \]\[ \text{Long put BE}=K-P \]What it tells you: The underlying price at expiry where the long option position’s profit is zero.
Symbols (what they mean):
How it’s tested:
Common pitfalls:
Payoffs at expiry
Where \(S_T\) is the price at expiry.
Balance sheet is a snapshot of what the company owns/owes:
\[ \text{Assets}=\text{Liabilities}+\text{Shareholders' equity} \]What it tells you: The firm’s resources (assets) are funded by either borrowing (liabilities) or owners’ capital (equity).
How it’s tested (CSC level):
Classify items correctly (asset vs liability vs equity).
Recognize that higher leverage (more liabilities relative to equity) generally increases risk.
Liquidity vs solvency: short-term obligations vs long-term leverage.
Financing choices (debt vs equity) change the capital structure and risk profile (concept).
Income statement shows profitability over a period:
Cash flow statement answers “where did the cash go?”
Current ratio
\[ \text{Current ratio}=\frac{\text{Current assets}}{\text{Current liabilities}} \]What it tells you: A quick liquidity check—how easily the firm can cover short-term obligations.
Exam cue: A very low current ratio can signal liquidity strain; interpret in context (industry norms matter).
Debt-to-equity (concept)
\[ D/E=\frac{\text{Total liabilities}}{\text{Shareholders' equity}} \]What it tells you: Leverage—how much borrowing supports the business relative to owners’ capital.
Exam cue: Higher D/E usually means higher financial risk (especially in downturns).
Interest coverage (concept)
\[ \text{Interest coverage}=\frac{\text{EBIT}}{\text{Interest expense}} \]What it tells you: Ability to pay interest from operating earnings.
Exam cue: Lower coverage increases default/refinancing risk; higher coverage generally indicates more cushion.
Explanations are provided above next to each formula; this section is a quick reference.
Bond price
\[ P=\sum_{t=1}^{n}\frac{C}{(1+r)^t}+\frac{F}{(1+r)^n} \]Current yield
\[ CY=\frac{\text{Annual coupon}}{\text{Market price}} \]Approx YTM (exam-friendly)
\[ YTM \approx \frac{C+\frac{F-P}{n}}{\frac{F+P}{2}} \]Duration (approx)
\[ \frac{\Delta P}{P}\approx -D_{\text{mod}}\cdot \Delta y \]Total return
\[ TR=\frac{V_1-V_0+I}{V_0} \]Dividend yield
\[ \text{Dividend yield}=\frac{\text{Annual dividend}}{\text{Price}} \]Breakevens: Long call \(K+P\) • Long put \(K-P\)
Earnings per share (concept)
\[ EPS=\frac{\text{Net income - preferred dividends}}{\text{Weighted average common shares}} \]P/E (concept)
\[ P/E=\frac{\text{Price per share}}{\text{Earnings per share}} \]Current ratio
\[ \text{Current ratio}=\frac{\text{Current assets}}{\text{Current liabilities}} \]Debt-to-equity (concept)
\[ D/E=\frac{\text{Total liabilities}}{\text{Shareholders' equity}} \]Interest coverage (concept)
\[ \text{Interest coverage}=\frac{\text{EBIT}}{\text{Interest expense}} \]Real return (approx)
\[ R_{\text{real}}\approx R_{\text{nominal}}-\pi \]Accrued interest — Interest earned since the last coupon payment; affects bond settlement amounts. Ask (offer) — Lowest price a seller is willing to accept. Balance sheet — Snapshot of assets, liabilities, and shareholders’ equity at a point in time. Bid — Highest price a buyer is willing to pay. Bid–ask spread — Difference between bid and ask; an implicit trading cost. Blue-chip — Large, established company with stable reputation (concept). Book value — Accounting equity value (assets minus liabilities) on the balance sheet. Callable bond — Bond the issuer can redeem before maturity; increases reinvestment/option risk. Capital market — Market for longer-term financing and investment (as distinct from money markets). Cash flow statement — Reports cash flows from operations, investing, and financing. Clean price — Bond price excluding accrued interest. Clearing — Post-trade process that matches trades and calculates obligations before settlement (concept). Convertible security — Security that can be converted into another security (often common shares) under stated terms (concept). Coupon — Bond interest payment rate/amount. Credit spread — Yield premium over a benchmark for taking credit risk (concept). Current ratio — Liquidity ratio: current assets divided by current liabilities. Current yield — Annual coupon divided by market price. Debt-to-equity (D/E) — Leverage ratio comparing liabilities to shareholders’ equity (concept). Dirty price — Bond price including accrued interest. Dilution — Reduction in existing shareholders’ ownership/earnings per share due to issuing new shares (concept). Duration — Interest rate sensitivity measure (approximate price change for a yield change). Earnings per share (EPS) — Net income attributable to common shares divided by weighted average shares (concept). Ex-dividend date — First day shares trade without the right to the upcoming dividend. Face value (par) — Principal repaid at maturity for a bond. Firm commitment underwriting — Underwriter buys the entire issue and resells to investors (concept). Forward / futures — Agreement to buy/sell an underlying at a future date/price (hedge/speculate). GDP — Gross Domestic Product; a measure of economic activity/output (concept). Income statement — Reports revenue, expenses, and net income over a period. Inflation — General price level increase; reduces real purchasing power. Initial public offering (IPO) — First public sale of a company’s shares (primary market financing). Interest coverage — Ability to cover interest expense from operating earnings (concept). Issuer — Entity that sells securities to raise capital. Leverage — Using borrowed funds or derivatives to amplify exposure and outcomes. Limit order — Order with a maximum buy price or minimum sell price. Liquidity — Ease of buying/selling without moving price materially. Listing — Admission of a security to trade on an exchange (concept). Market order — Order to buy/sell immediately at best available price. Maturity — Date when a debt security’s principal is repaid. Money market — Short-term debt instruments and funding markets (concept). Option premium — Price paid by the option buyer to the seller. P/E ratio — Price per share divided by earnings per share (valuation concept). Preferred share — Equity with stated dividend and priority over common dividends; features vary. Primary market — Market where new securities are issued and capital is raised. Private placement — Sale of securities to select investors rather than through a public offering (concept). Prospectus — Disclosure document for a public offering (concept). Rights offering — Offering existing shareholders rights to buy additional shares, typically at a set price (concept). Secondary market — Investor-to-investor trading; provides liquidity and price discovery. Settlement — Completion of a trade: delivery of securities and payment. Short sale — Selling borrowed securities with the intention to buy back later (concept). Stop order — Trigger-based order that activates when a price level is reached. Strike price (K) — Price at which an option can be exercised. Underwriter / underwriting syndicate — Dealer(s) that distribute an issue and help price/market it (concept). Warrant — Security giving the right to buy shares at a set price before expiry (concept). Working capital — Current assets minus current liabilities (liquidity concept). Yield curve — Relationship between yields and maturities at a point in time (concept). Yield to maturity (YTM) — Total return implied by a bond’s price, coupon, and time to maturity (concept).
Use these lessons when a cheat-sheet item needs fuller market-foundations review.
Use this free guide for reviewUse this free guide for review, then Start CSC Exam 1 Practice on Finance Prep for timed questions, topic drills, and detailed explanations.