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Investing Guidebook #361926

Course Overview

Credit

Amount

CPA

CFP^®

5.5

CDFA^®

Course Author: Steven M. Bragg, CPA Field of Study (CPA): Specialized Knowledge Field of Study (CFP): Investment Planning Field of Study (CDFA): Financial Analysis & Planning

Course Description

Course publication/revision date: This course was updated on 4/10/26.

It can be difficult to earn a consistent return on your invested funds. In the Investing Guidebook, we cover how to set up a structured approach to investing that improves your ability to gain a good return on your investments. It addresses the basic investment types, the sequence of investing activities, individual retirement accounts, and how to invest in stocks, bonds, and funds. It also reveals a number of ways to extract useful information from company financial statements, and how to measure your investing performance. The tips included in this course can be of great assistance in improving your investing skill.

Table of Contents

Chapter 1 - Investing Basics1

Introduction	1
Investing Basics	1
The Basic Investment Types	1
Ownership Investments	1
Stock Market Investments	2
Real Estate Investments	2
Business Ownership Investments	2
Lending Arrangements	2
Savings Instruments	2
Debt Reduction	3
Other Investments	3
Call Options	3
Put Options	3
Precious Metals	4
Currencies	4
Collectibles	4
Risk and Investing	4
Mitigating the Risk of a Decline in Market Value	5
Mitigating the Risk of a Decline in a Specific Investment	6
Mitigating the Risk of Inflation	6
FDIC Coverage	6
Liquidity and Investing	6
Return on Investment	7
Summary	8
Review Questions	9

Chapter 2 - Baseline Investing Activities10

Introduction	10
Step 1. Create a Cash Reserve	10
Step 2. Obtain Adequate Insurance	10
Step 3. Reduce Debt	11
Step 4. Budget a Savings Rate	11
Step 5. Align Your Life and Financial Goals	11
Step 6. Factor in Your Tax Situation	12
Step 7. Contribute to a Retirement Account	13
Step 8. Consider a Mix of Investments	14
Step 9. Consider When to Invest	14
Step 10. Think Through the Consequences of an Asset Sale	15
A Note Regarding Information Sources	16
Summary	17
Review Questions	18

Chapter 3 - Individual Retirement Accounts19

Introduction	19
Overview of Individual Retirement Accounts	19
Individual Retirement Account (IRA)	19
Roth IRA	19
IRA and Roth IRA Comparison	20
Rollover IRA	21
Savings Incentive Match Plan for Employees (SIMPLE)	22
Simplified Employee Pension (SEP) IRA	22
Ability to Contribute to an IRA	23
Caps on IRA Contributions	23
Contribution Caps for Singles	23
Contribution Caps for Spouses	24
Excess Contributions	24
Deductibility of IRA Contributions	24
Investment Options Not Allowed	25
Prohibited Transactions	26
Rollover Options	26
Allowable Distributions	27
Early Distribution Penalties	27
Taxability of IRA Interest	27
Required Minimum Distributions	28
Summary	31
Review Questions	32

Chapter 4 - Investing in Stocks33

Introduction	33
How Businesses Raise Money	33
How Businesses Add Value	33
Characteristics of Stocks	34
The Stock Market	34
Market Moving Events	35
Investing Strategies	36
Mutual Funds	38
Hedge Funds	38
A Word on Speculative Bubbles	39
Penny Stock Concerns	39
How to Judge Your Investing Performance	40
Best Practices for Investing in Stocks	40
Conducting Stock Research	41
Summary	43
Review Questions	44

Chapter 5 - Investing in Lending Arrangements45

Introduction	45
Characteristics of Lending Arrangements	45
Lending Choices	45
Banks	45
Money Market Funds	46
Bonds	47
Types of Bonds	47
Bond Features	48
Bond Investment Considerations	48
The Yield Curve	49
U.S. Government Debt Instruments	50
State and Local Government Debt	50
Corporate Bonds	51
How to Buy Bonds	51
Summary	52
Review Questions	53

Chapter 6 - Investing in Funds54

Introduction	54
Mutual Funds vs. Exchange-Traded Funds	54
Fund Investment Best Practices	55
Reduce Fund Costs	55
Look for Consistent Returns	56
Avoid Taxes	56
Allocate Assets	56
Avoid Leveraged Funds	57
Invest in Experience	57
Stock Fund Fundamentals	57
Bond Fund Fundamentals	58
Bond Fund Selection Process	58
Hybrid Funds	59
Summary	59
Review Questions	60

Chapter 7 - Working with Brokerage Firms61

Introduction	61
Types of Brokerage Firms	61
Advantages of Using a Brokerage Firm	62
Market Orders and Limit Orders	62
Securities Investors Protection Corporation	62
Summary	62
Review Questions	63

Chapter 8 - The Interpretation of Financial Statements64

Introduction	64
Interpreting the Balance Sheet	64
Relevance of a Low Cash Figure	67
The Impact of Sales Growth on Cash	67
Inherent Profit Margin	67
Relative Importance of Inventory	68
Sufficiency of Depreciation	69
Proportion of Sales to Fixed Assets	71
Days Payables Outstanding	71
Changes in Payable Days	72
Financial Leverage	73
Relative Size of Debt	74
The Book Value Concept	74
Book Value per Share	75
Interpreting the Income Statement	75
The Trend of Sales	77
The Quality of Sales	78
The Reliability of Sales	79
Gross Margin Analysis	79
The Inventory Build Concept	80
Strategy Impact on Operating Expenses	80
Effects of Interest Expense	80
Net Profit Ratio	80
The Big Bath	81
Interpreting the Statement of Cash Flows	82
Examination of Cash Flows from Operating Activities	85
Examination of Cash Flows from Investing Activities	86
Examination of Cash Flows from Financing Activities	87
Summary	88
Review Questions	89

Chapter 9 - Investing Metrics90

Introduction	90
Overview of Share Performance Measurements	90
Price/Earnings Ratio	90
Capitalization Rate	91
Total Shareholder Return	92
Market Value Added	93
Market to Book Ratio	94
Insider Buy/Sell Ratio	95
Options and Warrants to Common Stock Ratio	96
Short Interest Ratio	97
Institutional Holdings Ratio	98
Summary	99
Review Questions	100

Answers to Chapter Questions101

Glossary109

Index112

Course Details

Author: Steven M. Bragg, CPA

Steven Bragg, CPA, has been the chief financial officer or controller of four companies, as well as a consulting manager at Ernst & Young. He received a master’s degree in finance from Bentley College, an MBA from Babson College, and a Bachelor’s degree in Economics from the University of Maine. He has been a two-time president of the Colorado Mountain Club, and is an avid alpine skier, mountain biker, and certified master diver. Mr. Bragg resides in Centennial, Colorado. He has written more than 300 books and courses, including New Controller Guidebook, GAAP Guidebook, and Payroll Management.

Publication/Revision Date: 4/10/2026

Course Exam Questions (online): 35 (multiple-choice)

Program Delivery Method: NASBA QAS Self-Study

Available Formats of Course Text: Downloadable PDF, Printed/Mailed

Course Level, Prerequisites, and Advance Preparation Requirements

License	Course Level	Prerequisites	Advance Preparation Requirements
CPA	Overview	None	None
CFP®	Overview	None	None
CDFA®	Overview	None	None

* This program is appropriate for professionals at all organizational levels.

Sponsor ID Numbers

National Registry of CPE Sponsors I.D.: 107615

CFP Board Sponsor I.D.: 1008 — Course I.D.: 320302

Registered with the Institute for Divorce Financial Analysts

State CPA Board Sponsor ID Numbers (where applicable)

Florida Division of Certified Public Accounting: 0004761

Hawaii Board of Public Accountancy: 14003

New York State Board for Public Accountancy: 002146

Ohio Accountancy Board: CPE .51 PSR

Pennsylvania State Board of Accountancy: PX178025

Texas State Board of Public Accountancy: 009349

Learning Objectives

As a result of studying the course material, you should be able to meet the objectives listed below:

Identify the different types of investments.
Specify how to calculate the return on investment.
Describe the investing goals associated with a high marginal tax rate.
Identify the investing goals associated with someone approaching retirement age.
Specify the investing actions to take when the market appears to be overheated.
Identify the characteristics of an individual retirement account.
Recall the characteristics of the most common stock indices.
Specify the strategies most commonly followed by hedge funds.
Describe the best practices for investing in stocks and funds.
Identify the investment criteria for a money market fund.
Specify the differences between a market order and a limit order.
Recall how the accounting equation is used.
Specify the scenarios in which a business may report a cash balance of zero.
Identify the businesses in which inventory is more or less likely to be a consideration.
Recall the competitive strategies that require a reduced inventory investment.
Recall the circumstances under which financial leverage is more beneficial.
Specify the threshold at which debt levels are considered to be minor.
Recall how to calculate book value.
Specify the type of investor that is attracted to rapid sales growth.
Identify the situation in which a business experiences highly-reliable sales.
Recall the methods used to improve gross margin.
Specify which expenses are classified as operating expenses.
Identify the business model that tends to experience high operating expenses.
Recall how the net profit margin can be improved.
Specify what may happen when a company's price/earnings ratio is high.
Identify the contents of the total shareholder return calculation.