The Association for Accountants and Financial professionals In Business Learning system Part 2: Financial Deision Making Part 2 Version 3.0 ee SS os rr rr aE PETES!i CMA Learning System” Part 2: Financial Decision Making A comprehensive exam preparation learning tool including text materials and online practice tests designed to support those preparing to take the CMA exam. ‘The CMA Learning System™ is produced by the Institute of Management Accountants (IMA). Part 2 Version 3.0© Copy ‘These materials are copyrighted and may not be reproduced in any form or used in any way to create derivative works. Any reproduction, reuse, or distribution of CMA Learning System™ materials without prior written permission from the Institute of Management Accountants (IMA) is illegal and a material violation of the IMA Stasement of Ethical Professional Practice. ‘Any Certified Management Accountant (CMA) or CMA candidate who reproduces, reuses, or distributes CMA Learning System materials or content in any form without prior authorization from IMA is subject to legal action and will be reported to the Institute of Certified Management Accountants (IMA) and immediately expelled from the IMA and CMA program, ~. It is your responsibility to ensure that any CMA exam review materials that you are using have been provided to you through authorized channels or personnel. If you are ist doubt about the authenticity of your materials or question the means by which they have been provided to you, contact IMA customer service at (800) 638-4427 in the U.S. or +1 (201) 573-9000. This material is designed for leaming purposes and is distributed with the understanding that the publisher and authors are not offering legal or professional services. l SS ty coter Experts Acknowledgements of Subj ‘The CMA Learning System™ (CMALS) content is written to help explain the concepts and calculations fom the Certified Management Accountant (CMA) exam Learning Outcome Statements (LOS) published by the Institute of Certified Management Accountants (ICMA). IMA would like to acknowledge the team of subject matter experts who worked together in conjunction with IMA staff to produce this version of the CMA Learning System. Saurav Dutta, CMA, is an associate professor and former chair of the Accounting Department at the State University of New York at Albany. Dutta is the author of some 20 research articles published in various academic journals. He received his Ph.D. in Accounting from the University of Kansas and is also the recipient of the Robert Beyer Silver Medal for securing the second highest total score in a CMA examination, Tony Griffin is the accounting manager for Dayton Aerospace, Inc., a senior management consulting firm specializing in defense acquisition and logistics support to government and industry customers. Griffin has been actively involved in supporting the IMA and the CMA certification by serving as president of his local IMA chapter and by organizing and leading CMA review courses in the Dayton, Ohio, area. He also serves as the facilitator for the CMA Online Intensive Review course where he supports online students around the world with their preparations for the CMA exams. Karen L. Jett, CMA, is a consultant specializing in values-based business development and ethics training. Prior to starting her own business, she acquired over two decades of experience working in privately-held companies and holds a degree in accounting from Temple University (Philadelphia, PA). Jett is author of Grow Your People, Grow Your Business and Questioning Ethics, an innovative ethics training system designed specifically for smaller businesses. She is an adjunct professor at Villanova University (Villanova, PA) where she teaches the CMA Review Courses. Jan Kooiman holds a doctorate in Business Economics from the University of Amsterdam. He worked for an accounting and audit firm before stepping into the professional world as CFO and Board member of an international company. Kooiman is a qualified transactional Six Sigma Black Belt and Trainer, and is adjunct professor of Finance, Business and Accounting at the Webster and Leiden University in the Netherlands, teaching MBA Finance and Management Accounting, He is also the program manager and instructor of the CMA program at the World Trade Center Amsterdam. Lou Petro, CMA, CPA, CIA, CCP, CISA, CFE, CFM, PE, is a senior manager with a major fraud investigation firm and a former consultant and auditor. Petro specializes in fraud deterrence and investigation, corporate governance, bankruptcy, information systems auditing, production and inventory controls, internal controls, and cost and managerial accounting. He has also taught auditing, systems, accounting, and finance courses at colleges and universities in Michigan and Onario. Siaw-Peng Wan, CFA, is a professor of finance and the MBA program director at Elmiurst College (Elmhurst, IL). He received his Ph.D. in economics from the University of Illinois at Urbana- Champaign and he recently became a CFA charter holder. His most recent articles on online investing and banking have appeared in The Internet Encyclopedia and The Handbook of Information ‘Security. Wan has taught the CMA Review Courses at Northern Illinois University since 2004. ‘MALS Part 2: Financial Decision Making, Version 3.0 i (© 2009 Insite of Management Accountants, Al igh resered,‘The Institute of Management Accountants CMA Learning System™ Part 2: Financial Decision Making Contents Candidate Study Information. How to Use the CMA Learning System™. Create a Study Plan, Part 2 Introduction Section A: Financial Statement Analysis. Topic 1: Basic Financial Statement Analysis... Topic 2: Financial Performance Metrics ~ Financial Ratios Topic 3: Profitability Analysis. Topic 4: Analytical Issues in Financial Accounting... Practice Questions: Financial Statement Analysis. Section B: Corporate Finance. ‘Topic L: Risk and Return. Topic2: Managing Financial Risk... ‘Topic 3: Financial Instruments Topic 4: Cost of Capita. Topic 5: Managing Current Assets. Topic 6: Raising Capital Topic 7: Corporate Restructuring, International Finance. Practice Questions: Corporate Finance. Section: Decision Analysis and Risk Management... Topic 1: Cost/Volume/Profit Analysis. Topic 2: Marginal Anal ySi8.re Topic Topic4: Risk Rx Ascrnt Practice Questions: Decision Analysis and Risk Management Section: Investment Decisions. : Capital Budgeting Process Discounted Cash Flow Analysis Payback and Discounted Payback .. Ranking Investment Projects... Risk Analysis in Capital Investment 5: Valuation Practice Questions: Investment Decisions Section E: Professional Ethics... ‘Topic |: Ethical Considerations for the Organization. Practice Questions: Professional Ethics. ii (CMALS Part 2: Fizancial Decision Making, Version 3.0 (© 2009 Lnsteue of Management Accountant, All ights reserved. | | | | fl i I i i i i Q i iEssay Exam Support Materials. 487 Essay Exam Study Tips : nn sev sen 489) Examples of Essay Question AMSWEtS.......usnnu nnn ene 490 Practice Essay Questions. . 7 woe SOL Bibliography. a 546 HOEK cssensnntnstntse nnn = eect 00) Appendix A: Present Value Tables Appendix B: ICMA Learning Outcome Statements ~ Part 2 as of December 1, 2008... | i | | NR Eo (MALS Purt2: Financial Decision Making, Version 3.0 i (© 2009 Insieute of Management Accountants. Al rights served.| Candidate Study Information CMA Certification from ICMA ‘The Certified Management Accountant (CMA) certification provides accountants and financial professionals with an objective measure of knowledge and competence in the field of management accounting, The CMA. designation is recognized globally as an invaluable credential for professional accountancy advancement inside organizations and for broadening professional skills and perspectives. ‘The two-past CMA exam is designed to develop and measure critical-thinking and. decision-making skills and to meet the following objectives: = To establish management accounting and financial management as recognized professions by identifying the role of the professional, the underlying body of knowledge, and a course of study by which such knowledge is acquired. + To encourage higher educational standards in the management accounting and financial management fields. * To establish an objective measure of an individual’s knowledge and competence in the fields of management accounting and financial management. * To encourage continued professional development. Individuals earning the CMA designation benefit by being able to: + Communicate their broad business competency and strategic financial mastery. * Obtain contemporary professional knowledge and develop skills and abilities that are valued by successful businesses. * Convey their commitment to an exemplary standard of excellence that is grounded ona strong ethical foundation and lifelong learning, * Enhance their career development, salary qualifications, and professional promotion opportunities. ‘The CMA certification is granted exclusively by the Institute of Certified ‘Management Accountants, CMA Learning Outcome Statements (LOS) ‘The Certified Management Accountant exam is based upon a series of Leaning Outcome Statements (LOS) developed by the Institute of Certified Management Accountants (ICMA). The LOS describes the knowledge and skills that make up the CMA body of knowledge, broken down by part, section, and topic. The CMA ‘Learning Systeni (CMALS) supports the LOS by addressing the subjects they cover. Candidates should use the LOS to ensure they can address the concepts in different ways or through a variety of question scenarios. Candidates should also be prepared to perform calculations referred to in the LOS in total or by providing missing components of a calculation, The LOS should not be used as proxies for exact exam. questions; they should be used as a guide for studying and learning the content that will be covered on the exam. (CMALS Part 2: Financial Decision Making, Version 3.0 © 2009 Ins of Management Accountan's. Al ighs reserved. = scone mongers er RON ss AOE ee > ca co oo mo we ea ee ra en eel OR a =