CMA Exam #1 Preparation with Comprehensive Review

The primary purpose of the statement of cash flows is to allow users to assess the capacity of the enterprise to generate cash and cash equivalents and the needs of the enterprise for cash resources. In accomplishing its purpose, the statement focuses attention on three different activities related to cash flows:

• Operating activities represent the principal revenue-producing activities of the enterprise and all other activities that are not investing or financing activities.
• Investing activities represent the acquisition and disposal of long-term assets and other investments not included in "cash equivalents."
• Financing activities represent activities that result in changes in the size and composition of the equity capital and borrowing of the enterprise.

liabilities involve future disbursements of assets or other future economic benefits (HB Section 1000). A liability is said to have three essential characteris­tics: a) It is an obligation to others that entails settlement by future transfer or use of cash or other assets, provision of goods or services on a determinable date, or on the occurrence of some specified event; b) the entity has little or no discretion to avoid the obligation; and c) the transaction or other event creating the obligation has already occurred.

Room CMA1A1

This lecture is a short video on all topics in Section B. Planning, Budgeting and Forecasting. Print off the the IMA Learning Outcomes for Section B - Budgeting that I have restated as questions for you to research.

This section is most important - 30% of MC questions will be in this area. Also a case question will likely be on budgeting - so know the learning objectives in section B 5.

IMA learning Outcomes to be tested

Section B.2. Budgeting concepts

The candidate should be able to:

a. describe the role that budgeting plays in the overall planning and performance evaluation process of an organization

b. explain the interrelationships between economic conditions, industry situation, and a firm's plans and budgets

c. identify the role that budgeting plays in formulating short-term objectives and planning and controlling operations to meet those objectives

d. demonstrate an understanding of the role that budgets play in measuring performance against established goals

e. identify the characteristics that define successful budgeting processes

f. explain how the budgeting process facilitates communication among organizational units and enhances coordination of organizational activities

g. describe the concept of a controllable cost as it relates to both budgeting and performance evaluation

h. explain how the efficient allocation of organizational resources are planned during the budgeting process

i. identify the appropriate time frame for various types of budgets

j. identify who should participate in the budgeting process for optimum success

k. describe the role of top management in successful budgeting

l. identify best practice guidelines for the budget process

m. demonstrate an understanding of the use of cost standards in budgeting

n. differentiate between ideal (theoretical) standards and currently attainable (practical) standards

o. differentiate between authoritative standards and participative standards

p. identify the steps to be taken in developing standards for both direct material and direct labor

q. demonstrate an understanding of the techniques that are used to develop standards such as activity analysis and the use of historical data

r. discuss the importance of a policy that allows budget revisions that accommodate the impact of significant changes in budget assumptions

s. explain the role of budgets in monitoring and controlling expenditures to meet strategic objectives

t. define budgetary slack and discuss its impact on goal congruence

Read the relevant chapter in your copy of Horngen. Chapter 10 - Determining how costs behave, go over the PPT;s and the notes .Answer the questions in this section.B3 - forecasting techniques. The IMA likes to test learning curves.

IMA Learning Outcomes to be tested

Part 1 – Section B.3. Forecasting techniques

The candidate should be able to:

a. demonstrate an understanding of a simple regression equation

b. define a multiple regression equation and recognize when multiple regression is an appropriate tool to use for forecasting

c. calculate the result of a simple regression equation

d. demonstrate an understanding of learning curve analysis

e. calculate the results under a cumulative average-time learning model

f. list the benefits and shortcomings of regression analysis and learning curve analysis

g. calculate the expected value of random variables

h. identify the benefits and shortcomings of expected value techniques

i. use probability values to estimate future cash flows

The lecture presents the learning objectives as published by the IMA re-phrased as questions. The downloadable file contains past student's answers to some of the questions. Study Horngren and the notes then attempt the questions.

IMA learning outcomes to be tested

Part 1 – Section B.4. Budget methodologies

For each of the budget systems identified (annual/master budgets, project budgeting, activity-based budgeting, zero-based budgeting, continuous (rolling) budgets, and flexible budgeting), the candidate should be able to:

a. define its purpose, appropriate use, and time frame

b. identify the budget components and explain the interrelationships among the components

c. demonstrate an understanding of how the budget is developed

d. compare and contrast the benefits and limitations of the budget system

e. evaluate a business situation and recommend the appropriate budget solution

f. prepare budgets on the basis of information presented

g. calculate the impact of incremental changes to budg