CMA Part 2 Exam Preparation: Comprehensive Course Bundle

Explore ratio analysis and evaluate liquidity, activity, and solvency ratios to interpret a company's financial statements and its short-term financial position.

Learn how liquidity ratios assess a firm's ability to pay current obligations, using operating cycle concepts and the balance of current assets, current liabilities, and stockholders equity.

Assess net working capital by subtracting current liabilities from current assets to measure short-term liquidity. See a balance sheet example illustrating assets like cash and receivables against liabilities like payables.

Explore how the current ratio and quick ratio assess liquidity by linking current assets to current liabilities, indicating solvency and immediate payment ability.

Explore cash ratio and cash flow ratio to assess liquidity by comparing cash and marketable securities to current liabilities and by evaluating cash flow from operations against obligations.

Define the net working capital ratio as current assets minus current liabilities over total assets. See how changing current liabilities shifts the ratio using the Excel example.

Compute the account receivable turnover using net credit sales and average accounts receivable to assess collection efficiency. Determine days in receivable to gauge credit period and cash flow impact.

Analyze inventory turnover ratio, calculated as cost of goods sold over average inventory, to gauge inventory efficiency and turnover days; compare with accounts payable turnover to optimize cash flow.

Understand the operating cycle and cash cycle by linking receivable turnover and days of sale outstanding with days in inventory and payable turnover to reveal funds blocked and credit periods.

Assess how fixed assets turnover and total assets turnover reveal asset efficiency in generating revenue, using net sales over average fixed assets and over average total assets.

Examine capital structure ratios at a point in time, including debt to capital, debt to equity, long-term debt to equity, and debt to total assets, and interpret their solvency implications.

Explore earnings coverage ratios that assess a firm's ability to service debt from current earnings, including times interest earned, fixed charge, and cash flow to fixed charges ratios.

Explore leverage as an advantage in study and business, and distinguish fixed operating costs from fixed financial costs to understand operating and financial leverage and their computations.

Explore how fixed costs create operating leverage, boosting EBIT with sales growth and exposing risk when sales fall. Learn how fixed debt costs drive financial leverage and affect net income.

Explore equity multiplier and financial leverage. Calculate EBITDA margin and analyze return on assets and return on equity using averages.

Use the DuPont model to standardize returns by decomposing ROA into net profit margin and asset turnover, and ROE into margin, turnover, and equity multiplier.

Study market valuation techniques for shares, including book value per share, market-to-book ratio, price-earnings ratio, and earnings before interest taxes depreciation and amortization.

Explain earnings per share as a key performance measure, covering basic and diluted EPS, income available to common shareholders, weighted average shares outstanding, and future dilution from convertibles.

Explore earnings yield and price-earnings ratios, compute dividend payout ratios from earnings per share and market price per share, and examine ratio analysis limitations.

Analyze how ratio analysis relies on estimates and input data that can distort results, enable window dressing, and impair comparability due to inflation, policy differences, and seasonal factors.

Understand common size financial statements, which express income items as net sales percentages and balance sheet items as percentages of total assets, guiding cross-firm comparisons and expansion decisions.

Explore foreign exchange fluctuations and terms like reporting currency, functional currency, spot rate, and current exchange rate, and learn how to record transaction gains and losses at settlement dates.

Remeasurement converts unsettled transactions to the functional currency at each reporting date, with gains or losses in earnings; translation restates assets, liabilities, and revenue and expenses using historical rates.

Explore investment risk and portfolio management, learn risk types and minimization, and study financial instruments, cost of capital, and current asset management in corporate finance.

Define risk and return, explain return on investment and rate of return, and summarize the risk-return trade-off, including systematic and unsystematic risks and representative financial instruments.

Learn how standard deviation and variance assess investment risk, compute expected rate of return via weighted probabilities, and preview CAPM (capital asset pricing model).

Learn how the capital asset pricing model (CAPM) links a security's beta and systematic risk to the expected return, using the risk free rate and market return, with an example.

Learn portfolio management by selecting the optimal portfolio that maximizes return while minimizing risk. Explore indifference curves, risk aversion, and align investments with cash flow expectations.

Explore bonds as the main long-term debt financing for corporations and governments, covering par and face value, coupon rate, indenture, sinking fund, and tax-deductible interest.

Explains the types of bonds, including term, serial, variable rate, zero coupon, callable, convertible, mortgage, debentures, and registered and bearer bonds, and discusses advantages, disadvantages, risk, and valuation.

Compute bond valuation by discounting the present value of cash flows at the market rate, assess premium or discount, and record journal entries for bonds payable.

Compare equity and preference shares, emphasizing common stock ownership, voting rights, dividend features, dilution of earnings per share, and how IPOs affect a company's creditworthiness.

Preferred stock blends debt and equity, carries a fixed dividend and priority over common shareholders, often without voting rights, and may be cumulative, convertible, or participating.

Explore stock valuation, comparing preferred stock dividends to the market rate to price relative to par value. For common stock, value uses earnings per share with a risk premium.

Value a preferred stock with fixed dividends by dividing dividend per share by cost of capital. For example, a $12 dividend at 15% cost yields an $80 per share value.

Value a stock by discounting expected dividends per share using the constant growth dividend discount model. Compare model value to market price to spot undervalued or overvalued stocks.

Compute present value of dividends during the high-growth period, apply a steady-growth model for later years, and discount back to year one to obtain stock value under variable dividend growth.

Explore derivatives and hedging concepts, showing how long and short positions manage risk, and how options—covered or naked—function as a key derivative.

Forward contracts mitigate risk by locking in price and quantity for a future delivery, placing buyers in a long position and sellers in a short position, regardless of market changes.

Explore leases, convertible securities, stock purchase warrants, and retained earnings as sources of long-term financing, outlining their structure, benefits, and trade-offs for CMA part 2 exam preparation.

Defines cost of capital as investors' required return for long-term projects and guides discounting of future cash flows. Covers debt, preferred, common, and retained earnings costs, with equity costlier.

Compute a firm's weighted average cost of capital from its target capital structure, weighting debt, preferred stock, and equity costs after taxes; the example yields 13.89%, guiding project selection.

Calculate the after-tax weighted average cost of capital without preferred stock using E/V Re and D/V Rd(1-tax). Understand how minimizing WACC through optimal capital structure maximizes shareholder value.

The marginal cost of capital is the cost of the next dollar of new capital after internal funds are exhausted, typically higher than the current weighted average cost of capital.

Calculate the cost of new capital by evaluating new debt, new preferred stock, and common stock using net issue proceeds and flotation costs to derive the average cost of capital.

Explore working capital as the difference between current assets and current liabilities, and compare conservative, aggressive, and optimal current asset policies to minimize liquidity costs while guarding against insolvency.

Learn why firms hold cash for transactions, contingencies, and opportunities, and how to compute the optimal cash balance with an economic order quantity formula.

Learn to forecast future cash flows using a cash budget, projecting receipts and payments, analyzing credit collection rates, and timing purchases, payroll, and expenses.

Learn how to speed up cash collection, quantify benefits using daily cash receipts and reduced float, and evaluate profitability of faster collection deals with examples.

Speed up cash collections by using lockbox systems and fast wire transfers across domestic and international accounts. Avoid delays from drafts, cheque payments, and payment float to keep funds flowing.

Master receivables management by evaluating creditworthiness, establishing credit terms, and applying a three-step process: increase in receivables, cost of change, and net benefit or loss (including 2/10 net 30).

Explore inventory management as a key current asset within working capital, hedging supply and demand uncertainty, outlining costs (purchase, carrying, ordering, stockouts) and methods like EOQ, just-in-time, and kanban.

Short term financing relies on spontaneous sources such as accounts payable and accrued expenses, bank facilities, and market instruments, with accounts payable the cheapest financing for production.

Compute the annualized cost of not taking a discount using the given formula, and decide whether to pay early or finance the purchase, as illustrated by a 36.73% cost example.

Understand the effective interest rate on a loan by accounting for processing fees that reduce usable funds, i.e., net interest expense over usable funds.

Explore the factoring of accounts receivable as a financing source, showing how selling receivables to a factor lowers overhead, eliminates bad debts, and yields net proceeds after fees and interest.

Learn how dividend policy and share repurchases impact a company's earnings, growth, and shareholder value, including legal constraints, cash needs, stock dividends, splits, and treasury shares.

Explore decision making under various circumstances, including special orders with or without capacity and make-or-buy choices, and analyze price elasticity of demand, pricing theory, and risk management.

Apply marginal analysis to decision making by focusing on relevant and avoidable costs, and assess divestment and capacity decisions alongside carrying amount and economic value.

Apply decision-making margin analysis for special orders, comparing excess capacity and no excess capacity, and determine minimum price to cover variable costs and foregone contribution margin.

Decide whether to make or buy a product by comparing total relevant costs and capacity, considering outsourcing implications and opportunity costs.

Apply margin analysis to capacity-constrained decisions and product mix. Decide whether to sell at the split-off point or process further by comparing incremental costs and revenues.

Explore price elasticity of demand with the arc (midpoint) formula and interpretation, showing how price changes affect quantity demanded and how income and substitution effects shift the demand curve.

Interpret the demand elasticity coefficient: above one means elastic demand, one means unitary elasticity, below one means inelastic, while infinite and zero elasticity denote perfectly elastic and perfectly inelastic demand.

Explore pricing strategies by weighing internal factors, including marketing objectives, relevant costs, capacity, and special order considerations, and external factors like market type, customer perception, and price-demand relationship.

Explore market-based pricing, competition-based pricing, and cost-based pricing strategies, including price skimming, penetration pricing, intermediaries' markups, price adjustments, and variable and total cost formulas.

Master risk management by identifying the five risk types: hazard, financial, operational, strategic, and business, and quantifying exposure through expected loss, then apply avoidance and retention strategies.

Master strategies for risk exposures, including mitigation, sharing through insurance, and exploitation for high returns, while applying a structured risk management process to identify, assess, prioritize, respond, and monitor risk.

Explore CVP analysis and breakeven concepts, linking fixed and variable costs to revenue, calculate unit and dollar breakeven, and assess marginal cost and profit for production decisions.

Explore CVP analysis through margin of safety and break-even concepts, and learn how to compute targeted operating income and after tax net income to guide sales decisions.

Compute target income and margin of safety using a mathematical equation where operating income equals sales minus variable costs minus fixed costs, and apply it to break-even and multi-product scenarios.

Apply cost-volume-profit analysis to choose the best product option among multiple choices under limited resources, determining the breakeven revenue to compare fixed versus variable fee structures.

Use CVP analysis to evaluate special orders by calculating contribution margin and operating income, considering idle capacity and fixed costs, to decide whether to accept or reject the order.

Define marginal cost of capital as cost to raise the next dollar after internal funds are exhausted. Compare it with weighted average cost of capital when retained earnings are insufficient.

Learn how firms maximize profit by producing where marginal revenue equals marginal cost, and why continuing production while MR > MC yields profit before losses begin; apply to managerial decisions.

This lecture covers the short-run cost relationship, splitting total cost into fixed and variable parts, and shows how MC relates to AFC, AVC, and ATC as output changes.

Explores capital budgeting and its process, including cost considerations and applications; explains budgeting methods and ranks investment projects to guide resource deployment.

Explore capital budgeting concepts for long-term investments, including identifying, evaluating, and implementing projects, with tax implications, cost types, and the role of weighted average cost of capital.

Learn to rank investment proposals using capital budgeting methods by calculating net initial investment, after-tax cash flows, depreciation tax shields, and project termination cash flows, with tax and inflation considerations.

Master discounted cash flow analysis and time value of money concepts, including present value, future value, and annuities, for informed capital budgeting decisions.

Explore capital budgeting with NPV and IRR: discount cash flows at the hurdle rate, interpret positive NPV as desirable, and compare to IRR while noting IRR pitfalls.

Explain the payback period method and constant cash flow example, noting it ignores time value of money and highlights simplicity and risk.

Learn the discounted payback period, a capital budgeting method that discounts cash flows to present value to determine break even time. Compare its time value advantages with traditional payback drawbacks.

Learn to rank investment projects under capital rationing using the profitability index, a ratio of present value to investment, to maximize net present value with limited funds.

Introduce professional ethics in CMA part two, covering CMA expectations, governing laws, fraud risk, red flags, and linking internal controls to financial decision making.

Explore ethics for management accountants under the IMA, outlining four core principles: honesty, fairness, objectivity, and responsibility, and how they guide professional conduct, standards, and timely, reliable reporting.

Explore the four ethical standards for management accountants—competence, confidentiality, integrity, and credibility—and the consequences of non-compliance. Ensure competence through continuing professional education and by communicating limits when advising.

Maintain confidentiality of information, disclosing only when authorized or legally required. Inform relevant parties, monitor subordinates, and prevent leakage or use for unethical or illegal advantage.

Develop and uphold integrity by avoiding conflicts of interest, communicating with stakeholders transparently, and maintaining credibility to protect the institute’s reputation and stakeholder trust.

Follow your organization's policies to resolve an ethical conflict. If unresolved, discuss with your supervisor and escalate to higher management or the board, consulting IMA ethics counselors or an attorney.

We examine the Foreign Corrupt Practices Act of 1977, detailing anti-bribery provisions and internal accounting controls, and how it restricts corrupt payments to foreign officials by US issuers.

Explore the Sarbanes-Oxley Act 2002 (SOX), its ethics provisions under sections 406A and 406C, and the code of ethics for senior financial officers, auditors, and internal controls.

Discover how corporate responsibility for ethical behavior is built through a unified code of conduct and tone at the top, guiding decisions across the organization.

Explore how human capital shapes ethical culture in organizations, from hiring and continuous training to code of ethics, and how monitoring tools like surveys and performance feedback ensure responsible conduct.

Implement a whistleblower framework with a confidential ethics helpline for reporting violations. Align international ethics values through orientation and training, and reinforce with internal controls, re-engineering, and quality management.

Explore the fraud risk model and types of fraud, including fraudulent financial reporting and misappropriation of assets, driven by opportunity, rationalization, and motivation.

Identify key fraud risk indicators in financial reporting, such as implausible performance, bankruptcy pressure, high senior management turnover, strained auditor relations, and potential asset misappropriation.

Explore internal controls to prevent and address fraud and errors, including preventive, detective, corrective, directive, compensatory, and complementary controls, plus segregation of duties and safeguarding measures.

Explore core business ethics concepts, including morals, virtue, fairness, integrity, due diligence, and fiduciary responsibility. Understand how individual beliefs shape organizational behavior.

Explore teleology, utilitarianism, deontology, virtue ethics, relativism, and justice in business decisions, and how these moral philosophies inform corporate ethics, CSR, and IMA standards.

Explore the four IMA principles—honesty, fairness, objectivity, and responsibility—and the competence, confidentiality, integrity, and credibility standards guiding management accounting professionals.

Follow procedures to resolve ethical conflicts, using anonymous reporting and escalation through the chain of command up to the head of business; consult the IMS helpline for confidential guidance.

Explore the fraud triangle, pressure, opportunity and capability, and rationalization, and see how debt, access to resources, and personal justifications enable fraud when all three align.

Explore case studies of embezzlement and fraud across banks and a church fundraiser, highlighting the fraud triangle: opportunity, rationalization, and pressure, and the importance of due diligence.

Explore how organizational ethics stems from corporate culture shaped by top leadership, national cultures, and governance, with emphasis on groupthink, Sarbanes-Oxley section 302, and codes of ethics.

Ethics start at the top and must be reinforced through leadership communication, ongoing training, and clear decision-making expectations. Explore the whistleblower framework, non-compliance penalties, and international legal nuances across regions.

This framework for ethical conduct defines eight steps from assessing the current ethical position to implementing a code of conduct, leadership development, monitoring, and feedback to embed ethical practices.

Explore sustainability and social responsibility as corporate citizens, detailing economic, legal, ethical, and philanthropic responsibilities and how businesses balance pollution and stakeholder duties.

Master key decision analytics terms, including cost, cost driver, and cost object, and distinguish fixed and variable costs, revenue drivers, and relevant range in cost-volume-profit analysis to assess operating income.

Explore fixed and variable cost behaviors, view per-unit versus per-period costs on graphs, and identify the break-even point where total revenue meets total cost.

Explains break-even calculation using contribution margin and fixed costs, showing how operating income and margin of safety vary with sales, including multi-product scenarios and sensitivity analysis.

Assess how special order analysis uses marginal analysis to compare incremental cost against price, considering capacity and fixed costs, to maximize contribution margin.

Apply marginal analysis to decide between in-house production and outsourcing, weighing variable and fixed costs, incremental costs, and short-term profitability in a 1,000-unit scenario.

Apply marginal analysis to decide whether to sell or process further by comparing contribution margins across stages, accounting for processing costs and losses in a petrochemical example.

Use marginal analysis to decide keep or sell a loss-making unit, balancing contribution margin against fixed costs and rent effects to show shutdown saves only 30,000.

Examine keep or sell decisions for a factory segment by comparing fixed costs, parent charges, and land rent to reach break-even.

Maximizing contribution margin per unit of the limiting factor is analyzed across three products under a raw material constraint to identify the most profitable production mix.

Explore pricing decisions by analyzing variable and fixed costs, overheads, and incremental costs, including special order pricing and floor pricing to maximize contribution margin.

Explore pricing strategies including market based, cost based, and competitive approaches, with examples of price matching, undercutting, and demand-driven adjustments to optimize margins.

Apply target pricing through reverse engineering and market assessment, using internal cost models or cost tables, then adjust with life cycle and peak load pricing to optimize profits.

Learn how demand and supply create market equilibrium by examining demand and supply curves, price changes, income and substitution effects, and factors shifting curves.

Explore how price elasticity of demand shapes pricing decisions for normal goods, with elastic and inelastic examples, and how revenue and profit respond to price changes.