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Content Specification Outlines
CMA® (Certified Management Accountant) Examinations
Part 1 - Financial Planning, Performance, and Analytics

A. External Financial Reporting Decisions (15% - Levels A, B, and C)
1. Financial statements
a. Balance sheet
b. Income statement
c. Statement of changes in equity
d. Statement of cash flows
e. Integrated reporting
2. Recognition, measurement, valuation, and disclosure
a. Asset valuation
b. Valuation of liabilities
c. Equity transactions
d. Revenue recognition
e. Income measurement
f. Major differences between U.S. GAAP and IFRS
B. Planning, Budgeting, and Forecasting (20% - Levels A, B, and C)
1. Strategic planning
a. Analysis of external and internal factors affecting strategy
b. Long-term mission and goals
c. Alignment of tactics with long-term strategic goals
d. Strategic planning models and analytical techniques
e. Characteristics of a successful strategic planning process
2. Budgeting concepts
a. Operations and performance goals
b. Characteristics of a successful budget process
c. Resource allocation
d. Other budgeting concepts
3. Forecasting techniques
a. Regression analysis
b. Learning curve analysis
c. Expected value
Part 1 - Financial Planning, Performance, and Analytics
4. Budgeting methodologies
a. Annual business plans (master budgets)
b. Project budgeting
c. Activity-based budgeting
d. Zero-based budgeting
e. Continuous (rolling) budgets
f. Flexible budgeting
5. Annual profit plan and supporting schedules
a. Operational budgets
b. Financial budgets
c. Capital budgets
6. Top-level planning and analysis
a. Pro forma income
b. Financial statement projections
c. Cash flow projections
C. Performance Management (20% - Levels A, B, and C)
1. Cost and variance measures
a. Comparison of real to planned results
b. Use of flexible budgets to analyze performance
c. Management by exception
d. Use of standard cost systems
e. Analysis of variation from standard cost expectations
2. Responsibility centers and reporting segments
a. Types of responsibility centers
b. Transfer pricing
c. Reporting of organizational segments
3. Performance measures
a. Product profitability analysis
b. Business unit profitability analysis
c. Customer profitability analysis
d. Return on investment
e. Residual income
f. Investment base issues
g. Key performance indicators (KPIs)
h. Balanced scorecard
D. Cost Management (15% - Levels A, B, and C)
1. Measurement concepts
a. Cost behavior and cost objects
b. real and normal costs
c. Standard costs
d. Absorption (full) costing
e. Variable (direct) costing
f. Joint and by-product costing
2. Costing systems
a. Job order costing
b. Process costing
c. Activity-based costing
d. Life-cycle costing
3. Overhead costs
a. Fixed and variable overhead expenses
b. Plant-wide vs. departmental overhead
c. Determination of allocation base
d. Allocation of service department costs
4. Supply chain management
a. Lean resource management techniques
b. Enterprise resource planning (ERP)
c. Theory of Constraints
d. Capacity management and analysis
5. Business process improvement
a. Value chain analysis
b. Value-added concepts
c. Process analysis, redesign, and standardization
d. Activity-based management
e. Continuous improvement concepts
f. Best practice analysis
g. Cost of quality analysis
h. Efficient accounting processes
E. Internal Controls (15% - Levels A, B, and C)
1. Governance, risk, and compliance
a. Internal control structure and management philosophy
b. Internal control policies for safeguarding and assurance
c. Internal control risk
d. Corporate governance
e. External audit requirements
2. System controls and security measures
a. General accounting system controls
b. Application and transaction controls
c. Network controls
d. Backup controls
e. Business continuity planning
F. Technology and Analytics (15% - Levels A, B, and C)
1. Information systems
a. Accounting information systems
b. Enterprise resource planning systems
c. Enterprise performance management systems
2. Data governance
a. Data policies and procedures
b. Life cycle of data
c. Controls against security breaches
3. Technology-enabled finance transformation
a. System development life cycle
b. Process automation
c. Innovative applications
4. Data analytics
a. Business intelligence
b. Data mining
c. Analytic tools
d. Data visualization
A. Financial Statement Analysis (20% - Levels A, B, and C)
1. Basic financial statement analysis
a. Common size financial statements
b. Common base year financial statements
2. Financial ratios
a. Liquidity
b. Leverage
c. Activity
d. Profitability
e. Market
3. Profitability analysis
a. Income measurement analysis
b. Revenue analysis
c. Cost of sales analysis
d. Expense analysis
e. Variation analysis
4. Special issues
a. Impact of foreign operations
b. Effects of changing prices and inflation
c. Impact of changes in accounting treatment
d. Accounting and economic concepts of value and income
e. Earnings quality
Part 2 - Strategic Financial Management
B. Corporate Finance (20% - Levels A, B, and C)
1. Risk and return
a. Calculating return
b. Types of risk
c. Relationship between risk and return
2. Long-term financial management
a. Term structure of interest rates
b. Types of financial instruments
c. Cost of capital
d. Valuation of financial instruments
3. Raising capital
a. Financial markets and regulation
b. Market efficiency
c. Financial institutions
d. Initial and secondary public offerings
e. Dividend policy and share repurchases
f. Lease financing
4. Working capital management
a. Working capital terminology
b. Cash management
c. Marketable securities management
d. Accounts receivable management
e. Inventory management
f. Types of short-term credit
g. Short-term credit management
5. Corporate restructuring
a. Mergers and acquisitions
b. Other forms of restructuring
6. International finance
a. Fixed, flexible, and floating exchange rates
b. Managing transaction exposure
c. Financing international trade
C. Decision Analysis (25% - Levels A, B, and C)
1. Cost/volume/profit analysis
a. Breakeven analysis
b. Profit performance and alternative operating levels
c. Analysis of multiple products
2. Marginal analysis
a. Sunk costs, opportunity costs, and other related concepts
b. Marginal costs and marginal revenue
c. Special orders and pricing
d. Make vs. buy
e. Sell or process further
f. Add or drop a segment
g. Capacity considerations
3. Pricing
a. Pricing methodologies
b. Target costing
c. Elasticity of demand
d. Product life-cycle considerations
e. Market structure considerations
D. Risk Management (10% - Levels A, B, and C)
1. Enterprise risk
a. Types of risk
b. Risk identification and assessment
c. Risk mitigation strategies
d. Managing risk
E. Investment Decisions (10% - Levels A, B, and C)
1. Capital budgeting process
a. Stages of capital budgeting
b. Incremental cash flows
c. Income tax considerations
d. Evaluating uncertainty
2. Capital investment analysis methods
a. Net present value
b. Internal rate of return
c. Payback
d. Comparison of investment analysis methods
F. Professional Ethics (15% - Levels A, B, and C)
1. Business ethics
a. Moral philosophies and values
b. Ethical decision making
2. Ethical considerations for management accounting and financial management professionals
a. IMAs Statement of Ethical Professional Practice
b. Fraud triangle
c. Evaluation and resolution of ethical issues
3. Ethical considerations for the organization
a. Organizational factors and ethical culture
b. IMAs Statement on Management Accounting, “Values and Ethics: From Inception to Practice”
c. Ethical leadership
d. Legal compliance
e. Responsibility for ethical conduct
f. Sustainability and social responsibility

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Certified Management Accountant (CMA)
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($17,200,000 of plant and equipment+ $1,800,000 of working capital), a 15% imputed interest charge equals $2,850,000. Adding $2,000,000 of residual income to the imputed interest results in a target profit of $4,850,000. This profit can be achieved if costs are
$25,150,000 ($30,000,000 revenue $4,850,000 profit).
QUESTION: 621
The following information relates to Cinder Co.s Northeast Division Sales $600,000
Variable costs 360,000 Traceable fixed costs 60,000 Average invested capital 120,000 Imputed interest rate 8%
Cinders residual income was
A. $170,400 B. $180,000 C. $189,600 D. $230,400
Answer: A
Residual income is income of an investment center minus an imputed interest charge for invested capital. Accordingly, Cinders residual income is $170,400 [($600,000 sales
$360,000 variable costs $60,000 traceable fixed costs) net income ($120,000 average invested capital x 8%) imputed interest].
QUESTION: 622
REB Service Co. is a computer service center. For the month, REB had the following operating statistics:
Based on the above information, which one of the following statements is true? REB has a
1. Return on investment of 4%.
2. Residual income of $(5,000).
3. Return on investment of 1.6%.
4. Residual income of $(22,000).
Answer: B
Return on investment is commonly calculated by dividing pretax income by total assets available Residual income is the excess of the return on investment over a targeted amount equal to an imputed interest charge on invested capital. The rate used is ordinarily the weighted-average cost of capital. Some companies measure managerial performance in terms of the amount of residual income rather than the percentage return on investment. Because REB has assets of $500,000 and a cost of capital of 6%, it must earn $30,000 on those assets to cover the cost of capital. Given that operating income was only $25,000, it had a negative residual income of $5,000.
QUESTION: 623
Charli&s Service Co. is a service center. For the month of June, Charlies had the following operating statistics:
Charlies has a
1. Return on investment of 3.33%.
2. Residual income of $(5,000).
3. Return on investment of 6%.
4. Residual income of $(20,000).
Answer: B
Residual income is the excess of the real ROl in dollars over a targeted amount equal to an imputed interest charge on invested capital. The rate used is ordinarily the weighted-average cost of capital. Some entities measure managerial performance in terms of the amount of residual income ratherthan the percentage ROl. Assuming the investment base is defined as total assets available, Charlies targeted amount is $30,000 ($500,000 total assets x 6% cost of capital). Assuming that operating income of $25,000 is the ROI in dollars, residual income was $(5,000). This result is consistent with defining the numerator of the ROl calculation (Income Investment) as operating income. However, it might also be defined as net profit aftertaxes (net income). Moreover, the ROl denominator may be defined variously, e.g., total
assets available, total assets employed, working capital plus other assets, or shareholders equity. Edith Carolina, president of the Deed Corporation, requires a minimum return on investment of 8% for any projectto be undertaken by her company. The company is decentralized, and leaves investment decisions up to the discretion of the division managers as long as the 8% return is expected to be realized. Michael Sanders, manager of the Cosmetics Division, has had a return on investment of 14% for his division for the past 3 years and expects the division to have the same return in the coming year. Sanders has the opportunity to invest in a new line of cosmetics which is expected to have a return on investment of 12%.
QUESTION: 624
Residual income is a better measure for performance evaluation of an investment center manager than return on investment because
1. The problems associated with measuring the asset base are eliminated.
2. Desirable investment decisions will not be neglected by high-return divisions.
3. Onlythe gross bookvalue of assets needs to be calculated.
4. The arguments about the implicit cost of interest are eliminated
Answer: B
Residual income is the excess of the amount of the ROI over a targeted amount equal to an imputed interest charge on invested capital. The advantage of using residual income ratherthan percentage ROI is thatthe former emphasizes maximizing a dollar amount instead of a percentage. Managers of divisions with a high ROI are encouraged to accept projects with returns exceeding the cost of capital even if those projects reduce the departments ROI. Edith Carolina, president of the Deed Corporation, requires a minimum return on investment of 8% for any projectto be undertaken by her company. The company is decentralized, and leaves investment decisions up to the discretion of the division managers as long as the 8% return is expected to be realized. Michael Sanders, manager of the Cosmetics Division, has had a return on investment of 14% for his division for the past 3 years and expects the division to have the same return in the coming year. Sanders has the opportunityto invest in a new line of
cosmetics which is expected to have a return on investment of 12%.
QUESTION: 625
If the Deed Corporation evaluates managerial performance using return on investment, what will be the preference for taking on the proposed cosmetics line by Edith Carolina and Michael Sanders?
Carolina Sanders
1. Accept Reject
2. Reject Accept
3. Accept Accept
4. Reject Reject
Answer: A
A company with an 8% ROl threshold should obviously accept a projectyielding 12% because the companys overall ROI would increase. The manager being evaluated on the basis of ROI who is already earning 14% will be unwilling to accept a 12% return on a new project because the overall ROl for the division would decline slightly. This absence of goal congruence suggests a weakness in ROl-based performance evaluation.
QUESTION: 626
Managerial performance can be measured in many differentways, including return on investment (ROD and residual income (RI). A good reason for using RI instead of ROl is that
1. RI can be computed without regard to identifying an investment base.
2. Goalcongruence is more likelyto be promoted by using RI.
3. RI is well understood and often used in the financial press.
4. ROl does not take into consideration both the investment turnover ratio and return-on sales percentage.
Answer: B
The residual income method calculates the excess of the return on an investment over a targeted amount equal to an imputed interest charge on invested capital. The rate used is usually the weighted average cost of capital. Residual income may be preferable to ROl because an enterprise will benefit from expansion as long as residual income is earned. Using a ROl, expansion might be rejected if it lowered ROl even though residual income would increase. Thus, the residual income method promotes the congruence of a managers goal with those of the enterprise. Actions that tend to benefit the company will also tend to Strengthen the measure of the managers performance.
QUESTION: 627
The balanced scorecard provides an action plan for achieving competitive success byfocusing management attention on critical success factors. Which one of the following is not one of the perspectives on the business into which critical success factors are commonly grouped in the balanced scorecard?
1. Competitor business strategies.
2. Financial performance.
3. Internal business processes.
4. Employee innovation and learning.
Answer: A
A typical balanced scorecard classifies critical success factors and measures into one of four perspectives on the business: financial, customer satisfaction, internal business processes, and learning and growth.
QUESTION: 628
Using the balanced scorecard approach, an organization evaluates managerial performance based on
1. A single ultimate measure of operating results, such as residual income.
2. Multiple financial and nonfinancial measures.
3. Multiple nonfinancial measures only.
4. Multiple financial measures only.
Answer: B
The trend in managerial performance evaluation is the balanced scorecard approach. Multiple measures of performance permit a determination as to whether a manager is achieving certain objectives at the expense of others that may be equally or more important. These measures may be financial or nonfinancial and usually include items in four categories: profitability; customer satisfaction; innovation; and efficiency, qualify, and time.
QUESTION: 629
On a balanced scorecard, which of the following would not be an example of a customer satisfaction measure?
1. Market share.
2. Economic value added.
3. Response time
4. Customer retention.
Answer: B
Customer satisfaction measures include market share, retention, response time, delivery performance, number of defects, and lead time. Economic value added, or EVA, is a profitabilit/ measure.
QUESTION: 630
On a balanced scorecard, which is more of an internal process measure than an external- based measure?
1. Cycle time.
2. Profitability.
3. Customer satisfaction.
4. Market share.
Answer: A
Cycle time is the manufacturing time to complete an order. Thus, cycle time is strictly related to internal processes Profitability is a combination of internal and external considerations. Customer satisfaction and market share are related to how customers perceive a product and how competitors react.

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