ICMAB CMA Knowledge Level flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Communication process elements

Sender, encoding, message, channel, receiver, decoding, and feedback. Noise can interfere at any stage, reducing fidelity between intended and received meaning.

Channel richness

The capacity of a medium to convey information and cues. Face-to-face is richest; formal numeric reports are leanest because they carry few cues and slow feedback.

Grapevine

Informal, largely oral communication network within an organization. It spreads quickly, supplements formal channels, and is often accurate on organizational matters but can distort details.

7 Cs of writing

Clear, concise, concrete, correct, coherent, complete, and courteous. These criteria guide business messages toward clarity and reader-focused effectiveness.

Accounting equation

Assets = Liabilities + Equity. Every transaction preserves this equality, which underlies double-entry bookkeeping and the balance sheet.

Double-entry rule

Debits increase assets and expenses; credits increase liabilities, equity, and revenue. Total debits must equal total credits for every transaction.

Accrual basis

Revenue is recorded when earned and expenses when incurred, regardless of cash timing. It contrasts with cash basis, which records only cash movements.

Straight-line depreciation

Annual charge equals (Cost − Residual value) / Useful life. It allocates an equal depreciation amount to each period of the asset's service life.

Current ratio

Current assets divided by current liabilities. It measures short-term liquidity, indicating ability to cover obligations due within one year.

Closing entries

Entries that transfer revenue, expense, and dividend balances to retained earnings. They zero temporary accounts so the next period starts fresh.

Future value formula

FV = PV(1 + r)^n, where r is the periodic interest rate and n the number of periods. It compounds a present amount forward in time.

Net present value

Sum of discounted future cash inflows minus the initial outlay. A positive NPV means the project adds value at the given discount rate.

CAPM

Required return = risk-free rate + beta × (market return − risk-free rate). Beta captures systematic risk relative to the market portfolio.

WACC

Weighted average cost of capital = (E/V) × Re + (D/V) × Rd × (1 − tax rate). It is the hurdle rate for investment decisions.

Bond price and yield

Bond prices move inversely to market interest rates. A bond trades at a premium when its coupon rate exceeds the market yield, and at a discount when below.

Systematic versus unsystematic risk

Systematic risk is market-wide and non-diversifiable, measured by beta. Unsystematic risk is firm-specific and can be reduced through diversification.

Management functions (POLC)

Planning, organizing, leading, and controlling. Controlling compares actual performance against standards and applies corrective action when deviations occur.

Maslow's hierarchy

Five need levels: physiological, safety, social, esteem, and self-actualization. Lower needs are generally satisfied before higher needs motivate behavior.

Herzberg two-factor theory

Hygiene factors such as pay and conditions prevent dissatisfaction but do not motivate. Motivators such as achievement and recognition create satisfaction and drive performance.

Marketing mix 4 Ps

Product, price, place, and promotion. Services extend this to seven Ps by adding people, process, and physical evidence.

Break-even quantity

Fixed costs divided by contribution margin per unit, where contribution margin equals unit price minus unit variable cost. It is the sales volume yielding zero profit.

Compound interest

Amount = P(1 + r/n)^(nt), where n is compounding periods per year and t is years. More frequent compounding raises the effective return.

Mean, median, mode

Mean is the arithmetic average, median the middle value, and mode the most frequent value. Skewed distributions pull the mean toward the tail.

Coefficient of variation

Standard deviation divided by the mean. It expresses relative dispersion, allowing risk comparison across datasets with different scales.

Normal distribution rule

A symmetric bell-shaped distribution in which about 68% of values lie within one standard deviation, 95% within two, and 99.7% within three.

Price elasticity of demand

Percentage change in quantity demanded divided by percentage change in price. Demand is elastic when the absolute value exceeds one, inelastic when below one.

Price ceiling and floor

A ceiling set below equilibrium creates a shortage; a floor set above equilibrium creates a surplus. Both are binding price controls.

Real versus nominal GDP

Nominal GDP uses current prices; real GDP is adjusted for inflation, using base-year prices. Real GDP better measures output growth over time.

Fiscal versus monetary policy

Fiscal policy uses government spending and taxation. Monetary policy uses money supply and interest rates, typically managed by a central bank.

ERP system

Enterprise resource planning integrates core business functions such as finance, human resources, and supply chain into one system sharing a common database.

Cloud service models

IaaS provides infrastructure, PaaS provides development platforms, and SaaS provides ready applications. Deployment may be public, private, or hybrid.

Contract essentials

Valid contracts require offer, acceptance, consideration, capacity, lawful object, and intention to create legal relations. Missing elements can make a contract void or unenforceable.