CGMA cheat sheet

NPV = Σ CFt/(1+r)^t − initial outlay; accept projects with positive NPV when cash flows are conventional.

WACC = (E/V)·ke + (D/V)·kd·(1 − t) using market weights; apply a project-specific rate when project risk differs from the firm's average risk.

CAPM: ke = rf + β(rm − rf); beta captures systematic risk only, so unsystematic risk is not compensated.

IRR is the rate where NPV = 0; accept if IRR exceeds the hurdle rate, but rank mutually exclusive projects by NPV because IRR can mislead on scale and timing.

DuPont identity: ROE = net profit margin × asset turnover × equity multiplier.

Cash conversion cycle = days inventory outstanding + days sales outstanding − days payable outstanding; shortening it releases working capital.

EVA = NOPAT − (invested capital × WACC); positive EVA indicates returns exceed the cost of capital employed.

Break-even units = fixed costs ÷ (price − variable cost per unit); operating leverage rises with the fixed-cost share.

Payback ignores the time value of money and cash flows beyond the cutoff; discounted payback corrects timing but not project scale.

Little's Law: average WIP = throughput rate × average flow time, and holds for any stable system regardless of variability.

EOQ = √(2DS/H); total cost is minimised where annual ordering cost equals annual holding cost.

OEE = availability × performance × quality, a composite measure of productive good output versus scheduled time.

Takt time = available production time ÷ customer demand; any operation whose cycle time exceeds takt becomes the constraint.

Capacity utilisation = actual output ÷ design capacity; utilisation above roughly 85–90% typically produces non-linear growth in queue times.

Inventory turnover = COGS ÷ average inventory; days of inventory = 365 ÷ turnover.

DMAIC (Define, Measure, Analyze, Improve, Control) improves existing processes; DMADV designs new ones.

The bullwhip effect is dampened by sharing demand data, shortening lead times, everyday low pricing, and smaller order batches.

Learning-curve theory: each doubling of cumulative output reduces unit time by a constant percentage, commonly 70–90%.

Porter's five forces: rivalry, buyer power, supplier power, threat of new entrants, threat of substitutes; strong forces compress industry profitability.

VRIO requires a resource to be valuable, rare, costly to imitate, and supported by organisation before it yields sustained advantage.

Porter's generic strategies: cost leadership, differentiation, and focus; failing to choose one leaves a firm 'stuck in the middle'.

BCG matrix: stars (high growth, high share), cash cows (fund others), question marks (invest or divest), dogs (divest or harvest).

Ansoff matrix risk ladder: market penetration (lowest) → product development / market development → diversification (highest).

Value chain analysis locates advantage either in lower activity cost or in higher buyer willingness to pay through differentiation.

PESTLE scans political, economic, social, technological, legal, and environmental macro factors.

Blue ocean strategy pursues value innovation, breaking the cost–differentiation trade-off by creating new demand.

Span of control is the number of direct reports per manager; wider spans flatten the hierarchy but require standardised work and capable staff.

Herzberg: correcting hygiene factors (pay, policy, conditions) removes dissatisfaction but only motivators (achievement, recognition, growth) create satisfaction.

Expectancy theory: motivation = expectancy × instrumentality × valence; a value of zero on any element yields zero motivation.

Tuckman sequence: forming, storming, norming, performing, adjourning; performance stabilises after norming.

SMART goals: specific, measurable, achievable, relevant, time-bound; specificity and feedback mediate performance gains.

Theory X assumes workers avoid work and need control; Theory Y assumes self-direction - the assumption chosen shapes control systems.

Situational leadership matches telling, selling, participating, or delegating to follower readiness for the specific task.

Delegation transfers authority, never accountability; the manager remains answerable for the outcome.

Kotter's eight steps: urgency, guiding coalition, vision, communicate, empower action, short-term wins, consolidate gains, anchor in culture.