CMA Part 1 cheat sheet

Accounting equation: Assets = Liabilities + Equity; every recorded transaction preserves this equality.

ASC 606 five steps: identify the contract, identify performance obligations, determine the transaction price, allocate the price to the obligations, recognize revenue when each obligation is satisfied.

Basic EPS = (net income − preferred dividends) ÷ weighted-average common shares outstanding.

Effective interest method: interest expense = carrying value at the start of the period × market (effective) rate; carrying value converges to face value at maturity.

Inventory under FIFO or weighted average is measured at the lower of cost or net realizable value; under LIFO at the lower of cost or market.

US GAAP cash flow classification: interest paid and interest or dividends received are operating; dividends paid are financing.

Goodwill is not amortized; it is tested for impairment at least annually at the reporting unit level.

A lessee records a right-of-use asset and a lease liability at the present value of lease payments for leases longer than 12 months.

A deferred tax asset or liability arises from temporary differences between the book basis and the tax basis of assets and liabilities.

High-low method: variable cost per unit = (highest cost − lowest cost) ÷ (highest activity − lowest activity); fixed cost = total cost − (variable rate × activity level).

Regression line y = a + bx, where b = covariance(x, y) ÷ variance(x) and a = mean(y) − b × mean(x).

Coefficient of determination (R²) is the share of variation in the dependent variable explained by the independent variable(s); it ranges from 0 to 1.

Correlation coefficient ranges from −1 to +1; in simple regression its square equals R².

Production budget in units = budgeted sales units + desired ending finished goods − beginning finished goods.

Materials purchases in units = materials needed for production + desired ending materials inventory − beginning materials inventory.

A flexible budget is based on actual output; a static budget is based on the originally planned output level.

Expected value = Σ (probability of each outcome × value of that outcome); probabilities must sum to 1.0.

On an 80% learning curve, cumulative average time per unit falls to 80% of the prior cumulative average each time cumulative output doubles.

ROI = operating income ÷ average operating assets = (operating income ÷ sales) × (sales ÷ average operating assets) = margin × turnover.

Residual income = operating income − (required rate of return × average operating assets).

EVA = after-tax operating profit (NOPAT) − (WACC × invested capital).

Balanced scorecard perspectives: financial, customer, internal business process, and learning and growth.

Minimum transfer price = variable (outlay) cost per unit + opportunity cost per unit of the transferred item.

Price variance = (actual price − standard price) × actual quantity purchased; usage variance = (actual quantity used − standard quantity allowed) × standard price.

Segment margin = segment contribution margin − traceable fixed costs; common fixed costs are not allocated to segments.

Market share variance = (actual market share − budgeted market share) × actual market size × budgeted contribution margin per unit.

A favorable material price variance paired with an unfavorable usage variance may signal that lower-quality material was purchased.

Cost of goods manufactured = direct materials used + direct labor + applied overhead + beginning work in process − ending work in process.

Predetermined overhead rate = estimated total overhead ÷ estimated total allocation base; applied overhead = rate × actual activity.

Overhead is underapplied when applied overhead is less than actual overhead; the balance is closed to cost of goods sold or prorated.

Weighted-average equivalent units = units completed and transferred out + (ending work in process units × percentage complete).

Contribution margin per unit of the constrained resource = contribution margin per unit ÷ units of the constraint consumed per unit; rank products on this ratio.

Sunk costs are irrelevant; relevant costs are future costs that differ between the alternatives being considered.

Joint costs are allocated at split-off using sales value at split-off, net realizable value, physical units, or the constant gross margin percentage.

Normal spoilage is treated as a product cost included in manufacturing overhead; abnormal spoilage is expensed in the period incurred.

Absorption costing capitalizes fixed overhead into inventory while variable costing expenses it, so income differs by the change in inventory units × fixed overhead rate per unit.

COSO 2013 components: control environment, risk assessment, control activities, information and communication, and monitoring activities, supported by 17 principles.

Segregation of duties separates authorization, custody of assets, record keeping, and reconciliation among different employees.

Preventive controls stop errors before they occur; detective controls identify them after the fact; corrective controls restore the affected process.

Inherent risk × control risk = risk of material misstatement; detection risk is set by the auditor through the nature, timing, and extent of testing.

SOX Section 404 requires management to assess and report on the effectiveness of internal control over financial reporting.

The three lines of defense are operational management, a risk and compliance function, and internal audit providing independent assurance.

Limitations of internal control include collusion, management override, human error, and cost-benefit constraints.

COSO ERM (2017) has five components - governance and culture, strategy and objective-setting, performance, review and revision, and information, communication and reporting - supported by 20 principles.

Analytics hierarchy: descriptive (what happened), diagnostic (why it happened), predictive (what will happen), prescriptive (what action to take).

RTO is the maximum acceptable time to restore a process after disruption; RPO is the maximum acceptable data loss measured in time.

Cloud models: SaaS delivers software, PaaS delivers a development platform, IaaS delivers infrastructure; control shifts to the provider as you move toward SaaS.

ERP systems share one database across functions, reducing data redundancy but increasing dependence on a single system.

IT general controls cover access security, change management, IT operations, and backup and recovery, and they support reliance on application controls.

Data quality dimensions include accuracy, completeness, timeliness, consistency, uniqueness, and validity.

Robotic process automation fits high-volume, rule-based, repetitive tasks that use structured digital inputs and stable interfaces.

Blockchain is a distributed, append-only ledger in which each block is cryptographically linked to the previous block, making records tamper-evident.

A data warehouse stores structured, curated data for reporting; a data lake stores raw structured and unstructured data at scale.