CMA Final Paper 19 flashcards

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

Porter's Five Forces

Framework assessing industry attractiveness through rivalry among existing competitors, threat of new entrants, threat of substitutes, bargaining power of suppliers, and bargaining power of buyers.

BCG matrix

Portfolio tool plotting business units by market growth and relative market share into stars, cash cows, question marks, and dogs to guide investment and divestment decisions.

Ansoff matrix

Growth framework with four strategies: market penetration, market development, product development, and diversification, based on whether product or market is new.

Core competence

A collective capability that is valuable, rare, hard to imitate, and non-substitutable, enabling a firm to deliver distinctive customer value across multiple products or markets.

Value chain

A model separating primary activities (inbound logistics, operations, outbound logistics, marketing and sales, service) from support activities (infrastructure, HR, technology, procurement) to identify where value is created.

SWOT analysis

Strategic assessment that classifies internal strengths and weaknesses and external opportunities and threats, then pairs them in TOWS strategies to exploit or defend.

Revenue recognition five steps

IFRS 15 process: identify the contract, identify performance obligations, determine the transaction price, allocate the price to obligations, and recognize revenue when each obligation is satisfied.

Right-of-use asset

Lessee's IFRS 16 asset representing the right to use a leased asset over the lease term, measured initially at the lease liability plus initial direct costs and prepayments.

Impairment loss

Amount by which an asset's carrying amount exceeds its recoverable amount, which is the higher of fair value less costs of disposal and value in use.

Deferred tax liability

Balance sheet amount for income taxes payable in future periods due to taxable temporary differences, such as accelerated tax depreciation exceeding accounting depreciation.

Goodwill impairment test

Annual test required under IFRS comparing the recoverable amount of a cash-generating unit with its carrying amount including allocated goodwill; any excess is an impairment loss.

Fair value hierarchy

Three-level ranking of inputs: Level 1 quoted prices in active markets, Level 2 observable inputs other than quoted prices, and Level 3 unobservable inputs.

Break-even point

Sales volume at which total revenue equals total cost and operating income is zero, computed as fixed costs divided by contribution margin per unit.

Contribution margin ratio

Contribution margin divided by sales, expressing the proportion of each sales dollar available to cover fixed costs and generate profit.

Margin of safety

Excess of actual or budgeted sales over break-even sales; the margin of safety ratio equals that excess divided by actual sales.

Degree of operating leverage

Contribution margin divided by operating income; it indicates the percentage change in operating income for a one percent change in sales.

Absorption vs variable costing

Absorption costing includes fixed manufacturing overhead in product cost; variable costing expenses it as a period cost, so income differs by the change in inventory times the fixed overhead rate.

Material price variance

Difference between standard price and actual price multiplied by actual quantity purchased, indicating whether materials were acquired above or below standard cost.

Relevant cost

A future cost that differs between decision alternatives; sunk costs and allocated common fixed costs are excluded because they do not change the decision.

Weighted average cost of capital

Blended required return computed as the market-value-weighted average of after-tax cost of debt and cost of equity, used to discount projects of average risk.

CAPM

Capital asset pricing model: cost of equity equals the risk-free rate plus beta multiplied by the market risk premium, linking required return to systematic risk.

Net present value

Sum of present values of a project's expected cash inflows minus its initial investment, discounted at the cost of capital; a positive NPV adds value.

Internal rate of return

Discount rate that makes a project's net present value equal to zero; accept a project when IRR exceeds the hurdle rate or cost of capital.

Cash conversion cycle

Days inventory outstanding plus days sales outstanding minus days payables outstanding, measuring the time cash is tied up in operations.

Profitability index

Present value of cash inflows divided by initial investment; a value above one indicates an acceptable project and helps rank projects under capital rationing.

Contract elements

A valid contract requires offer, acceptance, consideration, capacity of the parties, and legality of purpose; a counteroffer rejects the original offer.

Statute of Frauds

Legal rule requiring written evidence for certain contracts, including those not performable within one year, land sales, suretyship, and some goods sales.

Business judgment rule

Presumption that directors acted on an informed basis, in good faith, and in the corporation's best interest, shielding them from liability for reasonable business decisions.

Fraud triangle

Model explaining fraud through three conditions: pressure or incentive, opportunity, and rationalization, all of which must be addressed by internal controls.

Segregation of duties

Internal control principle separating authorization, custody of assets, and record-keeping so no single person can both perpetrate and conceal an error or fraud.

Predictive analytics

Analytical approach using historical data and statistical models to forecast future outcomes such as demand, default risk, or fraud likelihood.

General IT controls

Controls over the IT environment, including access security, change management, backup and recovery, and operations, that support reliable application controls and financial reporting.