CMA Final Paper 19 key terms

A performance framework that measures an organisation across financial, customer, internal process, and learning and growth perspectives, linking day-to-day measures to strategy so managers see whether long-run capability is being built alongside short-term results.

A one-page diagram showing cause-and-effect links between objectives across the four balanced scorecard perspectives, making explicit how investment in people and processes is expected to drive customer outcomes and, ultimately, financial results.

An industry analysis tool assessing rivalry among existing firms, threat of new entrants, threat of substitutes, bargaining power of buyers, and bargaining power of suppliers to judge how attractive an industry is for earning sustained returns.

A structured review of an entity's internal strengths and weaknesses alongside external opportunities and threats, used to align capabilities with the environment before setting strategy, priorities, and resource allocation.

The attribute that lets a firm earn returns above the industry average, typically achieved through lower cost than rivals or through differentiation for which customers willingly pay a premium that exceeds the added expense.

The sequence of primary and support activities through which an organisation converts inputs into customer value, analysed to identify where cost is incurred and where differentiation or waste reduction is possible.

The degree to which an organisation's resources, structure, reward systems, and processes are consistent with one another and with the chosen strategy, so that everyday decisions reinforce rather than undermine strategic direction.

A small set of quantified measures chosen because they reliably signal progress toward a critical objective, allowing managers to monitor performance, compare against targets, and take corrective action promptly.

The principle governing when and how much revenue is recorded, generally when control of a promised good or service transfers to the customer, measured at the amount the entity expects to be entitled to receive.

A promise in a contract with a customer to transfer a distinct good or service; revenue is recognised as each obligation is satisfied, either at a point in time or over time as control passes.

An entity's right to consideration in exchange for goods or services already transferred, where that right is conditional on something other than the passage of time, such as future performance or acceptance.

Accounting that records transactions when the underlying economic event occurs rather than when cash moves, so income and expenses are matched to the periods they relate to and reported profit reflects activity, not receipts.

The convention that expenses are recognised in the same period as the revenue they helped generate, guiding adjustments such as depreciation, warranties, and accrued costs so reported profit is not distorted by timing.

A reduction in the carrying amount of an asset when its recoverable amount falls below book value, recognised immediately in profit or loss so the statement of financial position does not overstate resources.

The amount at which an asset or liability is recognised in the statement of financial position after deducting accumulated depreciation, amortisation, or impairment and adding or subtracting any revaluation adjustments.

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, reflecting current market conditions rather than historical cost.

The excess of consideration transferred plus the fair value of any previously held interest over the fair value of identifiable net assets acquired in a business combination, recognised as an asset and tested annually for impairment.

Sales revenue less all variable costs, representing the amount each unit or product line contributes toward covering fixed costs and then generating profit, and the basis for break-even and short-run decision analysis.

The level of activity at which total revenue equals total cost and profit is zero, computed in units as fixed costs divided by contribution per unit, or in revenue as fixed costs divided by the contribution margin ratio.

The excess of budgeted or actual sales over break-even sales, expressed in units, currency, or as a percentage, indicating how far sales may fall before the organisation incurs a loss.

A future cash flow that differs between the alternatives being compared; costs that are sunk, already committed, or identical under every option are excluded from the decision analysis because they cannot change the outcome.

The benefit forgone by choosing one course of action over the next best alternative, relevant to decisions whenever scarce capacity or resources could be deployed in another profitable use.

A method that assigns overhead to products or customers based on the activities they consume, using cost drivers such as setups, orders, or inspections to reduce the distortion caused by single volume-based allocation rates.

Any factor that causes a change in the total cost of an activity, such as number of machine hours, production runs, or customer orders, and which provides the basis for allocating or analysing that cost.

A system that records predetermined costs for materials, labour, and overhead and compares them with actual results, producing variances that direct management attention to operations deviating from plan.

A budget recast at the actual level of activity achieved, so that variable costs flex with volume while fixed costs stay constant, allowing a fair comparison of actual performance against what should have been incurred.

The process of decomposing the difference between budgeted and actual results into price and quantity components, identifying which factors drove the gap and which managers can act on.

The sum of a project's expected future cash flows discounted at the required rate of return, less the initial outlay; a positive result indicates the investment is expected to add value to the entity.

The discount rate at which a project's net present value equals zero, representing the annual return the investment is expected to earn; it is compared with the cost of capital to accept or reject.

The rate used to convert future cash flows to present value, reflecting the time value of money and the risk of the cash flows, often approximated by the organisation's weighted average cost of capital.

The blended after-tax cost of a firm's debt and equity, weighted by their proportions in the capital structure, used as the hurdle rate for investment appraisal and as a benchmark for returns.

The mix of debt and equity an organisation uses to finance its assets; the choice affects financial risk, the cost of capital, and the returns available to shareholders, and is constrained by covenants and market conditions.

The use of fixed-cost debt finance to magnify the effect of changes in operating profit on earnings per share, increasing potential returns to shareholders while also increasing the risk of financial distress.

The conflict of interest that arises when managers, acting as agents, pursue their own objectives rather than those of shareholders, addressed through incentives, monitoring, disclosure, and sound governance structures.

The system of rules, practices, and processes by which an organisation is directed and controlled, covering board composition, accountability, risk oversight, and the relationship between management, the board, and stakeholders.

The state of being free from relationships or interests that could compromise objective judgement, required of directors, auditors, and committee members so that decisions and opinions are not unduly influenced by others.

A model describing three conditions that together raise the likelihood of fraud: pressure or incentive, opportunity, and rationalisation; controls target opportunity while culture and oversight address the other two.

The policies, procedures, and systems designed to provide reasonable assurance that objectives are met, assets are safeguarded, records are reliable, and laws and regulations are complied with throughout the organisation.

A control that divides incompatible tasks, such as authorising a transaction, recording it, and holding the related asset, among different people so that no single individual can both commit and conceal an error or fraud.

The reporting, usually internally but sometimes externally, of suspected wrongdoing or unethical conduct within an organisation; effective programmes protect reporters and provide confidential channels for raising concerns.

The systematic examination of data using statistical and computational techniques to uncover patterns, test hypotheses, and support decisions, ranging from descriptive reporting of what happened to predictive and prescriptive modelling.

Data sets characterised by high volume, velocity, variety, and often veracity challenges, which exceed the capacity of conventional tools and require distributed processing and specialised analytical methods.

The presentation of data in charts, dashboards, and graphs so that patterns, outliers, and trends are quickly understood, supporting faster interpretation and clearer communication of analytical findings to decision makers.

The set of controls, technologies, and practices protecting systems and data from unauthorised access, theft, or disruption, including access management, encryption, monitoring, and tested incident response arrangements.