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CMA Part 2

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  • CMA Part 2 Financial Decision Making

    Cram Session

    Ronald Schmidt, CMA, CFM

    Patti Burnett, CMA

  • CMA Exam & Gleim

    CMA overview pages 3 6

    Pass both parts within 3 years

    Satisfy the experience requirements (see next page)

    CPEs

    Gleim website

    You can create a mock exam on website, and there are ones already created for you

  • Experience Requirements

  • Exam format

    3 hrs - 100 multiple choice questions = approx. 1.5 minutes per question (on average). Find ways to bank time Look for short-cuts You will find that you most question do not seem easy, dont get

    discouraged You earn points for each question answered correctly Some questions are test questions that carry no point value. You will not

    know which ones they are Extra time can be carried forward to the Essay portion

    1 hr - 2 Essay questions with up to 8 sub-parts You cant go back to multiple-choice part once you enter this portion of the

    exam Whatever you have typed on the screen will be saved as your answer,

    irrespective if the timer runs out on you

  • Exam format

    Topics Financial Statement Analysis 25%

    Corporate Finance 25%

    Decision Analysis and Risk Management 25%

    Investment Decisions 20%

    Ethics 5%

    If you find you have weaknesses in any topic ref. Appendix A for ref. the appropriate sub units

  • Last minute prep for the exam

    Focus on what you dont know Realize that you will be more proficient in some topics

    more than others Practice the Essay questions use the Gleim Essay Wizard Create short mock multiple choice exams (say no more

    than 50 questions) to condition for the longer 100 question exam, or take the Gleim online CMA Practice Exam that came with your Gleim study material. It is a 4 hour exam.

    You can also read the question and only the correct answer of questions at the end of each SU. It is a fast way of covering a lot of ground.

    Make sure your financial calculator has a fresh battery, and that it is not the first time you used it.

  • Day of the Exam

    Do not study up to the exam day/time Give yourself plenty of time to get to the testing center. Make sure you have identified exact

    location prior Make sure you are well rested (probably not a good idea to take exam after a long day of work, for

    example It is a four hour exam, make sure you are prepared for the duration (eat, etc.) Dress in layers. You can always shed layers when you are there, they have lockers Dont wear a watch into the testing center You can bring your own foam earplugs, so long that they are in a plastic bag Take a copy of the type of calculators that are permitted with you. Ref. the ones listed on the IMA

    Website You realistically should not plan on any breaks outside of bathroom breaks. Note the timer keeps

    running if you do take a break. Be optimistic. At this point there is nothing else you can do, and being stressed or discouraged will

    not help your test results.

    Relax - NO ONE HAS DIED FROM FAILING THE CMA EXAM, there is life beyond and we will help you pass it!!!!

  • Exam

    Budget your time, know your time hacks See how many Essay sub-questions you will be given.

    There are two parts with different amounts of sub-parts

    Answer the questions in consecutive order, and limit the number you want to come back to no more than say 10, but make sure you answer it before going on to the next.

    Never leave a question unanswered, score is based on number of correct answers.

    Do not allow the answer choices to affect your reading of the question

  • Most common reasons for missing questions

    1. Misreading the requirement (stem) Read the question first2. Not understanding what is required3. Making a math error Try to not do calculations of paper first, with the

    idea of transferring to the exam later. If you know how to use your memory button(s) well on your calculator, use it (i.e. save sub-calculations in your calculator).

    4. Applying the wrong rule or concept5. Being distracted by one or more of the answers the most common

    wrong answers are the incorrect alternatives6. Incorrectly eliminating answers from considerations read all answers

    first, some are more correct or complete then others7. Not having any knowledge of the topic tested dont agonize over it. If

    possible try to make an educated guess by eliminating obvious wrong answers. If you guess, use the same letter each time.

    8. Employing bad intuition when guessing

  • The essays

    Remember, 2 essay questions with up to 8 parts each!

    Ref. Scenario for Essay Questions 9 -11

    The CMA exam uses essays to reflect a more "real-world" environment in which candidates must apply the knowledge they have acquired. Essays are graded on both writing skills and subject matter. Partial credit IS available for essays that have some correct and some incorrect points. Finally, it is important to remember that essays are not intended to test typing ability, so the time you allocated for essay response is adequate to complete the questions even if you do not have the best typing skills.

    Answering multiple-choice questions is an effective method to study the material for both the multiple-choice and essay sections of the exam. They are an excellent diagnostic tool that will allow you to quickly identify your weak areas. Also, think about what your answer would be if the question were not multiple-choice. When reviewing the correct and incorrect answer explanations, your "essay answers" should be somewhat equivalent to the detailed answer explanations.

  • Ethics

    Ethics is tested from: Individual Perspective Part 1 Organizational Perspective Part 2

    Questions could be either Multiple Choice or Essay Make sure you study the IMA Framework on Ethics, ref. the

    IMA website, or following URL: http://www.imanet.org/PDFs/Public/Press_Releases/STATEMENT%20OF%20ETHICAL%20PROFESSIONAL%20PRACTICE_2.2.12.pdf

    http://www.imanet.org/resources_and_publications/ethics_center_helpline.aspx

    Have it conceptually memorized. Similar to the AICPA version You will then be able to answer any question from there Stay within an objective view, and dont get side-tracked in

    emotional distractors

  • SU 1 - Sarbanes-Oxley Act of 2002

    Enron, Arthur Andersen

    Extensive responsibilities on issuers / auditors of publicly traded securities.

    Sec 406(a) Senior financial officers Code of Ethics

    Reasonably necessary to promote Honest and ethical conduct

    Full, fair, accurate, timely, and understandable disclosure

    Compliance with governmental rules and regulations

    SOX does not define ethics.

  • SU 1- Corporate Responsibility for Ethical Behavior

    Values and Ethics: From Inception to Practice

    Responsible to : Foster a sense of ethics Written code of Conduct and ethical behavior

    Pervasive sense of ethical values has benefits. White space vs. Gray area.

    Tone at the top

    Human capital - Doing the right thing.

    Corporate culture

    Ethics training

  • SU 1- Basic Financial Statements, their users and limitations

    Statement of Financial position Balance sheet Single point in time, a few day changes a lot

    Assets versus Liabilities and Equity Contingent liabilities

    Purpose of the Balance Sheet It helps users assess the entitys liquidity, financial flexibility, profitability, and risk. Proprietary theory owners equity Under the proprietary theory, revenues increase capital,

    while expenses reduce it. Net income belongs to the owner, representing an increase in the proprietor's capital.

    Usefulness and Limitations Historical cost vs. market value Book value (def.?) does not reflect market value. Estimates Non-measurement of employees, reputations, etc.

  • SU 1- Basic Financial Statements, their users and limitations

    Companies financing structure Liabilities

    Current versus non-current assets (def., examples?)

    Equity = Residual balance Types of stock Additional paid in capital Reasons for equity to restricted Treasury stock (def., affect on equity)

    Notes in the financial statement Purpose Types

    Def. Real Accounts & Permanent Accounts

  • SU 1 - Statement of Cashflows

    Understand: Purpose Indirect method vs. Direct method Categories

    Operating Activities direct and indirect Investing Activities Financing Activities

    Two methods to report cash flows Direct method (FASB req.) Indirect method

    See questions 31 page 53 33 page 54 34 page 55

  • SU 1 Statement of Income and Statement of Retained Earnings

    Understand the different elements of the Income Statement Revenues versus gains Expenses versus losses

    Transactions that matter and that dont Transactions with owners Prior-period adjustments Items from other comprehensive income Transfers to and from appropriated retained earnings Adjustment made in a quasi-reorganization

  • SU 1 Statement of Income and Statement of Retained Earnings

    Cost of Goods COGS

    BI + COGM (Purchases for Retailer ) = GAFS EI = COGS

    COGM (Purchases for Retailer) BWIP + TTL Mfg cost for period EWIP = COGM Similar to COGS + EFG - BFG

    Statement of Retained Earnings Beg RE + NI Dividends = End RE Dividends Paid or declared?

  • SSU 1 Statement of Income and Statement of

    Retained Earnings Other Expenses

    S, G & A G & A incurred for the benefit of the organization as a

    whole Interest Expenses based on passage of time; ef