CMA - Part 2 Financial Decision Making

1. CMA - Part 2Financial Decision Making Study Unit 1 – Ethics for the Organization and Basic Financial Statements

2. Study Tip • Try to find a little time every day to study, whether it is reading or practicing quiz questions. 1 hour per day M – F and the 4 hour lecture = 10 hrs. per week • Passing the exam is a marathon not a sprint!

3. 1.4 – Statement of Financial Position (Balance Sheet) • Assets versus Liabilities and Equity • Purpose of the Balance Sheet • It helps users assess “the entity’s liquidity, financial flexibility, profitability, and risk.” • Proprietary theory – owners equity • Usefulness and Limitations • Historical cost vs. market value • Book value (def.?) does not reflect market value. • Estimates • Non-measurement of employees, reputations, etc.

4. 1.4 – Statement of Financial Position (Balance Sheet) • Account versus report format • Companies resources • Current versus non-current assets (def., examples?) • Non-ordinary type of non-current assets (examples?) • Companies financing structure • Liabilities • Current versus non-current assets (def., examples?) • Exceptions to the operating cycle def.

5. 1.4 – Statement of Financial Position (Balance Sheet) • Companies financing structure (cont.) • 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 • Quiz

6. Study Tip • Try to explain out loud a concept you are trying to learn as though you are trying to teach it to someone. A good place to do this is in your car or in front of a mirror.

7. 1.5 – Statement of Income and Statement of Retained Earnings • Elements of the Income Statement • Revenues versus gains • Expenses versus losses • Transactions “that matter” and that don’t • Transactions with owners • Prior-period adjustments • Items from other comprehensive income • Transfers to and from appropriated retained earnings • Adjustment made in a quasi-reorganization

8. 1.5 – Statement of Income and Statement of Retained Earnings • Formats • Multi-step versus single-step • Which is better for what? • Cost of Goods • COGS • BI + COGM = GAFS – EI = Purchases for Retailer • COGM • BWIP + TTL Mfg cost for period – EWIP = Purchases for Retailer • Sim. to COGS + EFG - BFG

9. 1.5 – Statement of Income and Statement of Retained Earnings • Other Expenses • S, G & A • Interest Expenses • Irregular Items • Discontinued Operations • Extraordinary Items • Statement of Retained Earnings • Beg RE + NI – Dividends = End RE • Dividends – Paid or declared?

10. 1.5 – Statement of Income and Statement of Retained Earnings • Comprehensive Income • Exclude from NI but included in OCI • Fair value changes of AVS securities • Currency translations • Service cost, gains and losses not prev. recognized in pension exp. • Disclosures • EPS • Dep. Sched. • Inc. Tax det. • Pension exp. Det. • Quiz

11. Study Tip • You need to achieve an 80% on the quizzes you attempt. If you have taken the quizzes twice and still not achieved an 80%, create another 20 question quiz from the test bank available, focusing (selecting) on material that you are having difficulty with. In different words “practice” what you don’t know rather than what you do know.

12. 1.6 & 1.7 – Statement of Cash Flows • Purpose of the Statement of Cash Flows • Three categories to report cash flows • Operating Activities • Investing Activities • Financing Activities • Two methods to report cash flows • Direct method (FASB req.) • Indirect method • Quiz

13. Study Tip • Always prepare for the next lecture first, as opposed to catching up on material you are behind on. There are plenty of weekends with no classes that will allow you to catch up past material. This way you are always prepared for the next class and have identified (and conveyed) what areas you need help with.