IMA CMA Part 2 Course Notes

At 25%, this is the largest Part 2 domain. The core rule is RELEVANCE: future amounts that differ between alternatives matter; sunk and unavoidable amounts do not. CVP translates contribution margin into break-even/target profit, while constrained-resource questions require maximizing contribution per unit of the scarce resource.

• Using gross margin instead of contribution margin for CVP.

• CVP: CM is the engine.

This 20% domain is formula-dense. Do not memorize ratios in isolation: know numerator, denominator, what direction usually means, and why the ratio can be distorted. Use common-size/trend analysis to spot change, ratios to diagnose the driver, and profitability decomposition to connect margin, turnover, and leverage.

• Using ending balances instead of average balances when average is appropriate.

• Purpose first, formula second.

Corporate Finance is built around required return and cash-flow timing. Know time value of money, cost of debt/equity, WACC, leverage, dividend/repurchase trade-offs, working-capital metrics, short-term credit costs, and basic FX exposure/hedging.

• Using pre-tax cost of debt in WACC.

• TVM first: timing matters.

Ethics is highly scenario-based. The safest approach is to identify the facts, stakeholders, obligations, and conflict; apply the IMA standards; follow established organizational policies/escalation; and avoid actions that compromise competence, confidentiality, integrity, or credibility.

• Reducing the IMA standards to only 'integrity and objectivity.'

• Memorize C-C-I-C: Competence, Confidentiality, Integrity, Credibility.

ERM integrates risk with strategy and performance. The strongest answer does not simply choose the lowest-risk option; it selects a response that keeps residual exposure within appetite/tolerance while supporting the business objective at a reasonable cost.

• Treating likelihood × impact as the only possible consideration when velocity/interdependence clearly matter.

• Start with objective → risk event → cause → consequence.

Capital budgeting is cash-flow analysis, not accounting-income analysis. Include only incremental after-tax cash flows, use a discount rate consistent with project risk, and prefer NPV when methods conflict because NPV directly measures expected value creation in currency terms.

• Using accounting net income instead of cash flow.

• Draw a timeline before calculating.