CMA Glossary2 Flashcards
1
Q
Liquidity
A
Ability to convert an asset into cash quickly. [CMA]
2
Q
Loan Covenants
A
Clauses in a loan agreement that require one party to do, or refrain from doing, certain things. [CMA]
3
Q
Local Area Network (LAN)
A
A computer communications system limited to no more than a few miles and using high-speed connections.
4
Q
Lockbox System
A
A system where a financial entity collects and deposits payments on behalf of an entity thereby reducing the mail and processing float. [CMA]
5
Q
Long Position
A
The purchase of a security with the expectation that the security will rise in value. [CMA]
6
Q
Long Run
A
A time period of sufficient length to enable decision makers to adjust fully to a market change; the period of time in which all costs are variable. [CMA]
7
Q
Long-Term Debt to Equity Ratio
A
Measure of the financial leverage of a firm. [CMA]
8
Q
Long-Term Liabilities
A
Debts due for repayment more than one year in the future or beyond the normal operating cycle. [CMA]
9
Q
Lower of Cost or Market Rule
A
A method of valuation that results in an asset being valued at either acquisition cost or market value, whichever is lower. [CMA]
10
Q
Maintenance
A
Expenditures necessary to achieve the originally anticipated useful life of a fixed asset. [CMA]
11
Q
Make Versus Buy
A
The decision either to produce a good or service with an entity’s own resources or to buy it from an outside supplier. [CMA]
12
Q
Malware
A
Software designed to infiltrate or damage a computer system; short for malicious software.
13
Q
Managed Floating Exchange Rates
A
An exchange rate that is mostly allowed to change (float) as demand in currency supply and demand changes but is often altered (managed) by governments through their buying and selling of certain currencies. [CMA]
14
Q
Management
A
The process of leading and directing all or part of an organization, often a business, through the deployment and organization of resources. [CMA]
15
Q
Management Accounting
A
The process of identification, measurement, accumulation, analysis, preparation, interpretation, and communication of financial information used by internal decision makers in order to plan, evaluate, and control an entity and to assure appropriate use of and accountability for its resources. (Also called Managerial Accounting.) [CMA]
16
Q
Management by Exception
A
The management practice of focusing on areas that deserve attention and ignoring areas that seem to be running smoothly. [CMA]
17
Q
Management Control
A
An organized, integrated process and structure through which management attempts to achieve enterprise goals effectively and efficiently. [CMA]
18
Q
Management Discussion and Analysis
A
A discussion of Management’s views of an entity’s performance, required by the US Securities and Exchange Commission to be included in the Annual Report on Form 10-K. [CMA]
19
Q
Management Information System
A
A system that provides past, present, and prospective information about internal operations and external intelligence. [CMA]
20
Q
Management Override of Internal Controls
A
Situation where management evades or overrides the organizational internal controls, typically in financial reporting.
21
Q
Management-by-objective (MBO)
A
A system in which a manager and an employee agree upon a set of specific performance goals, or objectives, and jointly develop a plan for reaching them.
22
Q
Manufacturing
A
The transformation of raw materials into finished goods. [CMA]
23
Q
Manufacturing Cost
A
The costs incurred to transform materials into other goods through labor and factory facilities. [CMA]
24
Q
Manufacturing Overhead
A
Indirect factory-related costs that are incurred when products are manufactured, usually contain both variable costs and fixed costs.
25
Margin of Safety
The excess of budgeted sales over the break-even volume. [CMA]
26
Marginal Cost
Cost resulting from the production of one additional unit. [CMA]
27
Market Comparables
Estimating the price of an asset by comparing to recent sales prices of assets with similar characteristics. [CMA]
28
Market Equilibrium Price
The price of a good or service that will balance the supply and demand. [CMA]
29
Market Penetration
A measure of an entity's sales of a given product or service compared to the total sales of all suppliers in the market. (Also called Market Share.) [CMA]
30
Market Price
The current price for which a good or service is offered in the marketplace. [CMA]
31
Market Price Method
A method of transfering price that sets the transfer price equal to the normal selling price of the seller when it sells the product externally.
32
Market Risk
The portion of stock price (or portfolio) movement that is attributable to the movement of the market as a whole. (Also called Systematic Risk.) [CMA]
33
Market Skimming Pricing
Charging a relatively high price for a short time when a new, innovative, or much-improved product is launched onto a market. [CMA]
34
Market Structure
The organizational and other characteristics of a market, in particular those that affect the nature of competition and pricing. [CMA]
35
Market Value
The value of a good, a service, or a security as determined by buyers and sellers in an open market. [CMA]
36
Marketability
A characteristic of a security that allows it to be sold at a reasonable price in a short period of time. [CMA]
37
Marketable Securities
1. Liquid securities that can be converted into cash quickly. 2. A balance sheet classification for negotiable financial instruments. [CMA]
38
Market-Based Transfer Price
When the price for goods or services charged by one division of a company to another is based on the market price. [CMA]
39
Market-to-Book Ratio
Current stock price divided by book value per share, where "book value" equals common shareholders' equity. (Also called Price-to-Book Ratio.) [CMA]
40
Master Budget
A budget that consolidates all budgets into an overall plan and control document, for a budgeted period. (Also called a Comprehensive Budget.) [CMA]
41
Master Budget Capacity
The expected level of capacity utilization for a budgeted period.
42
Matching
The process of recognizing expenses in the same accounting period as that in which the related revenues are recognized. [CMA]
43
Material Requirements Planning (MRP)
A system that translates a production schedule into requirements for each component needed to meet that schedule. [CMA]
44
Materiality
The concept that accounting should separately recognize only those events that are relatively important for understanding an entity's statements. [CMA]
45
Maturity Date
The date on which a debt becomes due for payment. [CMA]
46
Maturity Matching
The matching of asset and liability maturities; i.e., financing long-term assets with long-term sources and short-term needs with short-term sources. [CMA]
47
Maximum Possible Loss
The most pessimistic view of possible loss; when referring to insurance of a building, for example, the risk that the entire structure, its immediate surroundings, and all the building's contents will be destroyed. (Also called Extreme or Catastrophic Loss.) [CMA]
48
Merger
The combining of two or more companies. [CMA]
49
Mission statement
A brief formal outline of the purpose and scope of activities of a company or organization.
50
Mix Variance
A variance that results when actual proportions of the components of revenues or costs are different from the proportions used in arriving at the budgeted or planned revenue or cost, or the standard cost. [CMA]
51
Mixed Cost
A cost composed of fixed and variable elements. [CMA]
52
Monetary Items
Money or a claim (an obligation) to receive (or pay) a sum of money, the amount of which is fixed or determinable without reference to future prices of specific goods and services. [CMA]
53
Monitoring
Under COSO Framework, a component of internal control that covers the external oversight of internal controls by management or third parties; or the application of independent methodologies, like customized procedures or standard checklists, by employees within a process.
54
Monopolistic Competition
A situation where there are a large number of independent sellers, each producing a differentiated product in a market with low barriers to entry. [CMA]
55
Monopoly
A market structure characterized by a single seller of a well defined product for which there are no good substitutes and by high barriers to the entry of any other firms into the market for that product. [CMA]
56
Monte Carlo Technique
An analytical technique in which a large number of simulations are run to infer the most likely result, using random quantities for uncertain variables. [CMA]
57
Mortgage
A claim given by the borrower to the lender against the borrower's property. [CMA]
58
Moving Average
A method of calculating central tendency over time in an attempt to identify long-term trends. The average is calculated over a specific time period (e.g. years). For each time period after the initial one, the earliest value is dropped from the calculation and the most recent one is added in, to make an average over the same length of time. [CMA]
59
Moving Averages
One way to smooth data and also averages a recent set of data, but without the weighting.
60
Multicollinearity
A multiple regression equation is flawed because two variables thought to be independent are actually correlated to be independent.
61
Multinational Company
Company operating in several countries. [CMA]
62
Multiple Regression
A statistical method used to model the relationship between one dependent (or response) variable and one or more independent (or explanatory) variables by fitting a linear equation to observed data. (Also called Multiple Linear Regression.) [CMA]
63
Mutually Exclusive Project
Competing investment projects in which accepting one project eliminates the possibility of undertaking the remaining projects. [CMA]
64
Negotiable CD
A Certificate of Deposit with a very large denomination, usually $1 million or more. They are usually in bearer form, considered low risk and highly liquid. (Also called Jumbo CD.) [CMA]
65
Negotiated Price
In transfer pricing, the price charged by one segment of an organization to another for a product or service that is determined by negotiation between the segments. [CMA]
66
Negotiated Price Method
A method of transfering price that sets the transfer price equal to a price agreed upon by the buyer and seller through a negotiation process.
67
Net Cash Flow
The difference between the inflows and outflows within a given period.
68
Net Income
Income for a period after subtracting expenses from all sources for that period. (Also called Net Earnings.) [CMA]
69
Net Present Value (NPV)
The difference between the present value of all cash inflows from a project or investment and the present value of all cash outflows required to obtain the investment, or to undertake the project at a given discount rate. [CMA]
70
Net Profit Margin
A financial ratio where net income is divided by sales. (Also called Net Profit Margin Percentage.) [CMA]
71
Net Realizable Value
1. The estimated selling price in the ordinary course of business less the reasonably predictable cost of completion and disposal. 2. Accounts receivable less allowance for bad debts. [CMA]
72
Net Working Capital
Current assets less current liabilities. [CMA]
73
Net Working Capital Ratio
A liquidity financial ration that measures net working capital as a percent of total assets. [CMA]
74
Network
In data communications, a configuration in which two or more locations are physically connected for the purpose of exchanging data. [CMA]
75
Network Controls
Internal controls to insure accurate and secure flows of data in computer and communication systems. [CMA]
76
Network Security
The protection of networks and their services from unauthorized modification, destruction, or disclosure.
77
Nominal
A term signifying that a value has not been adjusted for inflation. [CMA]
78
Non-monetary Exchange
The exchange of goods or services between entities for which no monetary instruments are involved. (Also called Barter.) [CMA]
79
Non-price Competition
Methods firms use to attract customers other than price reductions, including advertising, free gifts, special packaging, etc. [CMA]
80
Nonrecurring Items
One-time occurrences for an entity involving unusual income or expense. [CMA]
81
Non-value Added
An activity that increases a good's costs without increasing its value to the consumer. [CMA]
82
No-par Stock
The shares of a company that carry no nominal or par value. [CMA]
83
Normal Capacity
The level of capacity utilization which is less than 100% of practical capacity which will satisfy average customer demand over time (accounting for seasonal and cyclical trends).
84
Normal Cost System
A costing system whereby cost objects are assigned the sum of direct materials and labor resources consumed plus an allocation of overhead based on normal capacity. [CMA]
85
Normal Profit
The net earnings for an enterprise that recognizes that a reasonable return on capital (both debt and equity) is one of the costs of the enterprise. [CMA]
86
Normal Spoilage
Inherent product deterioration that is expected even under the best operating conditions. It is unavoidable in the short run. [CMA]
87
Notes Payable
A short-term debt instrument whereby the issuer promises repayment on or before a specified date. [CMA]
88
Objective Function
In Linear Programming, the variable to be maximized (profit) or minimized (cost). [CMA]
89
Objectivity
A trait of financial reporting that emphasizes the verifiable, factual nature of events or transactions and minimizes personal judgment in the measurement process. [CMA]
90
Obsolescence
The loss in usefulness of an asset caused by technological or market changes. [CMA]
91
Off-Balance Sheet Financing
Financing from sources other than debt and equity offerings that are not reflected on an entity's balance sheet, such as joint ventures, partnerships, and operating leases. [CMA]
92
Oligopoly
A market situation in which a small number of sellers comprise the entire industry. [CMA]
93
Operating Budget
Detailed projection of all estimated revenue, expenses, and income based on forecasted sales revenue during a given period (usually one year). (Also called Operational Budget.) [CMA]
94
Operating Cycle
The average time between the acquisition of materials or services and the final cash realization from the sale of products. [CMA]
95
Operating Expenses
Expenses incurred in the course of ordinary activities of an entity. [CMA]
96
Operating Income
Earnings before Interest and Taxes. [CMA]
97
Operating Lease
A lease that does not meet the criteria for capitalized a lease; accounted for as rental payments. [CMA]
98
Operating Leverage
The percent of fixed costs in a company's cost structure. [CMA]
99
Operating Profit
The profit from a firm's core ongoing business operation. [CMA]
100
Operating Profit Margin
A financial ratio represented as operating profit divided by sales. (Also called Operating Profit Margin Percentage.) [CMA]
101
Operational Audit
A process of obtaining and evaluating evidence about operating procedures and events as compared with established criteria of good performance. [CMA]
102
Operational Budget
A plan for the revenues and expenses associated with operating activities of a given period. (Also called Current Budget.) [CMA]
103
Operational Risk
Risks resulting from breakdowns in internal procedures, people and systems. [CMA]
104
Operations
Activities of an entity that deal with producing, delivering and selling goods or services. [CMA]
105
Opportunity Costs
The value of the forgone alternatives. [CMA]
106
Option
A legal right to buy or sell something at a specific price within in a specified time. [CMA]
107
Ordering Cost
The cost of preparing a purchase order, and the special processing and receiving costs related to the number of orders processed. [CMA]
108
Organization Structure
The arrangement of responsibilities within an entity. [CMA]
109
Organizational Culture
The set of key values, beliefs, understanding and norms of an organization. [CMA]
110
Organizational Goals
A desired future state that the organization attempts to attain. [CMA]
111
Output Controls
Output controls ensure that a complete and accurate audit trail of the results of processing is reported to appropriate individuals for review. [CMA]
112
Outsourcing
The process of purchasing goods and services from outside vendors rather than producing the same goods or providing the same services within the company. [CMA]
113
Overdraft
A facility (usually at a bank or other financial institution) enabling an account holder to borrow up to an agreed amount, often for an agreed time. [CMA]
114
Overhead
Indirect costs. [CMA]
115
Overhead Allocations
Methods used to assign overhead costs to products, activities, or processes [CMA]
116
Overhead Budget
The estimated or planned expenditures of an entity for overhead costs (costs other than those directly related to products or services). [CMA]
117
Overhead Rate
The ratio of overhead costs for a specific period related to the amount of some measurable causal factor during the same period. (Also called Burden Rate.) [CMA]
118
Paid-In Capital
The amount paid by investors in exchange for stock. (Also called Contributed Capital.) [CMA]
119
Par Value
1. The dollar amount printed on the face of some stock certificates. 2. The face value of a bond. [CMA]
120
Parallel Testing
Testing procedure where new software is compared on new and old system simultaneously.
121
Participative
A type of budgeting that allows managers to participate in the preparation of budgets. (Also called Bottom-Up.) [CMA]
122
Participative Standards
Budget standard developed with a great deal of input from the employees charged with meeting the standard.
123
Participatory Budgeting
Budgeting where top management and operating managers develop budgets through joint decision-making.
124
Payback
The period of time necessary to recover the cash cost of an investment from the cash inflows attributable to the investment. [CMA]
125
Payroll Cost
1. Payments to employees for labor services. 2. Taxes and tax-like payments an employer incurs as a legal condition of employment such as unemployment insurance paid to state and federal governments. [CMA]
126
Penetration Pricing
Pricing technique of setting a relatively low initial price to attract new customers (a price usually lower than the market price.) [CMA]
127
Pension
An amount given to a person usually after retirement. [CMA]
128
Percentage-of-Completion Method
A method of accounting for long-term construction contracts where revenue and gross profit are recognized each period based upon the progress of the construction. [CMA]
129
Performance
A general term applied to part or all of the conduct or activities of an entity over a period of time, often with reference to some standard. [CMA]
130
Performance Evaluation
A management process of reviewing an employee's performance over a period of time, comparing that performance to expectations or standards, and communicating the results to the employee. [CMA]
131
Performance Measurement
A quantification of the effectiveness and efficiency with which the objectives of a responsibility center have been accomplished. [CMA]
132
Period Cost
An expenditure or loss that is charged to the current period rather than as a cost of the products produced in that period. [CMA]
133
Physical Inventory
A physical count of all inventories on hand. [CMA]
134
Pilot Testing
Preliminary testing or study to try out software or process and make any needed changes or adjustments.
135
Planned Value
The amount of work you planned to have accomplished by now, in dollars or hours; also called budgeted cost for work scheduled (BCWS).
136
Planning
The act of drawing up plans for an organization's future direction to attain its goals.
137
Plant
Land, buildings, machinery, equipment, furniture and other fixed assets used to produce products. [CMA]
138
Plant-Wide Overhead
A single overhead rate for an entire plant used to allocate overhead costs to products produced in the plant. [CMA]
139
Political Risk
The risk of loss when investing in a given country caused by changes in a country's political structure or policies, such as tax laws, tariffs, expropriation of assets, or repatriation of profits restrictions. [CMA]
140
Portfolio
A group of investments held by an institution or individual. [CMA]
141
Post-Audit
A set of procedures for evaluating the results of a capital budgeting project. [CMA]
142
Post-Retirement Benefits
Payments to which former employees may be entitled once they are no longer employed, including pension benefits, death benefits, health benefits, and life insurance. [CMA]
143
Practical Capacity
Measure of capacity that is the maximum level at which the plant or department can operate efficiently. [CMA]
144
Preferred Stock
Capital stock that provides a fixed dividend paid before any dividends are paid to common shareholders. It takes precedence over common stock in the event of liquidation. [CMA]
145
Premium
The extra amount paid for a security over and above its intrinsic or par value. [CMA]
146
Premium Pricing
The practice of setting a price artificially high in order to encourage a perception of exclusivity or status appeal. [CMA]
147
Prepaid Expenses
Payments made for services to be received after the date of payment. [CMA]
148
Present Value
The value today (or at some specific date) of an amount or amounts to be paid or received later (or at other, different dates), discounted at some discount rate. [CMA]
149
Prevention Costs
Costs incurred by an entity to prevent defects in the products or services it produces. Examples include inspection, design, and quality training. [CMA]
150
Preventive Controls
Controls designed to discourage or pre-empt errors, irregularities, or improper outcomes from occurring.
151
Price Elasticity of Demand
The percentage change in the quantity of a product demanded divided by the percent change in its price. It indicates the degree of consumer response to a variation in price. [CMA]
152
Price Variance
The difference between actual price and budgeted price multiplied by the actual quantity of input. (Also called Rate Variance or Sales Price Variance.) [CMA]
153
Price Variance (Direct Costs)
Price variance = (actual input price ? budgeted input price) x actual input quantity.
154
Price/Earnings (P/E) Ratio
Current Market Price per share divided by Earnings per share. [CMA]
155
Price-to-Book Ratio
Current Market Price per share divided by Net Book Value per share. (Also called Market-to-Book Ratio.) [CMA]
156
Pricing
The process of determining the amount to charge customers for products or services. [CMA]
157
Prime Cost
The cost of direct materials and direct labor. [CMA]
158
Pro Forma Balance Sheet
The statement that shows the estimated assets, liabilities, and stockholders' equity at a particular point in time. The stockholders' equity is equal to the assets minus the liabilities.
159
Pro Forma Income Statement
The statement that shows the budgeted revenues and budgeted expenses for a period of time, along with the budgeted net income (net profit), which is equal to the budgeted revenues less the budgeted expenses.
160
Pro Forma Statement of Cash Flows
The statement that shows the projected inflows and outflows of cash during a period of time, along with the projected increase or decrease in the company's cash during that period.
161
Pro Forma Statements
1. Financial statements that have one or more assumptions or hypothetical situations built into the data. 2. Budgeted balance sheets and income statements are sometimes referred to as pro forma statements. [CMA]
162
Probability
The likelihood or chance of occurrence of an event. [CMA]
163
Probability Distribution
A collection of data that shows all the values that the random variable can take and the likelihood that each will occur. [CMA]
164
Process
An activity or group of inter-related activities that adds value to inputs and provides outputs to customers.
165
Process Analysis
The review of business processes including definition, monitoring, measurement, and reporting with the goal of improving processes to meet customer requirements profitably. [CMA]
166
Process Costing
A method of allocating manufacturing cost to mass-produced identical or similar products to determine an average cost per unit. Each unit receives the same manufacturing input as every other unit. Refineries, paper mills, and food processing companies are examples that use process costing. [CMA]
167
Processing Controls
Controls on the processing stage of an information system, including Run-to-Run controls, Operator Intervention controls, and Audit Trail controls. [CMA]
168
Procurement Policies
Rules and regulations to govern the process of acquiring goods and services needed by an organization in order to function efficiently. [CMA]
169
Product Cost
The direct material, direct labor, and production overhead cost of a product. [CMA]
170
Product Life-Cycle
The time span between the initial concept of a product or service and the time when the entity no longer produces the product. Stages are Introduction, Growth, Maturity, and Decline. [CMA]
171
Product Line
A grouping of similar products. [CMA]
172
Product Mix
The array of products offered for sale by a company. [CMA]
173
Product Profitability Analysis
Analysis that reviews the profitability performance of a given product or products.
174
Production Budget
The planned cost of producing goods during a given period. [CMA]
175
Production Costs
The material, labor, and overhead cost of producing products and services. Excludes distribution and selling costs. (Also called Manufacturing Cost.) [CMA]
176
Production Volume Variance
The difference between budgeted fixed overhead and applied fixed overhead. [CMA]
177
Productivity
The relationship between output and inputs; i.e., the effectiveness of using particular inputs (e.g., labor) to produce an output. [CMA]
178
Profit Center
A responsibility center whose financial performance is measured by the difference between its revenue and its expenses or cost. [CMA]
179
Profit Margin
The profit margin on sales; net income as a percent of sales revenue. [CMA]
180
Profit Plan
A schedule of planned or expected revenues, expenses, assets, and liabilities. A profit plan provides guidelines for future operations and appraisal of performance. (Also called Budget.) [CMA]
181
Profitability Analysis
An analysis performed to determine whether a specific product, group of products, or an entire entity is making a profit. [CMA]
182
Profitability Index
A measure used in capital budgeting to rank projects, calculated as the present value of the future cash flows from an investment divided by the initial investment. (Also called the benefit-cost ratio.) [CMA]
183
Program Budget
A budget that is structured to show the expenses (and often revenues) of the principal programs that the entity will undertake. [CMA]
184
Progress Payment
A payment of an interim billing based upon partial completion of a contract. [CMA]
185
Project Budget
A budget of costs classified by resources and function for a specific project over the project's life, which may span several operating budget time periods. [CMA]
186
Promissory Note
A signed statement promising to pay to a specified person or the bearer a particular sum of money on a fixed date or on demand. [CMA]
187
Property, Plant, and Equipment (PP&E)
A balance sheet classification for fixed assets used in business operations. Property, plant, and equipment items are normally grouped and reported at acquisition cost using separate disclosure of accumulated depreciation or depletion. (Also called Plant Assets, Operational Assets, or Fixed Assets.) [CMA]
188
Prorate
To allocate; to charge an indirect cost to the several cost objects that are assumed to have caused this cost. [CMA]
189
Protectionism
Steps taken by countries to protect their domestic industries from foreign competition. [CMA]
190
Provision
Estimated liability or expense when the exact amount is not known. [CMA]
191
Proxy
Authorization given by one person to another so the second person can act for the first. Often used by shareholders to authorize management to vote shares of stock. [CMA]
192
Public Company
A company that has issued securities through an offering, and which are now traded on the open market. (Also called publicly-held or publicly-traded company.) [CMA]
193
Public Company Accounting Oversight Board (PCAOB)
A board established by the U.S. Sarbanes-Oxley Act of 2002 which regulates the auditing profession and sets standards for audits of public companies. [CMA]
194
Pure Competition
A model of industrial structure characterized by a large number of small firms producing a homogeneous product in an industry (market) that permits complete freedom of entry and exit. [CMA]
195
Put Option
An option to sell a particular asset within a specified period of time for a specified price. [CMA]
196
Qualitative Factors
Factors that are relevant to a decision but which cannot be expressed numerically. [CMA]
197
Quality
The extent to which a product or service conforms to specifications or provides customers the characteristics that were promised. [CMA]
198
Quality Assurance
The function responsible for providing assurance that products or services are consistently maintained at a high level of quality. [CMA]
199
Quality Control
A process, such as statistical sampling, that monitors the quality of operations. [CMA]
200
Quantity Discount
An allowance given by a seller to a buyer because of the size of an individual purchase transaction or the total size during a specified period. [CMA]
201
Quick Ratio
A ratio that measures an entity's ability to pay off short-term obligations using the most liquid current assets (excluding inventory). (Also called Acid-Test Ratio.) [CMA]
202
Quotas
Limits on the amount of a good produced, imported into the country, exported, or offered for sale. [CMA]
203
Random Variable
A quantity, resulting from measurement of a random process, that varies, but whose statistical distribution can be determined. [CMA]
204
Rate of Return
A measure of the cash flows from an investment compared to the amount of the investment. [CMA]
205
Ratio Analysis
The calculation of significant financial and other ratios and the comparison of these ratios with those of prior years, industry averages, or standards. [CMA]
206
Real Option
An alternative or choice that becomes available with a business investment opportunity. For example, by investing in a particular project, a company may have the real option of expanding, downsizing, or abandoning other projects in the future. A value can be calculated using option pricing models. [CMA]
207
Realize
Converting non-cash resources and rights into money, used in accounting and financial reporting to refer to sales of assets for cash or claims to cash. [CMA]
208
Real-Time Processing
The processing of data immediately upon their receipt.
209
Receivable
An amount owed to an entity, whether or not it is currently due. [CMA]
210
Reciprocal Allocation Method
A method for allocating service department costs by including the mutual services rendered among all departments. [CMA]
211
Recognition
The process of formally recording an item in an entity's financial statements. [CMA]
212
Reconciliation
A schedule or calculation showing how one amount is derived from another amount. [CMA]
213
Recourse
The rights of a lender if a borrower does not repay as promised. [CMA]
214
Redundant Data Checks
Controls that compare repeated data for compatibility.
215
Reengineering
A technique used to make improvements within an organization, focusing on identifying and abandoning outdated rules and fundamental assumptions. The end result is a new work method to achieve organizational goals within production, support, or decision-making processes. [CMA]
216
Regression Analysis
A statistical analysis tool that quantifies the relationship between a dependent variable and one or more independent variables. [CMA]
217
Regression Equation
A statistical technique used to explain or predict the behavior of a dependent variable, taking the form of Y = a + bx + c, where Y is the dependent variable that the equation tries to predict, x is the independent variable that is being used to predict Y, a is the Y-intercept of the line, and c is a value called the regression residual. [CMA]
218
Regression Line
The "line of best fit" where the margin of error at every point is minimized.
219
Reinvestment Rate
The rate of return at which cash flows from an investment are expected to be reinvested. [CMA]
220
Relative Sales Value Method
A method used to allocate joint costs in proportion to the sales value of joint products produced. [CMA]
221
Relevance
The capacity of information to make a difference in a decision by helping users to form predictions about the outcomes of past, present, and future events or to confirm or correct prior expectations. [CMA]
222
Relevant Cost
A cost that should be considered in choosing among alternatives. Only those costs yet to be incurred (future costs) that differ among the alternatives (differential costs) are relevant in decision making. [CMA]
223
Relevant Range
The range of economic activity within which estimates and predictions are valid. [CMA]
224
Reliability
The quality of information that assures that information is reasonably free from error and bias and faithfully represents what it purports to represent. [CMA]
225
Reorder Point
The quantity level of an inventory item that triggers an order to replenish the item. [CMA]
226
Reorganization
1. A financial restructuring of an organization, such as bankruptcy. [CMA]
227
Repair
The activity of putting assets back into normal or expected operating condition without an increase in the asset's previously estimated service life. [CMA]
228
Reporting Currency
The currency in which an entity prepares its financial statements. [CMA]
229
Reporting Segments
The parts of an organization segmented for reporting purposes along given parameters (geography, product type, etc.)
230
Repurchase Agreement
A contract in which the seller of securities, such as Treasury Bills, agrees to buy them back at a specified time and price. (Also called Repo or Buyback.) [CMA]
231
Required Rate of Return
The minimum acceptable rate of return on an investment. (Also called Hurdle Rate.) [CMA]
232
Required Reserves
The minimum amount of funds that a bank is required by law to keep on hand in order to back-up its deposits. [CMA]
233
Research and Development Cost
Outlays made in an attempt to discover new knowledge (research) or to use the results of research to develop new or improved products or processes (development). [CMA]
234
Reserve
A term used primarily to segregate part of retained earnings, such as for a reserve for contingencies. [CMA]
235
Residual Income
A means of measuring performance of an investment center that stresses profit responsibility and the financial management efficiency of the investment center manager. Residual income is typically calculated as the difference between investment center profits and a charge for capital resources committed to the unit. [CMA]
236
Residual Risk
The risk remaining after controls have been put in place to mitigate the inherent risk; or, the exposure to loss after all known risks have been mitigated. [CMA]
237
Resource Allocation
A plan for using available resources, for example human resources, especially in the near term, to achieve goals for the future; the allocation of resources among the various projects or business units. [CMA]
238
Resource Driver
A measure of the quantity of resources consumed by an activity (e.g., floor space occupied by the activity). [CMA]
239
Resources
Inputs of economic value consumed or applied when performing an activity.
240
Responsibility
A system of accounting that assigns revenues, costs, and/or capital to units of an enterprise (responsibility centers). [CMA]
241
Responsibility Accounting
A system that measures the budgets/plans, actions, and results of responsibility centers.
242
Responsibility Budget
A budget that sets forth approved plans structured in terms of the units responsible for carrying them out. It is a control device in that it is a statement of performance expected of each responsibility center manager against which actual performance can be compared. [CMA]
243
Responsibility Center
An organizational unit headed by a manager who is responsible for its activities. [CMA]
244
Restructuring
A significant modification made to the debt, operations, or structure of a company. [CMA]
245
Retained Earnings
Net income over the life of a corporation less dividends. [CMA]
246
Return
The change in the value of an investment over an evaluation period, including any cash flows received pertaining to the investment during that period. [CMA]
247
Return on Assets (ROA)
A measure of how effective an entity is at earning a return on the assets employed in its business. [CMA]
248
Return on Common Equity
A measure that indicates the rate of return on the shareholders' investment. (Also called return on owners' equity.) [CMA]
249
Return on Invested Capital
A measure of how effectively a company uses the money (debt or equity) invested in its operations. [CMA]
250
Return on Investment (ROI)
The ratio of income earned on the investment to the investment made to earn that income. [CMA]
251
Return on Sales
A measure that provides insight into what percentage of our sales revenue our annual profit represents (how much profit is being produced per dollar of sales), also known as operating profit margin.
252
Revenue
Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) during a period from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations. [CMA]
253
Revenue Center
A responsibility center in which management control is focused on the revenue that the center earns. [CMA]
254
Revenue Recognition
An accounting principle under generally accepted accounting principles (GAAP) that determines the specific conditions under which revenue is recorded in the financial statements. [CMA]
255
Rework
Units of production that are not considered acceptable that are subsequently repaired and sold as acceptable finished units.
256
Rights
An offer made by a company to its shareholders to enable them to buy new shares in the company at a discount from the market price. [CMA]
257
Risk
A measure of the variability of the return on investment [CMA]
258
Risk Analytics
The process of defining and analyzing the dangers to firms posed by potential natural and human-caused adverse events; quantitative risk analysis estimates the probabilities of adverse events and the likely extent of the losses; qualitative risk analysis defines the threats, determines the extent of vulnerabilities, and devises countermeasures should an adverse event occur. [CMA]
259
Risk Assessment
1. In capital budgeting, methods used to identify, and quantify the relative risk of a project. 2. In auditing, a systematic process for exercising and integrating professional judgments about potential adverse conditions and events. [CMA]
260
Risk Exposure
The extent of risk faced by an organization that is expressed in terms of either the likelihood and impact of a loss.
261
Risk Management
Management of potential adverse conditions and events.
262
Risk Premium
The return in excess of the risk-free rate of return that an investment is expected to yield; a form of compensation for investors who take on the extra risk. [CMA]
263
Risk Response
Steps taken to deal with variance types of risk; four different strategies: avoidance, mitigation, acceptance, or transference. (Also called Risk Treatment.) [CMA]
264
Risk Transfer
Shifting risk from one party to another (e.g., insurance). [CMA]
265
Risk-Adjusted Return
In capital budgeting, a rate of return that is adjusted for the expected risk of the proposed project. The net present value of a project whose risk is expected to be greater than average is found by using a higher than average discount rate. (Also called Risk-Adjusted Discount Rate.) [CMA]
266
Rolling Budget
A moving projection of financial operations for a series of weeks, months, or quarters immediately ahead. At the end of each period, the portion of the projection then lapsed is removed and a new projection for a period of similar length is added to the series. (Also called Continuous Budget.) [CMA]
267
Routing Verification
A technique for reducing the risk of data being intercepted.
268
R-squared
The measure of the "goodness of fit" of the regression line and the percentage of variation in the dependent variable that is explained by the independent variable.
269
Safeguarding Controls
Controls for the prevention or timely detection of unauthorized transactions and unauthorized access to assets that could result in losses that are material to the financial statements.
270
Safety Stock
A quantity of inventory held to meet unanticipated demand during the time between placement of an order and its receipt into inventory, or unanticipated delays in receiving the replenishment. [CMA]
271
Sales Budget
A projection of sales for a given period of time. [CMA]
272
Sales Forecast
The forecast that represents the subjective prediction, projection, or estimation of expected sales over a specified future time period.
273
Sales Mix
Quantities of various products or services that constitute total unit sales.
274
Sales Mix Variance
Sales mix variance = (actual sales mix ratio ? budgeted sales mix ratio) x total units x (budget contribution margin per unit).
275
Sales on Installment
Arrangements in which the buyer takes possession of the property immediately but does not receive the deed and title until a series of payments (installments) have been made. [CMA]
276
Sales Volume Variance
Sales volume variance = (units sold ? units in static budget) x budgeted standard contribution margin per unit.
277
Sales-Mix Variance
The difference between budgeted and actual sales caused by a difference between the budgeted and actual proportions of products with different profit margins. [CMA]
278
Sales-Volume Variance
The difference between the flexible budget units and the static budget units multiplied by the budgeted unit contribution margin. [CMA]
279
Salvage Value
The expected value of an asset at the end of its useful life. [CMA]
280
Sarbanes-Oxley
A U.S. law enacted in 2002 to specify the requirements of corporate governance, including accounting issues. It addresses the regulation of the accounting profession, the standards for audit committees of public companies, the certifications management must make, and standards of internal control that companies must meet. [CMA]
281
Scenario Analysis
The process of estimating the expected value of a portfolio, assuming changes in key factors that would affect security values; more broadly, the process of analyzing possible future events by considering alternative possible outcomes. [CMA]
282
Scrap
Residual material left over after production with no economic value.
283
Seasonal Trend
A consistent rise or drop in business activity that occurs due to predictable changes in the calendar. [CMA]
284
Seasonality
Regular pattern of volatility, usually within a single year.
285
Secondary Offering
The issuance of new stock for public sale from a company that has already made its initial public offering. (Also called Subsequent Offering.) [CMA]
286
Secure Network Server
A device that acts as a gateway between a protected enclave and the outside world.
287
Securities and Exchange Commission (SEC)
The U.S. federal agency empowered to regulate U.S. financial markets in order to protect investors. All publicly-traded companies have to comply with SEC rules and regulations, including the filing of annual, quarterly, and other disclosure reports. [CMA]
288
Segment
One of two or more divisions, product departments, plants, or other subdivisions of an entity reporting directly to a home office, usually identified with responsibility for profit and/or producing a product or service. [CMA]
289
Segment Margin
A reporting segment's contribution margin minus all traceable costs for segment.
290
Segregation of Duties
A basic key internal control used to ensure that errors or irregularities are prevented or detected on a timely basis by employees in the normal course of business. It requires that no single individual should have control over two or more phases of a transaction or operation. [CMA]
291
Selling and Administrative Budget
A budget for costs related to selling or marketing (e.g., sales representatives' salaries, commissions, traveling expense, and advertising) and for the general administration of the corporation (e.g., salaries of top officers, rent, and other general office expense). [CMA]
292
Selling Costs
Any expense or class of expense incurred in selling or marketing. [CMA]
293
Sensitivity Analysis
A technique that identifies and analyzes alternative outcomes of an investment resulting from the alteration of one or more of the variables in the analysis (Also known as What-if analysis). [CMA]
294
Separable Costs
For products produced in a joint process, the costs incurred beyond the split-off point that are assignable to one or more individual products. [CMA]
295
Service Department
A unit (department) within an entity that provides services to other departments of the entity. [CMA]
296
Shareholder
The owner of shares in a company. [CMA]
297
Shareholders' Equity
The owner's equity in a corporation. (Also called Stockholders' Equity.) [CMA]
298
Short Position
The purchase of a security with the expectation that the security will fall in value. [CMA]
299
Short Run
A time period of insufficient length to allow decision makers to adjust fully to a change in market conditions. In the short run, producers may be able to increase output by using more labor or raw materials, but they will not have time to expand the size of their plants. [CMA]
300
Short-Term Credit
Credit extended to an entity by a financial institution (Bank Loan), investors (Commercial Paper) or suppliers (Trade Credit). [CMA]
301
Shrinkage
The loss of raw materials, work-in-process, or finished goods in terms of weight or volume due to the nature of the product or the methods employed for production, transportation, and storage. [CMA]
302
Sight Draft
A draft which is payable on demand. [CMA]
303
Simple Linear Regression
A form of regression analysis with only one independent variable.
304
Simple Regression
A regression model that uses only one independent variable to estimate the dependent variable. [CMA]
305
Simulation
A method of studying an operational problem, whereby a model of the system or process is subjected to a series of recalculations of possible outcomes to reflect varying assumptions. [CMA]
306
Slack
In budgeting, the difference between the costs or expenses actually required in the operation of a responsibility center and the costs or expenses that have been proposed or approved in the budget. [CMA]
307
Software
A collection of computer programs and related data that provide the instructions telling a computer what to do and how to do it. [CMA]
308
Solvency
The ability to pay all debt obligations as they become due. [CMA]
309
SOX Section 201
Section of Sarbanes-Oxley Act that prohibits a public accounting firm that is auditing the financial statements of a company from providing other services to that same company, with a focus on management consulting and internal auditing services.
310
SOX Section 203
Section of Sarbanes-Oxley Act that requires rotation of audit partner after five consecutive years.
311
SOX Section 302
Section of Sarbanes-Oxley Act requiring management to certify accuracy of financial reports.
312
SOX Section 404
Section of Sarbanes-Oxley Act requiring internal control report included in public companies' annual reports.
313
Special Purpose Entity
Entities created by corporations, usually as subsidiaries but sometimes as partnerships or trusts, for a single, well-defined, and narrow purpose, usually the acquisition and financing of specific assets. (Also known as Special Purpose Vehicles.) [CMA]
314
Spending the Budget
Term for behavior by managers when they spend maximum amount in budget to avoid "losing" it in the following budget cycle.
315
Spending Variance
Actual amount of overhead incurred less the expected amount based on the flexible budget for actual inputs. [CMA]
316
Spin-Off
A new independent company created by divesting part of a parent company's assets and operations, and distributing shares in the new company to the parent company's shareholders. [CMA]
317
Split-Off Point
The point of production beyond which the cost of separate products can be measured. Up to this point, the products were either joint products or byproducts. [CMA]
318
Split-Up
Reorganizing a corporation whereby all capital stock and assets are exchanged for the stock of two or more newly established companies, resulting in the liquidation of the parent corporation. [CMA]
319
Spoilage
Units of production that are not considered acceptable and discarded or sold at reduced price.
320
Spot Rate
The exchange rate for immediate delivery of currencies or commodities exchanged; the rate of interest or price being charged currently. [CMA]
321
Spreadsheet
A work sheet organized in the form of a matrix with rows and columns [CMA]
322
Stakeholders
All groups (employees, community members, stockholders, management, etc.) impacted by the actions of an organization?they are said to have a "stake" in what happens.
323
Stand-alone Method
One method to allocate the common costs that uses information about each user of a cost object as a separate entity to arrive at the cost-allocation weights.
324
Standard Cost
The anticipated cost of producing a unit of output; a predetermined cost to be assigned to products produced. Standard cost implies a norm, or what costs should be. [CMA]
325
Standard Cost System
A system for planning budgets, managing and controlling costs, and evaluating cost management performance that employs standard costs.
326
Standard Deviation
A statistical measure of the spread or dispersion of a set of data, calculated as: the square root of the arithmetic mean of the squares of the deviation of each of the class frequencies from the arithmetic mean of the frequency distribution. [CMA]
327
Standard Error (SE) of Estimate
The "average" deviation of the data points from the regression line or curve.
328
Standard Input
Carefully predetermined quantity of input required for one unit of output.
329
Standard Price
Carefully predetermined expected price paid for one unit of input.
330
Start-Up Costs
The costs of preparing to operate facilities which can include costs of designing, tooling, recruiting, and training the labor force before production starts; moving; preparation of facilities; and related general and administrative costs. [CMA]
331
Statement of Cash Flow
A statement that classifies cash receipts and payments according to whether they are the result of operating, investing, or financing activities. [CMA]
332
Statement of Changes in Shareholders' Equity
An accounting statement presenting the individual components of Shareholders' Equity at various points in time and the changes that occurred within the individual components. [CMA]
333
Statement of Earnings (Income Statement)
A financial statement that reports revenues, expenses, gains, and losses for an accounting period, usually compared with amounts in one or more earlier periods. [CMA]
334
Statement of Financial Position (Balance Sheet)
The statement of financial position that discloses the assets, liabilities, and equity accounts of an entity at a particular date. Comparable information from one or more prior periods may be included. [CMA]
335
Statement on Management Accounting (SMA)
Practice-based monographs on critical issues that affect the profession of management accounting, published by IMA. [CMA]
336
Static Budget
A static budget is a budget that does not change as volume changes. [CMA]
337
Step-Down Method
The method of allocating service department costs that begins by allocating one service department's costs to production departments and to all other service departments. A second service department's costs, including costs allocated from the first, are then allocated to production departments and to all other service departments except the first one, etc. The costs of all service departments are ultimately allocated to production departments. [CMA]
338
Stock Dividends
The payment of a dividend to shareholders in the form of stock instead of cash. [CMA]
339
Stock Option
The right to purchase or sell a specified number of shares of stock in a company for a specified price at a specified time. [CMA]
340
Stock Split
An increase in the number of common shares outstanding resulting from the issuance of additional shares to existing shareholders without requiring payment from the shareholders. [CMA]
341
Stock-Out Costs
The contribution margin or other measure of profits not earned because a seller has run out of inventory and is unable to fill a customer's order. [CMA]
342
Storage Controls
Internal controls for computer data and business information; e.g. off-site storage, locked rooms, passwords, backups, etc. [CMA]
343
Straight-Line Method
A method of depreciating assets in which an equal amount of depreciation is taken each year over the estimated economic life of the asset. [CMA]
344
Strategic Business Unit (SBU)
A business unit within the overall corporate entity which is distinguishable from other business units because it serves a defined external market where management can conduct strategic planning in relation to products and markets. [CMA]
345
Strategic Planning
A process used to make decisions about the long-term goals and strategies of an organization. [CMA]
346
Strategic Risk
The possible impact on earnings or capital arising from adverse business decisions, improper implementation of decisions, or lack of responsiveness to industry changes. [CMA]
347
Strategy
An organization's plan to achieve its vision and objectives.
348
Strike Price
Price at which a call option or put option may be exercised (carrying out the terms of agreement). (Also called Exercise Price.) [CMA]
349
Subsidiary
A corporation that is controlled, directly or indirectly, by another corporation. The usual condition for control is ownership of a majority of the outstanding voting stock. [CMA]
350
Sunk Costs
A past cost which cannot now be changed and therefore should not enter into current decisions for increasing or decreasing present profit levels. [CMA]
351
Supply
The total amount of a good or service available for purchase. One of the two key determinants of price along with demand. [CMA]
352
Supply Chain
The network of entities involved in the production and sale of a product or service.
353
Sustainable Equity Growth
The maximum growth rate that a firm can sustain without having to increase financial leverage. [CMA]
354
Sustainable Growth Rate
Maximum growth rate a firm can sustain without increasing financial leverage. [CMA]
355
Swaps
An arrangement whereby two companies lend to each other on different terms; e.g., one at a fixed interest rate and the other at a variable interest rate. [CMA]
356
System
In data processing, a collection of people, machines, and methods organized to accomplish a set of specific functions. [CMA]
357
Systematic Risk
The portion of stock price (or portfolio) movement that is attributable to the movement of the market as a whole. (Also called Market Risk.) [CMA]
358
Systems Development
A process used to determine the needs of an information system and then designing and implementing the system to meet those needs [CMA]
359
Tactical Planning
A plan for achieving the entity's objectives covering a relatively short time period, usually one year. [CMA]
360
Target Costing
A cost management tool used to reduce the overall cost of a product over its entire life cycle. The target is a predetermined cost that should result in an acceptable price to customers as well as an acceptable return to the organization. [CMA]
361
Target Pricing
Setting a selling price for a product or service based on the value of the product or service to the customer, constrained by competitor's prices of similar items. [CMA]
362
Tariffs
Taxes levied on goods imported into a country. [CMA]
363
Taxation
The act of a government imposing a levy on individuals or corporations. [CMA]
364
Theoretical Capacity
The level of capacity when producing at full efficiency all the time.
365
Theory of Constraints
A method of optimizing a process when faced with limiting factors and bottlenecks. [CMA]
366
Throughput Contribution
Revenue less direct material costs of goods sold. [CMA]
367
Throughput Costing
An inventory costing method that treats all costs except those related to variable direct materials as costs of the accounting period in which they are incurred. The variable direct material costs are the only ones included in inventory values. (Also called Super-Variable Costing.) [CMA]
368
Time Drafts
A financial instrument that is payable at a specified point in the future. [CMA]
369
Time Series
A sequence of observations that are ordered in time. [CMA]
370
Time Series Analysis
Regression analysis that uses time as the independent variable.
371
Time Value of Money
The concept that money now is worth more than in the future, even after adjusting for inflation, because the money now can earn interest until the time the money in the future would be received. [CMA]
372
Times Interest Earned
The ratio of earnings before interest, income taxes, and extraordinary items (EBIT) to annual interest expense. A measure of the entity's ability to make interest payments when they are due; i.e., the number of times interest is covered by earnings. (Also called Interest Coverage.) [CMA]
373
Top-Down Approach
An approach to auditing internal controls whereby specific risk factors are identified to determine the scope and evidence required in the assessment of internal control. (Also called Risk-based Approach.) [CMA]
374
Total Fixed Overhead Variance
Total fixed overhead variance = fixed overhead spending variance + fixed overhead production volume variance.
375
Total Quality Costs
The difference between the actual cost of a product or service and what the reduced cost would be if there were no possibility of substandard service, failure of products or defects in their manufacture.
376
Tracking Stock
A class of common stock that is tied to the performance of a particular division within the corporation; a way of divesting a business line without losing complete control. [CMA]
377
Trade Credit
Buying goods and services on account; a form of short-term financing. [CMA]
378
Trade Discount
A reduction in the stated selling price based on quantities ordered or purchased. [CMA]
379
Transaction Controls
Internal controls within information systems to review individual transactions for accuracy, completeness, and validity. [CMA]
380
Transaction Gains or Losses
Gains or losses that result from a change in exchange rates between the functional currency and the currency in which a foreign currency transaction is denominated. [CMA]
381
Transaction Processing
The component of an information system that converts economic events into financial transactions, records financial transactions in the accounting records, and distributes financial information to operating personnel. [CMA]
382
Transfer Pricing
Price at which goods and services are transferred from one profit center to another. [CMA]
383
Translation Adjustments
Adjustments that result when an entity's financial statements are translated from the entity's functional currency into the reporting currency. [CMA]
384
Transmission
In communications, the mechanism by which the message is transferred from the sender to the intended recipients. [CMA]
385
Treasury Bills (T-bills)
Short term securities issued by the U.S. Treasury with minimum denominations of $10,000 and maturities of three months, six months and one year. They are issued at a discount to face value. [CMA]
386
Treasury Bonds
Long term securities issued by the U.S. Treasury with minimum denominations of $1,000 and maturities of ten years or more. [CMA]
387
Treasury Notes
Medium term securities issued by the U.S. Treasury with minimum denominations from $1,000 and maturities of two to ten years. [CMA]
388
Treasury Stock
Fully-paid capital stock reacquired by the issuing company through gift, purchase, or otherwise, and available for resale or cancellation. [CMA]
389
Trend
In data analysis, a general slope upward or downward over a long period of time.
390
Trojan Horse
A computer program that appears to perform a useful and innocent function, however, it is actually a malicious program that is harmful when executed. [CMA]
391
T-value
The measure of regression coefficient divided by standard error that indicates whether there is really any relationship between the independent variable and the dependent variable (by indicating whether that coefficient is significantly different from zero).
392
Uncollectible Accounts Receivable
An Account Receivable that has been reviewed and a determination made that the amount due will not be collected. [CMA]
393
Unexpected Loss
Loss in excess of the expected average loss. [CMA]
394
Unfavorable Variance
The amount by which actual cost exceeds standard or budgeted cost, or the amount by which actual revenue is less than standard or budgeted revenue. [CMA]
395
Unit Contribution
The difference between the selling price and the variable cost of one unit of a product. [CMA]
396
Unit Cost
The cost of one unit of a product or of one unit of a cost element of a product. It is usually obtained by dividing a total cost by the total number of units. [CMA]
397
Unsystematic Risk
The risk of price change due to the unique circumstances of a specific security or enterprise, as opposed to the overall market. This risk can be virtually eliminated from a portfolio through diversification. (Also called Company Risk.) [CMA]
398
Upstream Costs
Costs incurred prior to the time a product is manufactured, including research and development and design. [CMA]
399
Utility
The relative satisfaction or need gratification derived from a good or service. [CMA]
400
Valuation
The process of determining the value of an asset, a security, or an entire entity. [CMA]
401
Value
Attributed worth, expressed in money and applied to a particular asset, to services rendered, to a group of assets, or to an entire business unit, such as the value of a plant or business enterprise. [CMA]
402
Value at Risk (VAR)
The worst loss that might be expected from holding a security or portfolio over a given period of time, given a specified level of probability. [CMA]
403
Value Chain
The basic business functions that increase the usefulness to the customer of a product or service. For a manufacturing entity, the functions typically include Research and Development, Design, Production, Marketing, Distribution, and Customer Service. [CMA]
404
Value Chain Analysis (VCA)
An examination of the activities that comprise the value chain with the purpose of making them more efficient, effective, and economical.
405
Value Engineering
An evaluation of the activities in the Value Chain to reduce costs without sacrificing customer satisfaction. [CMA]
406
Value-Added
Activities and processes that add value or usefulness to consumers of a product or service. [CMA]
407
Value-Based Pricing
A pricing strategy where the selling price of a good or service is based primarily on the customer's perceived value of the good or service. [CMA]
408
Variable Cost
An operating expense that varies directly, and proportionately, with sales or production volume, facility utilization, or some other measure of activity. [CMA]
409
Variable Cost Method
A transfer pricing model where the price is set at selling unit's variable cost.
410
Variable Costing
Method of inventory costing that includes all direct manufacturing costs and variable indirect manufacturing costs as inventory (fixed indirect manufacturing costs are excluded). (Also called Direct Costing.) [CMA]
411
Variable Overhead Costs
Overhead expenses that change in proportion to the changes in a volume- or activity-based cost driver.
412
Variable Overhead Efficiency Variance
Variable overhead efficiency variance = (actual cost driver units x standard cost driver rate) - (standard cost driver units x standard cost driver rate).
413
Variable Overhead Expenses
The portion of overhead costs that increase (decrease) as the number of units produced increase (decrease). [CMA]
414
Variable Overhead Flexible Budget Variance
Variable overhead flexible budget variance = variable overhead spending variance + variable overhead efficiency variance.
415
Variable Overhead Spending Variance
Variable overhead spending variance = actual cost - (actual cost driver units x standard cost driver rate).
416
Variance
The difference between actual results and standard budgeted results. [CMA]
417
Verifiability
The ability, through agreement among measures, to ensure that information represents what it purports to represent or that the chosen method of measurement has been used without error or bias. [CMA]
418
Vertical analysis
Compares each amount on a financial statement with a base amount selected from the same year; e.g., advertising as a percent of sales. [CMA]
419
Virus
A self-replicating computer program that infects the host computer by spreading copies of itself into other executable programs. [CMA]
420
Warrant
A certificate entitling the holder to buy a specified number of shares for a specified time for a specified price. [CMA]
421
Warranty
A promise by a seller to correct, for a stated period of time, deficiencies in products sold. [CMA]
422
Weighted Average Cost of Capital (WACC)
An average representing the required return on all of a company's securities. Each source of capital, such as stocks, bonds, and other debt, is weighted in the calculation according to its percentage of the company's capital structure. [CMA]
423
Weighted Average Method
An inventory method that for product-costing purposes combines costs and equivalent units of a period with the costs and the equivalent units in beginning inventory.
424
Weighted Moving Average
A method of calculating central tendency over time in an attempt to identify long-term trends. For each time period after the initial one, the earliest value is dropped from the calculation and the most recent one is added in, to make an average over the same length of time. More recent data points are weighted higher than earlier data points. [CMA]
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Whistleblower
Person who tells the public or someone in authority about alleged dishonest or illegal activities occurring within an organization. [CMA]
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Wide Area Network (WAN)
A system in geographic areas larger than those served by local area networks.
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Work Cells
Groups of related manufacturing processes that produce a given product or product type.
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Working Capital
Current Assets less Current Liabilities. (Also called Net Working Capital.) [CMA]
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Work-in-Process Inventory
The costs incurred to date on products for which production has begun but has not been completed. [CMA]
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Write-Off
Charging the cost of an asset to expense or to a loss account. [CMA]
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Yield
Income as a percentage of price. [CMA]
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Yield Variance
The difference between the actual quantity of material used for a given amount of product and the standard quantity of the material required for that amount of product, priced at the standard cost per unit of material. [CMA]
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Zero Balance Account
A disbursement (checking) account that has a zero balance. As checks are submitted for payment, funds are transferred from another account to exactly cover the amount of the checks, generally on a daily basis. [CMA]
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Zero-Based Budgeting
Preparing a budget from the ground up, as though the budget were being prepared for the first time. Alternative means of conducting activities and alternative budget amounts are evaluated. [CMA]
