CMAGlossary1 Flashcards
1
Q
ABC Overhead Costing Method
A
A method that assigns overhead using multiple cost pools and multiple cost drivers (volume- and/or activity-based).
2
Q
Abnormal Spoilage
A
Unacceptable units that are not expected to occur under an efficient production process. [CMA]
3
Q
Absorbed Overhead
A
That portion of factory indirect cost that has been allocated to a specific product, or saleable service. (Also called Applied Overhead.) [CMA]
4
Q
Absorption Costing
A
A costing system that assigns to inventory all types of manufacturing costs, including direct, indirect, fixed and variable. (Also called Full Absorption Costing.) [CMA]
5
Q
Accelerated Depreciation
A
A pattern of depreciation in which the amount of depreciation computed in the early years is greater than the amounts computed in the later years. [CMA]
6
Q
Accounting
A
The process of identifying, classifying, measuring, recording and communicating in monetary terms transactions and events of an economic entity that are of a financial character. [CMA]
7
Q
Accounting Profit
A
Revenue less all expenses included in the entity’s income statement. [CMA]
8
Q
Accounting Standards
A
Principles and procedures to be followed by accountants as formulated by an authoritative body. (Also called Accounting Principles.) [CMA]
9
Q
Accounting System
A
Methods, procedures, and standards followed in accumulating, classifying, recording and reporting business events and transactions. [CMA]
10
Q
Accounts Payable
A
Monies that are due to a vendor (supplier) for merchandise or services rendered. [CMA]
11
Q
Accounts Payable Turnover
A
A financial ratio used to measure the rate at which an entity pays off its suppliers. [CMA]
12
Q
Accounts Receivable
A
Monies due to an entity from customers who have bought merchandise or received services on account. [CMA]
13
Q
Accounts Receivable Turnover
A
A financial ratio used to measure asset utilization and a company’s ability to collect cash from credit sales to its customers. [CMA]
14
Q
Accrual Accounting
A
The method of recognizing and recording (a) revenues when earned, and (b) expenses when incurred, both irrespective of the time when cash is received or paid. [CMA]
15
Q
Accrued
A
The accumulation of income that is due but has not been received or a cost that is incurred but has not been paid by an entity during the accounting period. [CMA]
16
Q
Accumulated Depreciation
A
The amount of depreciation expense related to a fixed asset that has been recognized as an expense from the date of acquisition of that asset. [CMA]
17
Q
Acid-Test Ratio
A
A ratio that measures an entity’s ability to pay off short-term obligations using the most liquid current assets (excluding inventory). (Also called Quick Ratio.) [CMA]
18
Q
Acquisition Cost
A
The value of cash or other resources given up in exchange for goods or services. It includes all costs necessary to get the asset ready for its intended use. (Also called Historical Cost or Original Cost.) [CMA]
19
Q
Activity
A
A repetitive action (event, task, unit of work) with a specified business purpose.
20
Q
Activity Analysis
A
The process of detailing the activities in making a product or providing a service, classifying them as value-added or non-value-added, and finding ways to minimize or eliminate the non-value added actions.
21
Q
Activity Cost Driver
A
A measure of the amount of activity used by a cost object.
22
Q
Activity Driver
A
A measure of the amount of activity used by a cost object.
23
Q
Activity Driver (Cost Driver )
A
A factor used to assign cost from an activity to a cost object. A measure of the frequency and intensity of use of an activity by a cost object. [CMA]
24
Q
Activity-Based Budgeting
A
An approach to budgeting that involves quantifying activities and processes and forecasting their costs in order to achieve strategic goals and improve performance. [CMA]
25
Activity-Based Costing (ABC)
A costing system that (a) identifies the relationship between the incurrence of cost and activities, (b) determines the underlying "driver" of the activities, (c) establishes cost pools related to individual "drivers," (d) develops costing rates, and (e) applies cost to product on the basis of resources consumed (drivers). [CMA]
26
Activity-Based Management
Management and decision making method using activity based costing information in an effort to improve customer satisfaction and profits by enhancing activities that add value and reducing activities that do not add value to the customer. [CMA]
27
Actual Cost (See: Actual Cost System)
Acquisition cost, historical cost, or original cost. [CMA]
28
Actual Cost System (See: Actual Cost)
A costing system that records actual costs.
29
Additional Paid-in Capital
The amount received by a company from its shareholders for purchase of shares of stock above the par or stated value of the stock. [CMA]
30
Administrative Expense
Costs incurred for the general operation of an enterprise as a whole, as contrasted with costs related to a more specific function such as manufacturing or selling. (Also called General and Administrative Expense.) [CMA]
31
Allocate
Identification of costs with cost objectives; apportioning or distributing costs to products, processes, jobs, or departments. [CMA]
32
Allocation Base
The basis used to assign indirect costs to cost objects, such as labor or machine hours. [CMA]
33
Allowance for Uncollectible Accounts
A contra account to Accounts Receivable established to record the estimated percentage of Accounts Receivable that will not be collected. [CMA]
34
Amortization
The accounting process of allocating costs to the time periods during which such costs are consumed. [CMA]
35
Annual Report
A report prepared by entities after the close of each reporting year that includes financial statements and disclosure, an audit report, information from management, and other pertinent information concerning the entity's financial condition and operating performance. [CMA]
36
Annuity
A series of payments of an equal amount at fixed intervals for a specified number of periods. [CMA]
37
Application Controls
Controls, such as input controls, adopted to safeguard specific data processing activity, such as payroll. Their purpose is to provide reasonable assurance that data is properly processed, recorded, and reported. [CMA]
38
Appraisal Costs
Costs incurred to determine whether products and services are conforming to customer and/or manufacturing requirements. Examples include inspection and testing costs. [CMA]
39
Appreciation
The situation where there is an increase in economic worth caused by rising market prices. [CMA]
40
Arbitrage Pricing Theory (APT)
A framework for analyzing the relationship between risks and rates of return on securities, especially common stocks. It asserts that the risk elements that influence returns on securities include (1) inflation, (2) industrial production, (3) risk premiums, and (4) the slope of the term structure of interest rates.
41
Asset
1. Probable future economic benefits obtained by an entity as a result of past transactions. 2. Any owned physical object or right having economic value to its owners, expressed for accounting purposes in terms of its cost or other value (such as current replacement cost). [CMA]
42
Asset Coverage
A measure of the extent to which a company is able to cover its debt obligations after all liabilities have been satisfied.
43
Asset Turnover
A financial ratio that assesses how efficiently an entity is utilizing its assets; it relates sales to assets. (Also called Total Asset Turnover.) [CMA]
44
Audit
The systematic examination by analyses, confirmation, and tests of accounting records to confirm with reasonable assurance that the records adequately reflect economic status and operations. [CMA]
45
Audit Committee
Members of the board of directors (in the case of corporations), trustees, legislative bodies, or similar governance boards, with responsibilities for oversight and direction of the internal auditing function. [CMA]
46
Audit Report
A written document that presents the scope and results of the audit. [CMA]
47
Auditing Standard #5
PCAOB standard making Section 404 audits and management evaluations more risk-based and scalable to company size and complexity.
48
Authoritative (top-down) Budgeting
A budgeting process where all budgets for the organization are prepared by top management, including budgets for lower-level operations. [CMA]
49
Authoritative Standard
Budget standard that is determined by the management of the company.
50
Authority
The formal and legitimate right of a manager to make decisions, issue orders, and allocate resources to achieve organizationally desired outcomes. [CMA]
51
Autocorrelation
A relationship between two variables that is inherently non-linear.
52
Average Collection Period
A measure of the average number of days it takes to collect receivables (credit sales). (Also called Days Sales Outstanding and Days Sales in Receivables.) [CMA]
53
Average Fixed Cost
Total fixed costs divided by the number of units produced. (Fixed cost per unit) [CMA]
54
Average Total Cost
Total manufacturing costs divided by the number of units produced. Sometimes called per unit cost. [CMA]
55
Average Variable Cost
Total variable cost divided by the number of units produced. [CMA]
56
Backflush Costing
A product costing approach used in a Just-in-Time operating environment in which some or all of the costing is delayed until the goods are finished. Standard costs are then pulled backward through the system to assign costs to products. [CMA]
57
Backup Controls
Controls, such as file duplicating, in an Information Technology (IT) environment to insure that data is not lost. [CMA]
58
Bad Debts
Accounts or notes receivable that management determines to be uncollectible after reasonable efforts to collect them have not been successful. [CMA]
59
Balance Sheet
A financial statement that summarizes a company's assets, liabilities and shareholders' equity at a particular point in time. [CMA]
60
Balanced Scorecard
An approach using multiple measures to evaluate performance, including financial measures, and the non-financial measures of customers, internal business processes, and learning and growth. [CMA]
61
Balanced scorecard
A management tool to evaluate performance which includes both financial measures and non-financial measures (customers, internal business processes, and learning and growth).
62
Banker's Acceptances
Financial instrument of an entity stating that payment is guaranteed by a bank, commonly used in foreign trade. [CMA]
63
Bankruptcy
A condition in which a court has granted a company legal protection from creditors because it cannot meet its obligations as they come due. [CMA]
64
Batch Costing
The costs of activities related to a group of units of products or services rather than to each individual unit of product or service. [CMA]
65
Batch Processing
The processing in which data is gathered over a period of time and aggregated (batched) for subsequent sequential processing.
66
Benchmarking
A process of measuring an entity's performance, products, and services against standards based on best levels of performance achievable or achieved by other entities. [CMA]
67
Best Practice
A technique, method, process, or activity that is more effective at delivering a particular outcome than any other technique, method, process, or activity. [CMA]
68
Best Practice Analysis
Analysis of the way leading-edge organizations deliver world-class standards of performance in areas such as cost, quality, and timeliness.
69
Beta
A measurement of the movement of the price of a particular stock compared with the movement of the market as a whole during the same period. If a stock has a beta value less than 1, it is regarded as less risky than the overall market. If a stock has a beta value greater than 1, it is regarded as more risky than the market. [CMA]
70
Binomial Option-Valuation Models
Option pricing models in which the underlying asset can take on only two possible, discrete values in the next time period for each value that it can take on in the preceding time period. [CMA]
71
Black-Scholes Option-Valuation Model
A model for pricing options in which the value of an option depends on (1) the value of the underlying asset, (2) the time to expiration of the option, (3) the exercise price, (4) the volatility of the underlying asset, and (5) the risk-free rate or time value of money. [CMA]
72
Board of Directors
A group of individuals elected by a corporation's shareholders to oversee the management of the corporation. The members of a Board of Directors meet periodically and assume legal responsibility for corporate activities. [CMA]
73
Bond
A long-term debt instrument signifying the promise of the issuer to pay the face amount at the maturity date. Periodic interest payments are often required. [CMA]
74
Bonds Payable
A long-term liability account used to record the amount of bonds that are outstanding. [CMA]
75
Book Value
The amount at which an asset or a liability is carried on the books of account, net of any contra account. (Also called Net Book Value.) [CMA]
76
Book Value per Share
Measures common shareholder equity on a per share basis. [CMA]
77
Bottleneck
Operational constraints or inefficient usage of available resources creating work-in-process inventory buildup and/or idle time. [CMA]
78
Bottom-Up Approach
An approach to auditing internal controls whereby all controls are documented irrespective of risk. [CMA]
79
Breakeven Analysis
An analysis of the relationship of cost and revenue. It determines the volume at which there is neither profit nor loss for a product or group of products. (Also called Cost/Volume/Profit Analysis.) [CMA]
80
Breakeven Point
The volume of sales at which total revenues and total costs are equal. [CMA]
81
Budget
A schedule of planned or expected revenues, expenses, assets, and liabilities. A budget provides guidelines for future operations and appraisal of performance. (Also called Profit Plan.) [CMA]
82
Budget Committee
A group of senior managers tasked with budget oversight.
83
Budget Cycle
The period of time between one budget and the next.
84
Budget Planning Calendar
A schedule of activities for the development and adoption of the budget.
85
Budget Process
The process used by an organization to prepare a plan for a future period, allocate resources, determine revenues and expenditures, and compile reports pertaining to that plan. [CMA]
86
Budgetary Slack
Intentional underestimation of revenues and/or overestimation of expenses. [CMA]
87
Budgeting
The process of planning flows of financial resources into, within, and from an entity during a specified future period or for a specified project. [CMA]
88
Business
A commercial or industrial enterprise. [CMA]
89
Business Combination
A grouping of a company with other businesses into a single accounting entity for reporting purposes (consolidated financial statements). The company and the other businesses continue to operate as separate entities. [CMA]
90
Business Plan
A document prepared by a company's management, detailing the past, present, and future of the company. It forms the basis for preparing budgets for the individual company units. [CMA]
91
Business Portfolio
A collection of products, projects, services, or brands that are offered for sale by an entity. [CMA]
92
Business Process
A sequence of logically related and time based work activities to provide a specific output for a customer. [CMA]
93
Business Process Reengineering (BPR)
A technique for radically and fundamentally altering the way a business operates to achieve improvements in cost, quality, service, and speed.
94
Business Unit
Any segment of an organization, or an entire business entity that is not divided into segments. Sometimes treated as a Profit Center. [CMA]
95
Byproduct
An item resulting from a production process that has relatively little value compared to the company's main product. [CMA]
96
Call Option
A contract that gives the buyer the right to buy an asset (for example a share of stock) at a specified price within a specified period of time. [CMA]
97
Call-Back Procedure
One type of control in which the host computer redials or reconnects with remote users at previously authorized connections.
98
Capacity Constraints
Resources that limit the maximum performance possible considering the conditions of the existing physical plant, labor force, method of production, or supply of material. [CMA]
99
Capacity Management
Management of an entity's costs of unused (excess) capacity such as production facilities, distribution channels, etc. [CMA]
100
Capital
1. The equity invested in an entity by its owners. Total assets less liabilities. 2. Long-term assets (e.g., equipment). [CMA]
101
Capital Adequacy
The amount of capital relative to a company's assets. A useful measure in risk management (particularly for banks). [CMA]
102
Capital Asset Pricing Model (CAPM)
A general framework for analyzing the relationship between risks and rates of return on securities, especially common stocks. [CMA]
103
Capital Budget
A plan of proposed outlays for acquiring long term assets and the means of financing the acquisition. [CMA]
104
Capital Budgeting
The evaluation and making of long-term investment decisions. [CMA]
105
Capital Gain or Loss
The extent by which the net realized value from sales of a capital asset exceeds (or in the case of a capital loss is less than) the cost of acquisition plus additional improvements, less depreciation and/or depletion charges. [CMA]
106
Capital Investment
Any expenditure which increases the capacity, efficiency, life span, or economy of the operation of an existing fixed asset. Outlay of money from which future cash inflows are expected for more than a year. (Also referred to as Capital Expenditure.) [CMA]
107
Capital Lease
A lease that transfers substantially all the benefits and risks inherent in the ownership of the property to the lessee, who accounts for the lease as an acquisition of an asset and the incurrence of a liability. [CMA]
108
Capital Rationing
A situation that exists when a constraint is placed on the total amount of the entity's capital investment funds. The limited investment funds available must be allocated to the highest priority projects. [CMA]
109
Capital Stock
Ownership shares in a corporation issued to shareholders. May consist of Common Stock and Preferred Stock. [CMA]
110
Capital Structure
The relative proportions of short-term debt, long-term debt, and owners' equity in the company. [CMA]
111
Capitalize
To record expenditure that is expected to benefit a future period as an asset rather than treating the expenditure as an expense of the period in which it occurs. [CMA]
112
Carrying Cost
Costs of storing and holding inventory, including the cost of capital from the time of acquisition or manufacture until the time of sale or use. [CMA]
113
Cartel
An organization of sellers coordinating supply decisions to maximize joint profits. A cartel seeks to create a monopoly in the market. [CMA]
114
Cash
Refers to money in the form of liquid currency that a bank will accept for immediate deposit, such as coins, checks, and money orders. [CMA]
115
Cash Budget
An estimate of the amount and timing of cash receipts and disbursements at various points over a future period, and cash on hand at the end. [CMA]
116
Cash Cycle
The period of time during which cash is converted into inventories, and inventories are converted back into cash through the sale of goods or collection of accounts receivable. (Also called Cash Conversion Cycle or Earnings Cycle.) [CMA]
117
Cash Discount
A reduction in the basic price, commonly used to encourage prompt payment or promote sales. [CMA]
118
Cash Equivalents
Short-term financial instruments of high liquidity and safety which can be converted to cash on short notice [CMA]
119
Cash Flow
The stream of cash inflows and outflows of an entity or segment of an entity. [CMA]
120
Cash Flow at Risk
A probabilistic estimate of the sensitivity of cash flow; how budgeted cash flow might be affected by changes in certain risk factors and other variables. [CMA]
121
Cash Flow Ratio
A liquidity measure, whereby operating cash flow is divided by current liabilities. [CMA]
122
Cash Flow to Fixed Charges
A leverage ratio that measures the cash flow available to meet fixed charges. [CMA]
123
Cash Management
The processes an entity uses to collect, disburse, and invest its cash. [CMA]
124
Cash Ratio
A measure of a company's liquidity that relates cash and marketable securities to current liabilities. [CMA]
125
Centralization
An organizational structure in which senior management maintains significant direction, authority, and control over all operations and policies. [CMA]
126
Certainty Equivalent
The amount a recipient would require with certainty to be indifferent between this certain risk-free amount and a particular uncertain risky amount. [CMA]
127
Change in the Quantity Demanded
A change in the quantity that buyers are willing to purchase at different price levels due only to a change in price. Often referred to as a movement along the demand curve. [CMA]
128
Change in the Quantity Supplied
A change in the quantity sellers are willing to supply due only to a change in price. Often referred to as a movement along the supply curve. [CMA]
129
Check Digit
A redundant digit added to a computer code to check accuracy of other characters in the code.
130
Chief Audit Executive (CAE)
Top position within the organization responsible for internal audit activities.
131
Code of Conduct
A set of rules outlining acceptable ethical behavior for employees within an organization. [CMA]
132
Coefficient of Variation
A statistical measure of relative dispersion or relative risk. It is computed by dividing the standard deviation by the expected value. [CMA]
133
Collateral
An asset pledged as a guarantee to a lender until a loan is repaid. If the borrower defaults, the lender has a right to sell the collateral asset. [CMA]
134
Commercial Bank
An institution that accepts deposits, offers checking accounts, makes loans, and offers a variety of other related services. [CMA]
135
Commercial Paper
A short-term unsecured loan of a corporation having maturity up to 270 days. It is typically issued on a discount (from face value) basis. [CMA]
136
Commitment Fee
A fee paid to a financial institution by an entity to secure a line of credit and maintain the unused portion thereof. [CMA]
137
Committed Costs
Costs that are fixed (administrative salaries, rent, etc.) and generally are not controllable.
138
Committee of Sponsoring Organizations (COSO)
A voluntary private-sector organization, established in the U.S., dedicated to providing guidance on organizational governance, business ethics, internal control, enterprise risk management, fraud, and financial reporting. [CMA]
139
Common Base Year Statements
Financial Statements showing the percentage change over a base year. (Also called Horizontal Analysis.) [CMA]
140
Common Cost
A cost of operating a facility that is shared by two or more users. [CMA]
141
Common Stock
An ownership share in a company, having voting and dividend rights. [CMA]
142
Common-Size Financial Statements
Financial statements used for comparison between firms. A common size Income Statement shows all amounts as a percent of revenue. A common size Balance Sheet shows all values as a percent of total assets. [CMA]
143
Company Risk
The risk due to the unique circumstances of a specific enterprise, as opposed to the overall market. (Also called Unsystematic Risk.) [CMA]
144
Comparability
The quality of information that enables users to identify similarities in and differences between two sets of economic phenomena. [CMA]
145
Compensating Balance
An amount required to be kept on deposit at a bank. [CMA]
146
Compensation
Employee or management wages and other financial benefits earned from labor. [CMA]
147
Competence
An ethical standard in IMA's Statement of Ethical Professional Practice that requires members to maintain an appropriate level of professional expertise and perform duties in accordance with relevant laws and standards. [CMA]
148
Competition-Based Pricing
A pricing strategy wherein the price of a product is determined primarily by the price being charged by one or more competitors. [CMA]
149
Completed-Contract Method
An accounting method that defers recognition of revenues until the completion of a contract, but recognizes anticipated losses immediately. [CMA]
150
Compliance
An organization's adherence to laws, rules, policies, and procedures.
151
Compliance Audit
A type of internal audit that reviews an organization's adherence to laws, rules, policies, and procedures. [CMA]
152
Compliance Risk
Risk to earnings or capital arising from violations of laws, rules, regulations, policies, procedures, and/or ethical standards. [CMA]
153
Compound Interest
Interest resulting from the periodic addition of simple interest to principal, establishing the new base as the principal for computation of interest for the next period. [CMA]
154
Comprehensive Income
All changes in equity during a period except those resulting from investments by owners and distributions to owners. [CMA]
155
Computer-Assisted Audit Techniques (CAAT)
The use of computers to automate or simplify the audit process in testing, fraud detection, and the analysis of large volumes of data.
156
Concentration Banking
A procedure utilized to manage cash wherein an entity utilizes a large bank (the Concentration Bank) to gather all the cash from smaller local (depository) banks where customers make payments. [CMA]
157
Confidentiality
An ethical standard in IMA's Statement of Ethical Professional Practice that requires members to keep employer information confidential and to not use confidential information for personal advantage. [CMA]
158
Conservatism
1. An accounting concept that states that revenues are recognized only when they are reasonably certain, but expenses are recognized when they are probable. 2. A prudent reaction to uncertainty to try to ensure that uncertainty and risks inherent in business situations are adequately considered. [CMA]
159
Consistency
Conformity from period to period with unchanging policies and procedures. [CMA]
160
Consolidated Financial Statements
Financial Statements showing financial condition or operating results of two or more associated enterprises as they would appear if they were one entity. [CMA]
161
Constant Gross Profit Method
A method of allocating joint costs where costs are allocated so that the overall gross-margin percentage is identical for each individual product. (Also called Gross Margin Method.) [CMA]
162
Constraint
An activity, resource, or policy that limits or bounds the attainment of an objective. [CMA]
163
Constraints Analysis
An evaluation of constraints in a manufacturing process.
164
Contingency Planning
Planning for the response to situations that may occur such as emergencies or setbacks [CMA]
165
Continuous
Not dividable into distinct units.
166
Continuous 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 Rolling Budget.) [CMA]
167
Continuous Improvement
A management approach to productivity improvement, where planned improvements occur in small incremental amounts by refinement of all components of a process. (Also called Kaizen.) [CMA]
168
Contribution Margin
The excess of sales revenues over variable costs. (Also called Marginal Contribution or Marginal Income.) [CMA]
169
Contribution Pricing
A method of establishing the price of the product based on variable costs and usually a profit margin. [CMA]
170
Control
Assuring that desired budgeted results are achieved through checks and balances on managers, including the use of performance evaluations tied to the budget.
171
Control Activities
Under COSO Framework, a component of internal control that includes the policies, procedures, and practices that ensure management objectives are achieved and risk mitigation strategies are executed.
172
Control Environment
Under COSO Framework, a component of internal control that establishes the foundation for the internal control system by providing fundamental discipline and structure.
173
Control Risk
A measure of the auditor's assessment of the likelihood that misstatements exceeding a tolerable level will not be prevented or detected by the client's internal control system. [CMA]
174
Controllable Cost
A cost that can be influenced by the actions of the responsible manager. [CMA]
175
Controller
The individual within an entity who is responsible for the accounting function. (Also called Comptroller.) [CMA]
176
Controls
Measures put in place to monitor activities and ensure they are functioning as designed. [CMA]
177
Conversion Cost
The sum of all manufacturing costs except direct material. [CMA]
178
Convertible
Securities (bonds or preferred stock) issued by companies which can be converted into common shares at a given price at a future date. [CMA]
179
Corporate Culture
The behavioral climate in an organization.
180
Corporate Governance
The set of rules, processes, policies and/or laws by which an organization is directed, operated and controlled. [CMA]
181
Corporate Social Responsibility (CSR)
When a company considers the ethical, legal, economic, environmental and philanthropic impact on stakeholders of the way it does business and tries to act in a responsible manner.
182
Corrective Controls
Controls designed to correct errors or irregularities that have been detected.
183
Correlation
The extent or degree of statistical association among two or more variables. [CMA]
184
Cost (noun)
1. In management accounting, a measurement in monetary terms, of the amount of resources used for some purpose. 2. In financial accounting, the sacrifice measured by the price paid or required to be paid, to acquire goods or services. [CMA]
185
Cost (verb)
To ascertain the cost of something. [CMA]
186
Cost Allocation System
A method by which costs are allocated to cost objects (Job order costing, Process costing, Activity-based costing, and Life-cycle costing). [CMA]
187
Cost Behavior
The change or lack of change in the amount of a cost item associated with changes in the level of activity. [CMA]
188
Cost Benefit Analysis
A tool for planning and reporting that involves the identification and measurement of all costs and benefits attributed to an activity. [CMA]
189
Cost Center
A grouping of operating costs having some common characteristics for measuring performance and assigning responsibility. A Responsibility Center where the manager is responsible for costs only. [CMA]
190
Cost Change Control System
An element of the cost management plan in which the cost baseline are outlined.
191
Cost Driver
A variable causally affecting costs over a time period. [CMA]
192
Cost Management
Actions undertaken by managers to satisfy customers while continuously controlling and reducing costs. [CMA]
193
Cost Objects
A function, organizational subdivision, contract, or other work unit for which cost data are desired and for which provision is made to accumulate and measure the cost of processes, products, jobs, capitalized projects, etc. [CMA]
194
Cost of Capital
A measure of the cost of using capital. A weighted average of the interest cost of debt capital and the implicit cost of equity capital. It is the minimum rate of return that must be earned on new investments that will not dilute the interests of the shareholders. [CMA]
195
Cost of Goods Sold
The inventory costs of the goods sold during a specific time period; the difference between the costs of goods available for sale during a specific period of time and the cost of goods on hand at the end of the period. Inventory costs include all costs necessary to get the product ready for sale. [CMA]
196
Cost of Quality
Costs incurred to detect, prevent, or rectify poor quality production. [CMA]
197
Cost of Sales
The cost of products or services whose sales are reported as revenue. (Also called Cost of Goods Sold.) [CMA]
198
Cost Pools
The collection of cost elements that have a common cause and that can be assigned to other cost objects according to a common basis of allocation. [CMA]
199
Cost Standards
Cost standards that are based on the quantity of the resources that should be used and what should be the cost for each unit of those resources.
200
Cost System
The system an entity utilizes to collect and assign costs to intermediate and final cost objects. [CMA]
201
Cost/Volume/Profit Analysis (CVP)
An analysis of the relationship of cost and revenue emphasizing both the volume at which there is zero profit and the influence of fixed and variable factors on the profit expectations at various levels of operation. (Also called Breakeven Analysis.) [CMA]
202
Cost-Based Pricing
The practice of establishing the selling price of a good or service based primarily on the cost to produce it. [CMA]
203
Costing
The accumulation and assignment of costs to cost objects. [CMA]
204
Cost-Plus Pricing
A pricing practice in which the selling price is determined by adding a percentage or monetary amount to the cost of a product. [CMA]
205
Countermeasure
An action, device, procedure, technique, or other measure that reduces the vulnerability of information systems.
206
Countertrade
The trading of goods for other goods. (Also called Barter.) [CMA]
207
Coupon Rate
The annual rate of interest stated on a debt instrument. [CMA]
208
Credibility
An ethical standard in IMA's Statement of Ethical Professional Practice that requires members to communicate information fairly and objectively, disclose all relevant information, and to disclose delays or deficiencies in information. [CMA]
209
Credit
A contractual agreement in which a borrower receives something of value now and agrees to repay the lender at a later date. [CMA]
210
Credit Risk
An investor's risk of loss arising from a borrower who defaults; i.e., does not make payments as promised. [CMA]
211
Critical Success Factors
The important things an entity must do to be successful. [CMA]
212
Cumulative Average-Time Learning Model
A learning curve model in which the cumulative average time per unit declines by a constant percentage each time the cumulative quantity of units produced is doubled. [CMA]
213
Current Assets
Cash and other assets that are expected to be sold, consumed or converted into cash during the normal operating cycle of a business. [CMA]
214
Current Cost
The amount of cash needed if the same asset, an identical asset, or an asset with equivalent productive capacity were acquired currently. [CMA]
215
Current Liability
A liability required or expected to be discharged (fulfilled) by using current assets within one year or the operating cycle, whichever is longer. [CMA]
216
Current Ratio
A financial ratio used to measure short-term solvency. (Also called Liquidity Ratio.) [CMA]
217
Currently Attainable Standard
A practical cost standard that can be attained by competent and well-trained workers most of the time without extraordinary effort.
218
Customer Satisfaction
A measure of the extent to which customers are satisfied with the products and related services they received from a supplier. [CMA]
219
Cycle Time
The total elapsed time to move a unit of work from the beginning to the end of a physical process, as defined by the producer and the customer. [CMA]
220
Cyclical
A type of trend where something (e.g., sales) varies in a regular pattern; a repeated sequence. [CMA]
221
Cyclicality
Repetition of up (peaks) or down movements (troughs) that follow or counteract a business cycle that can last several years.
222
Data Communications
Transfer of data among functional units through data transmission protocols. [CMA]
223
Data Encryption
In computer security, the process of transforming data into an unintelligible form in such a way that the original data either cannot be obtained or can be obtained only by using a decryption process. [CMA]
224
Data Warehouse
A central repository for all or significant parts of the data that an organization's business systems collect. [CMA]
225
Database
I. A set of data that is sufficient for a given purpose or for a given data processing system. 2. A collection of data fundamental to a system or to an enterprise. [CMA]
226
Database Management
The management of an organization's data. [CMA]
227
Days Purchases in Payables
A financial ratio measuring the portion of accounts payable that is current. [CMA]
228
Days Sales in Inventory
A measure of the age or adequacy of inventory. [CMA]
229
Days Sales in Receivables
A measure of the average number of days a credit sale is outstanding. (Also called Days Sales Outstanding and Average Collection Period.) [CMA]
230
Debt Covenant
An agreement between a company and its creditors that the company will operate within certain limits (for example, adhering to specified debt or coverage ratios).
231
Debt Ratio
A financial ratio used to measure the extent to which an entity utilizes debt. (Also called Debt to Total Assets Ratio.) [CMA]
232
Debt Security
A promise in writing to repay a debt. For example a bond, bill or note. [CMA]
233
Debt to Total Assets Ratio
A financial ratio used to measure the extent to which an entity utilizes debt, expressed as total debt divided by total assets. (Also called Debt Ratio.) [CMA]
234
Debt-to-Equity Ratio
A measure of leverage, represented by total debt divided by equity. [CMA]
235
Decentralization
An organizational structure in which senior management maintains minimal control over individual operations and policies. [CMA]
236
Decision Tree
A diagram of possible alternatives and their expected consequences used to formulate possible courses of actions in order to make decisions. [CMA]
237
Declining-Balance Method
An accelerated depreciation method in which an asset's net book value is multiplied by a constant depreciation rate resulting in higher depreciation charges in the early years of an asset's life. [CMA]
238
Default Risk
The risk that a debtor may not be able to meet the terms of a loan. [CMA]
239
Deferred
When an asset or liability is not realized as an expense or income until a future date. [CMA]
240
Deferred Expenses
Expenditures not recognized in the period in which they were made. They are carried forward as assets that will become expenses in future periods. (Also called Deferred Charges.) [CMA]
241
Deferred Income Taxes
In general, the difference between the income tax expense recorded for financial accounting purposes and the amount of income tax paid. [CMA]
242
Deferred Revenue
Generally, revenues received or recorded but not yet earned. (Also called Deferred Credit.) [CMA]
243
Degree of Financial Leverage
A financial ratio represented as the % change in net income divided by the % change in Earnings Before Interest and Taxes. [CMA]
244
Degree of Operating Leverage
A financial ratio represented as the % change in Earnings Before Interest and Taxes divided by the % change in sales. [CMA]
245
Delegation of Authority
The assignment of authority and responsibility to another person to carry out specific activities. [CMA]
246
Demand
The quantity of a commodity or service wanted at a specified price and time. Along with supply and other factors, a key determinant of price. [CMA]
247
Department
A division or distinct section of an organization. [CMA]
248
Departmental Overhead
The total overhead costs incurred by a department. [CMA]
249
Dependent Variable
The variable whose value depends on one or more variables in the equation; typically the cost or activity to be predicted.
250
Depletion
The process of allocating the cost of wasting assets (natural resources) to expense over the periods benefiting from the cost. [CMA]
251
Depreciation
The process of allocating the cost of tangible assets to operations over periods benefited (generally the expected life of the asset). [CMA]
252
Derivatives
A collective term for financial instruments whose prices are based on the price of another (underlying) investment (e.g., futures, options, warrants, and convertible securities). [CMA]
253
Detection Risk
The risk that errors not detected or prevented by the control structure will also not be detected by the auditor. [CMA]
254
Detective Controls
Controls designed to find and identify errors, irregularities, or improper outcomes after they have occurred.
255
Differential Cost
The difference in total cost between two alternatives. (Also called Incremental Cost). [CMA]
256
Diluted Earnings per Share
Earnings (net income) per share where "share" includes common stock, preferred stock, unexercised stock options, unexercised warrants, and some convertible debt. [CMA]
257
Direct Cost
A cost that is specifically identified with a single cost object. [CMA]
258
Direct 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 Variable Costing.) [CMA]
259
Direct Foreign Investment
Overseas investment by multinational enterprises. [CMA]
260
Direct Labor Budget
The budget estimating the quantity and cost of direct labor needed.
261
Direct Labor Cost
The compensation of all labor that can be identified with a cost object. [CMA]
262
Direct Materials Budget
The budget estimating the quantity and cost of direct materials to be purchased.
263
Direct Materials Cost
The acquisition cost of all materials that can be identified as part of the cost object. [CMA]
264
Direct Method
1. Method of allocating service department costs that ignores any services rendered by one service department to another, allocating each service department's costs 2. A method of preparing The Statement of Cash Flows where net cash flow from operating activities are reported as major classes of operating cash receipts and cash disbursements (as opposed to indirect method.)directly to the production departments. (Also called Direct Allocation Method.) [CMA]
265
Direct Profit
The difference between contribution margin and fixed costs.
266
Disaster Recovery
A procedure for storing an installation's essential data in a secure location, and for recovering that data in the event of a catastrophic problem. [CMA]
267
Disbursement
The payment of cash. [CMA]
268
Disbursement Float
The value of checks that an entity wrote that have not yet cleared the banking system and not yet deducted from the entity's bank account. (Also called Payment Float.) [CMA]
269
Disclosure
An explanation or exhibit attached to a financial statement, or report. [CMA]
270
Discount
1. In the case of debt securities, the difference between the price paid by an investor and the face value. 2. In the case of products for sale, the difference between the price paid by a customer and the full price of the item. [CMA]
271
Discount Factor
The present value of one unit of currency that is expected to be received in future years. [CMA]
272
Discount Rate
The interest rate used to convert future cash flows to their present value. [CMA]
273
Discounted Cash Flow
A method of evaluating future net cash flows by discounting them to their present value. The two methods most commonly used are Internal Rate of Return (IRR) and Net Present Value (NPV) methods. [CMA]
274
Discounted Payback
The amount of time expected to elapse before the discounted present value of cash inflows equals the discounted present value of the cash outflows. [CMA]
275
Discretionary Cost
A cost whose amount within a time period is governed by a management decision to incur the cost. (Also called Managed Cost or Programmed Cost.) [CMA]
276
Diseconomies of Scale
Increases in average total costs occurring from an increase in the scale of production in the long run. [CMA]
277
Distribution
The mechanism by which products or services are delivered to the customer. [CMA]
278
Distribution Channels
A chain of intermediaries, each passing the product down the chain to the next organization, until it finally reaches the consumer or end-user (e.g., retailer, wholesaler, agent). [CMA]
279
Diversification
A technique used by an investor to reduce risk by distributing investment funds among a variety of asset classes. [CMA]
280
Divestiture
The sale of one or more of a company's subsidiaries or divisions. [CMA]
281
Dividend
The distribution of part of a company's earnings to shareholders. [CMA]
282
Dividend Discount Model
A method used to place a value on a share of stock based on the net present value of the dividends that are expected to be received in the future. Expressed as D / (k ? g), where D = the expected dividend per share, k = the expected rate of return, and g is the expected growth rate. (2 forms: constant growth model and two-stage model.) [CMA]
283
Dividend Payout
The amount of the dividend paid on a share of stock in a year. [CMA]
284
Dividend Payout Ratio
The annual dividend per share of stock as a proportion of Earnings per Share. [CMA]
285
Dividend Yield
The annual dividend income per share received from a company as a proportion of the current market price per share. [CMA]
286
Downstream Costs
Costs incurred after a product is manufactured, including marketing, distribution, and customer service. [CMA]
287
Draft
An instrument signed by a one person to another person requesting payment at a future time to a third party. [CMA]
288
Drum-Buffer-Rope System
The Theory of Constraints production application, where drum refers to the constraint, buffer refers to the material release duration, and rope refers to the release timing. The aim is to protect the constraint in the system against process dependency and variation, maximizing the systems' overall effectiveness. [CMA]
289
Dual Allocation Method
A method of allocating service department costs where cost are classified into two cost pools ? a variable cost cost-pool and a fixed-cost cost-pool. Each of these pools uses a different cost-allocation base. [CMA]
290
Dual-Rate Transfer Pricing
A method where the transfer price is set at different levels for the supplying and receiving divisions of an organization. [CMA]
291
DuPont Model
A method used to analyze the components of Return on Equity (ROE), where ROE is expressed as the product of Profit Margin, Total Asset Turnover and the Equity Multiplier (Financial Leverage Ratio). [CMA]
292
Duration
A measure of the volatility of fixed income securities or of a portfolio of fixed income securities to changes in interest rates (i.e., the weighted average number of years until cash flows are received). [CMA]
293
Earned Value
The value, in terms of your baseline budget, of the work accomplished by now, in dollars or hours, or budgeted amount for the work (also known as the budgeted cost of work performed (BCWP)).
294
Earnings
The excess of revenue over expenses for an accounting period. Sometimes used synonymously with net earnings, net income, or income. [CMA]
295
Earnings at Risk
A probabilistic estimate of the sensitivity of earnings; how forecasted earnings might be affected by changes in certain risk factors and other variables. [CMA]
296
Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
A metric used to evaluate profitability; it eliminates the effects of financing and accounting decisions. [CMA]
297
Earnings Coverage
The availability of a company's cash flows to service its debt. [CMA]
298
Earnings Distribution
A probabilistic distribution of earnings outcome such that one can estimate the probability of obtaining a certain level of earnings. Used in risk management. [CMA]
299
Earnings Per Share (EPS)
Net income available to common shareholders on a per share basis. [CMA]
300
Earnings Quality
The extent that net income is a realistic portrayal of operating performance (i.e., that reported results have not been intentionally overstated or understated by management). [CMA]
301
Earnings Yield
Earnings per share for the most recent 12 months as a proportion of the current price per share. [CMA]
302
Earnings-Based Valuation
Techniques used to value a share of stock or entity based on earnings expected to be generated by the item or entity. Generally involves present value models. [CMA]
303
Economic Order Quantity (EOQ)
The optimal amount of an item to order when inventory is reduced to the reorder point. (Also called Optimal Lot Size.) [CMA]
304
Economic Profit
A return to investors that exceeds the opportunity cost of financial capital. [CMA]
305
Economic Value Added (EVA)
Net income (after taxes) earned in excess of the amount of net income required to earn the company's cost of capital.
306
Economies of Scale
Reduction in an entity's per unit cost associated with production processes that produce large volumes of output. [CMA]
307
Effective Interest Rate
The internal rate of return or yield to maturity of a bond at the time of issue. [CMA]
308
Efficiency
The relative amount of inputs used to achieve a given output level.
309
Efficiency (Usage) Variances
The difference between the actual quantity of input used and the budgeted quantity of input, multiplied by the budgeted price. [CMA]
310
Efficiency Variance (Direct Costs)
Efficiency variance = (actual input quantity - budgeted input quantity) x budgeted input price.
311
Efficient Market Hypothesis
The hypothesis that security prices always fully reflect all publicly available information concerning traded securities. [CMA]
312
Elasticity
A measure of the degree to which a price change for an item results in a unit change in supply or a unit change in demand. [CMA]
313
Elasticity of Demand
A measure of consumer response to a change in the price of a product or service. Calculated as the percent change in quantity demanded divided by a percent change in price. Depending on the response, the product or service is called either elastic or inelastic. [CMA]
314
Encryption
A procedure that transforms information, using an algorithm, to make it unreadable to anyone who does not have the key to decode the message. [CMA]
315
Enterprise Resource Planning (ERP)
ERP systems integrate (or attempt to integrate) the data and processes of an organization into a single unified system. [CMA]
316
Enterprise Risk Management (ERM)
A process applied across the enterprise designed to 1. Identify potential events that, if they occur, could negatively impact the enterprise; and 2. Manage this risk to provide reasonable assurance to management and the Board of Directors. [CMA]
317
Enterprise-Wide
Used to describe systems and processes in use throughout an organization. [CMA]
318
Entity
A person, partnership, corporation, or other separate identifiable unit. [CMA]
319
Equilibrium
In economics the state of a market for a product or service where there is a balance of supply and demand [CMA]
320
Equity
The residual amount after deducting an entity's liabilities from its assets. The amount that shareholders own in a corporation. [CMA]
321
Equity Carve-Out
When a parent company sells a minority (usually 20% or less) stake in a subsidiary for an IPO. (Also called partial spin-off.) [CMA]
322
Equity Multiplier
Total assets as a proportion of common equity. (Also called Financial Leverage Ratio.) [CMA]
323
Equivalent Units
A measure of the physical quantities of inputs necessary to produce output of one fully complete unit. [CMA]
324
Ethical Relativism
The view that morality is not absolute and ethical standards should be adjusted according to the situation.
325
Ethics Code
A list of principles and/or standards governing the conduct of individuals within an organization. [CMA]
326
Ethics Help-Line
A resource for obtaining guidance on ethical dilemmas; generally in the form of an exclusive telephone number that connects to an ethcs counselor. [CMA]
327
Eurodollars
Deposits denominated in U.S. Dollars at financial institutions outside the United States. [CMA]
328
Exception Reporting
Reporting that alerts management by focusing on significant deviations from planned performance. [CMA]
329
Exchange Rate
The price of one country's currency in terms of another country's currency. [CMA]
330
Exchange Rate Risk
The risk that the value of a cash flow will decline due to a change in exchange rates. [CMA]
331
Exercise Price
Price at which a call option or put option may be exercised (carrying out terms of agreement). (Also called Strike Price.) [CMA]
332
Expected Value
The weighted average of the outcomes of an action, in which the values of the possible outcomes are weighted by their probabilities. [CMA]
333
Expenditure
Payment for goods or services received that may be made at either the time the goods or services are received or a later time. [CMA]
334
Expense
Cost of goods and services used in the current accounting period. [CMA]
335
Expense Recognition
The recording in the accounting system of a cost. [CMA]
336
Experience Curve
A curve that shows the decline in cost per unit in various business functions of the value chain as the amount of these activities increases.
337
Exponential Smoothing
A methodology used to produce a smoothed time series which assigns exponentially decreasing weights as the observation get older. [CMA]
338
Expropriation Risk
The risk of a foreign government seizing the private property of a company. [CMA]
339
External Factors
Factors beyond the control of an entity that influence overall economic conditions or the market for its product. [CMA]
340
External Failure Costs
Costs that an entity incurs when it detects nonconforming products or services after delivering them to customers (e.g., warranty repairs and product liability). [CMA]
341
External Financial Reporting
The reporting of financial information focused on an external audience (lenders, investors, and the general public). [CMA]
342
External Financing Needed
The required outside financing that can be calculated based on the relationships between assets, liabilities, and sales.
343
Factoring
The sale of accounts receivable at a discount to a factor (usually a financial institution). The financial institution then collects the accounts from the customer. [CMA]
344
Factory Overhead
All manufacturing costs except direct materials and direct labor. [CMA]
345
Fair Market Value
The exchange price that would prevail for a good or service traded in an active market consisting of a large number of well-informed buyers and sellers dealing at arm's length. [CMA]
346
Fair Value Method
A method used to value an entity's investments in marketable securities. If the carrying value of marketable securities falls below the Fair Market Value, then the value of the security should be reduced to the Fair Market Value. [CMA]
347
Favorable Budget Variance
A variance arising when actual or current performance exceeds expected performance. [CMA]
348
Feedback
The process of informing users of information about how actual performance compares with the expected or desired level of performance. [CMA]
349
Fiduciary Duty
An obligation to act in the best interest of another party; for example, corporate board members have a fiduciary duty to the shareholders.
350
Financial Accounting
The accounting for assets, equities, revenues and expenses of an entity; primarily concerned with the historical reporting to external users of the financial position and operations of the entity on a regular periodic basis. [CMA]
351
Financial Accounting Standards Board (FASB)
An independent board consisting of seven members responsible for establishing generally accepted accounting principles for the U.S. [CMA]
352
Financial Budget
The part of the Master Budget that includes the Capital Budget, Cash Budget, Budgeted Balance Sheet, and Budgeted Statement of Cash Flows. [CMA]
353
Financial Instrument
An instrument having monetary value (e.g., bond). [CMA]
354
Financial Leverage
The extent to which the assets of an entity are financed with debt. [CMA]
355
Financial Leverage Ratio
Total assets as a proportion of total common equity, which measures the extent of financial leverage. [CMA]
356
Financial Reporting
Presentation of financial information indicating an entity's financial position, operating performance, and funds flow for an accounting period. [CMA]
357
Financial Statement
A report containing financial information about an organization, including the Balance Sheet (or Statement of Financial Position), Income Statement, and Cash Flow Statement. [CMA]
358
Financing Expenses
Expenses incurred by an entity in order to issue debt or equity securities. [CMA]
359
Finished Goods Inventory
The part of inventory that accounts for the completed product, ready for sale or other disposition. [CMA]
360
Firewall
A network configuration (usually both computer hardware and software) that prevents unauthorized traffic into and out of a secure network. [CMA]
361
Firm
A business entity, such as a corporation [CMA]
362
First-In-First-Out (FIFO)
A method of inventory valuation and cost flow assumption, where the ending inventory cost is computed from the most recent purchases and the cost of goods sold is computed from the oldest purchases, including beginning inventory. [CMA]
363
Fiscal Year
Any accounting period of 12 successive calendar months (or 52 weeks, or 365 days), used by an entity for financial reporting. [CMA]
364
Fixed Asset
A noncurrent, nonmonetary, tangible asset used in the normal operations of a business. [CMA]
365
Fixed Asset Turnover
Measures an entity's ability to generate sales from fixed assets. It relates sales to net property, plant, and equipment. [CMA]
366
Fixed Budget
A budget with fixed and unchangeable amounts of revenues and expenses. (Also called a static budget.) [CMA]
367
Fixed Charge Coverage Ratio
A leverage ratio, represented as earnings before fixed charges and taxes divided by fixed charges. Fixed charges include interest, required principal repayments, and leases. [CMA]
368
Fixed Charges
Fixed financial costs such as interest payments and lease (rent) payments. [CMA]
369
Fixed Cost
A cost that does not vary with the volume of activity in the short term. (Also called Nonvariable Cost or Constant Cost.) [CMA]
370
Fixed Exchange Rate
A monetary system in which a country's currency is set at a fixed rate relative to other currencies. [CMA]
371
Fixed Overhead
Overhead Costs that do not vary with the level of output [CMA]
372
Fixed Overhead Production Volume Variance
Fixed overhead production volume variance = budgeted fixed overhead - applied fixed overhead.
373
Fixed Overhead Spending Variance
Fixed overhead spending variance = actual fixed overhead - budgeted fixed overhead.
374
Flexible Budget
A budget in which the budgeted amounts may be adjusted to any activity level. [CMA]
375
Flexible Exchange Rate
An exchange rate for a country's currency that is determined by the market forces of supply and demand. (Also called Floating Exchange Rate.) [CMA]
376
Floating Exchange Rate
An exchange rate for a country's currency that is determined by the market forces of supply and demand. Also referred to as a Flexible Exchange Rate. [CMA]
377
Flowchart
A graphical representation of the flow of information in which symbols are used to represent operations, data, reports generated, equipment, etc. [CMA]
378
Forecast
A projection of the expected financial position, results of operations, and cash flows based on expected conditions in the future. [CMA]
379
Foreign Corrupt Practices Act
A U.S. federal law requiring any company having publicly-traded stock to maintain records that accurately and fairly represent the company's transactions, and have an adequate system of internal accounting controls. Enacted with the intent to bring an end to bribery of foreign officials. [CMA]
380
Foreign Exchange
Financial instruments, such as paper currency, notes, and checks, used to make payments between countries. [CMA]
381
Forfaiting
A form of finance where a third party purchases trade receivables from an exporter at a discount, and then collects from the importer the payment using the shipped goods as collateral. [CMA]
382
Forward Contract
A non standardized cash market transaction in which the delivery of the commodity is deferred until after the contract has been made. [CMA]
383
Forward Delivery
A transaction in which the settlement will occur on a specified date in the future at a price agreed upon on the trade date. (Also called Forward Trade.) [CMA]
384
Forward Market
A market in which participants agree to trade some commodity, security, or foreign exchange at a fixed price for future delivery. [CMA]
385
Franchise
A license granted by one entity (franchisor) to another entity (franchisee), entitling the franchisee to produce or market a product or service in a specific area, for a specific time. [CMA]
386
Fraud
An illegal act defined as the intentional misrepresentation or concealment of information in order to deceive.
387
Fraudulent
Intentional perversion of truth in order to induce another to part with something of value or to surrender a legal right. [CMA]
388
Fringe Benefit
Non-wage forms of compensation, including pensions and health insurance, provided to an employee in addition to monetary compensation. [CMA]
389
Full Cost
The sum of all the costs in all the business functions. [CMA]
390
Full Cost Method
A method of transfering price in which the price is set at the selling unit's variable cost and allocated fixed costs; it is also called the absorption cost method.
391
Function
The general end or purpose to be accomplished by an organizational unit, such as administration, selling, or research. It can also be a group of related activities serving a common end. [CMA]
392
Functional Currency
The currency of the primary economic environment in which the entity operates. [CMA]
393
Future
A legal agreement to make or take delivery of a specified instrument at a fixed future date at a price determined at the time of dealing. [CMA]
394
Gap Analysis
A comparison between actual and desired quality outcomes or between an organization's performance and its benchmarked competitors.
395
Generally Accepted Accounting Principles (GAAP)
The body of accounting rules, methods, and procedures endorsed by the accounting profession, either by convention or by authoritative literature, as a guide to the preparation of financial statements. [CMA]
396
Geographical Pricing
Product and service pricing based on the marketplace in which it is provided. [CMA]
397
Goal Congruence
A characteristic of a management control system that is structured so that the goals of individuals are consistent with the goals of the organization. [CMA]
398
Going Concern
The assumption that, in the absence of evidence to the contrary, a firm will continue to exist indefinitely. [CMA]
399
Goodwill
The excess of the fair market value an entity above its identifiable net assets. [CMA]
400
Gross Profit (See: Gross Profit Margin)
Net sales less cost of sales. (Also called Gross Profit Margin.) [CMA]
401
Gross Profit Margin (See: Gross Profit)
Net sales less cost of sales. (Also called Gross Profit.) [CMA]
402
Gross Profit Margin Percentage
Gross profit divided by sales. [CMA]
403
Gross Revenue
Total unadjusted revenue. (Also called Gross Sales.) [CMA]
404
Hardware
The physical components of a computer system. [CMA]
405
Hazard Risk
The risk within a situation that has the potential for harm to humans, property and damage of environment or a combination of these. [CMA]
406
Hedging
A method of reducing exposures to fluctuations in prices, exchange rates, or interest rates. [CMA]
407
Heteroscedasticity
A regression in which the variances in y for the values of x are not equal.
408
High-low method
Method of estimating cost behavior by using only the highest and lowest values of the cost driver within the relevant range. [CMA]
409
Historical Cost
The amount originally paid for an asset, unadjusted for subsequent changes in value. (Also called Acquisition Cost or Original Cost.) [CMA]
410
Holding Gain or Loss
Unrealized gains or losses from holding asses or liabilities during a period of changing prices. [CMA]
411
Homoscedasticity
A regression in which the variances in y for the values of x are equal or close to equal.
412
Horizontal Analysis
Compares each amount on a financial statement with a base amount for a selected base year. (Also called Common Base Year Statements.) [CMA]
413
Hurdle Rate
The minimum acceptable rate of return that companies will consider from a prospective project or investment. (Also called Required Rate of Return.) [CMA]
414
Hybrid Cost System
A cost system having characteristics of both Job Costing and Process Costing systems. [CMA]
415
Ideal Standard
A theoretical cost standard that can only be achieved with perfect performance and total efficiency in every aspect of the operation.
416
IMA Statement of Ethical Professional Practice
A commitment to ethical professional practice made by members of the Institute of Management Accountants (IMA) that includes standards that guide the conduct of members including competence, confidentiality, integrity, and credibility. The statement also includes guidelines for the resolution of ethical conflict. [CMA]
417
Impaired Asset
An asset whose fair market value is less than the amount listed on the balance sheet. [CMA]
418
Implicit Costs
Costs recognized in particular situations that are not regularly recognized in the accounting records of an entity. (Also called Imputed Costs.) [CMA]
419
Implicit Interest Rate
Rate that would have resulted from two independent parties negotiating an interest rate. (Also called Imputed Interest Rate.) [CMA]
420
Imposed Budget
A budget that is decided by higher level management without the participation of the manager of the unit to whom that budget relates. (Also called Top-Down Budget.) [CMA]
421
Income before Taxes
All profits before taking into account income taxes.
422
Income Statement
A financial statement that reports the results of operations for a period of time. By presenting revenues, expenses, gains, losses, and net income, it measures a company's success over a time period. (Also called Statement of Earnings.) [CMA]
423
Income Tax
An annual tax levied by a government on the financial income of an entity. [CMA]
424
Incorporated (Inc.)
A company formed into a legal corporation. [CMA]
425
Incremental
The difference in cash flow, both as to amount and as to timing, between two alternative courses of action. [CMA]
426
Incremental Analysis
A method of analyzing managerial decisions that emphasizes incremental rather than the total costs and benefits associated with an action (or set of alternative actions). (Also called Marginal Analysis or Differential Analysis.) [CMA]
427
Incremental Method
Another method to allocate the common costs that ranks the users of a cost object by those most responsible for the common cost and then uses that ranking to allocate costs to users.
428
Incremental Unit-Time Learning Model
A learning curve model in which the incremental unit time (the time needed to produce the last unit) declines by a constant percentage each time the cumulative quantity of units produced is doubled. [CMA]
429
Indenture
A written agreement (also called a deed of trust) between a debt issuer and a purchaser, stating the maturity date, interest rate and other terms. [CMA]
430
Independent Auditor
An external auditor who has no financial or other interest in the client whose financial statements are being examined. [CMA]
431
Independent Checks
Checks carried out by employees independent of the work being checked; meant to ensure reliable accounting information and operational efficiency.
432
Independent Variable
The variable presumed to influence another variable (dependent variable); typically it is the level of activity or cost driver.
433
Indirect Cost
Any cost not directly identified with a single final cost object, but identified with two or more final cost objects or with at least one intermediate cost object. All costs other than direct materials and direct labor. (Also called Overhead Cost or Burden.) [CMA]
434
Indirect Method
A method of preparing the Cash Flow Statement where net cash flow from operating activities is determined by adding back to or deducting from net income those items that had no effect on cash. [CMA]
435
Industry Risk
Risks companies face by virtue of the industry they are in. [CMA]
436
Inflation
A rise in the general level of prices of goods and services. [CMA]
437
Information and Communication
Under COSO Framework, a component of internal control that support all other control components by communicating control responsibilities to employees and by providing information in a form and time frame that allows people to carry out their duties.
438
Information System
A system consisting of people, computers, voice and data communications, and methods organized to accomplish data and information operations. Information systems support the running of the enterprise's business. [CMA]
439
Information Technology (IT)
IT deals with the use of electronic hardware and software to convert, store, protect process, transmit, and retrieve information. [CMA]
440
Inherent Risk
1. The risk related to the very nature of the activities the company undertakes in the course of business. 2. The auditor's assessment of the likelihood that there are material misstatements in the financial statements before considering the effectiveness of internal controls. [CMA]
441
Initial Public Offering (IPO)
A company's first public issue of common stock. [CMA]
442
Input Controls
Controls that ensure the complete and accurate recording of authorized transactions by authorized users and identify rejected and duplicate items. [CMA]
443
Insider Trading
The buying and selling of a corporation's stock by individuals with access to non-public information. [CMA]
444
Installment Sale
An arrangement where the buyer takes possession of the property immediately but does not receive the deed and title until a series of payments have been made. [CMA]
445
Institute of Internal Auditors (IIA)
A professional practices standard-setting body for the discipline.
446
Instrumentalism
The belief that ideas should be measured by how effective they are in practice rather than by moral or philosophical standards; a form of pragmatism.
447
Insurance
A form of risk management used to hedge against the risk of a contingent, uncertain loss; the transfer of the risk of a loss from one entity to another, in exchange for payment. [CMA]
448
Intangible
A type of non-current asset that has no physical substance and whose value comes from rights or advantages conferred upon the owner. Examples are patents, copyrights, trademarks, brand names, licenses, and goodwill. [CMA]
449
Integrity
An ethical standard in IMA's Statement of Ethical Professional Practice that requires members to avoid conflicts of interest and refrain from activities that would discredit the profession. [CMA]
450
Interest
The cost incurred or amount earned for the use of borrowed capital. [CMA]
451
Interest Coverage Ratio
The ratio of cash available for debt servicing to interest, principal and lease payments.
452
Interest-Bearing
A debt instrument that includes a provision that interest be paid. [CMA]
453
Interim Financial Reports
Financial statements prepared for periods shorter than one year, such as monthly or quarterly. [CMA]
454
Intermediate Product
Product transferred from one subunit to another subunit of the same organization prior to further work or sale.
455
Internal Auditing
An appraisal activity within an entity that measures and reports on the extent to which various organizational policies are followed and goals are met. [CMA]
456
Internal Control
Controls established by management to ensure adherence to management policies, safeguarding of assets, and completeness and accuracy of records. [CMA]
457
Internal Control Risk
The risk that internal controls are not effective, because of either inadequate set-up and design or lax execution. [CMA]
458
Internal Factors
In strategic planning, an analysis of the internal strengths and weaknesses of an entity. [CMA]
459
Internal Failure Costs
Costs incurred when an entity detects nonconforming products or services before delivering them to customers. Examples include scrap, rework and retesting. [CMA]
460
Internal Rate of Return (IRR)
The discount rate that equates the net present value of a stream of cash outflows and inflows to zero. [CMA]
461
International Accounting Standards Board (IASB)
An independent, privately-funded accounting standard-setter based in London, UK, with board members from nine countries, committed to developing a single set of high-quality, understandable and enforceable global financial accounting standards [CMA]
462
Internet
The worldwide collection of interconnected networks that use the Internet suite of protocols and permit public access. [CMA]
463
Intranet
A private network that integrates Internet standards and applications within an organization's existing computer networking infrastructure. [CMA]
464
Intrusion Detection System
A system that scans for intrusions into a computer or network by observation of actions, security logs, or audit data.
465
Inventoriable Costs
All costs of a product that are considered assets in the balance sheet when they are incurred and that become cost of goods sold only when the product is sold.
466
Inventory
The actual raw materials, supplies, goods on hand, goods in process of manufacture, and goods in transit, in storage, or consigned to others, or the act of accounting for, listing and pricing inventory. [CMA]
467
Inventory Turnover
A ratio that measures the number of times a firm's average inventory is sold during a year. [CMA]
468
Inventory Valuation
The measurement of the cost assigned to items in inventory. [CMA]
469
Invested Capital
The amount of capital contributed to a business by equity investors, either directly or through the retention of earnings. [CMA]
470
Investment
Expenditure to acquire property or other assets in order to produce income; also, the asset so acquired. [CMA]
471
Investment Center
A responsibility center whose performance is measured in the amount of income it earns relative to the investment in its assets. [CMA]
472
Irregularity
One-time deviations from expectations caused by unforeseen circumstances such as war, natural disasters, poor weather, labor strikes, single-occurrence company-specific surprises or macroeconomic shocks.
473
Job Order Costing
A method of cost accounting that accumulates costs for individual jobs or lots. [CMA]
474
Joint Product Costing
A method of cost accounting used when simultaneously producing or otherwise acquiring two or more products (joint products) that must, by the nature of the process, be produced or acquired together. (Also called Common Cost.) [CMA]
475
Joint Venture
A business enterprise jointly undertaken by two or more companies, who share the initial investment, risks, and profits. [CMA]
476
Journal
A record of original entry that records transactions in chronological sequence. [CMA]
477
Just-In-Time Manufacturing (JIT)
A manufacturing process where products are produced or procured as they are needed rather than when they can be made [CMA]
478
Kanban
A manufacturing strategy wherein parts are produced or delivered only as needed. [CMA]
479
Kinked Demand Curve
A demand curve that is highly elastic for a price increase but inelastic for a price decrease, based on the assumption that rival firms will match a price reduction but not a price increase. [CMA]
480
Last-In-First-Out (LIFO)
A method of inventory valuation and cost flow assumption, where ending inventory is measured by assigning the most recent costs incurred to costs of goods sold, and the earliest costs to ending inventory. [CMA]
481
Law of Diminishing Returns
The principle that states that as increasingly more units of a variable resource are combined with a fixed amount of other resources, use of additional units of the variable resource will eventually increase output at a decreasing rate. [CMA]
482
Lead Time
The time expected to elapse between the date an order is placed and the date the goods or services are received. [CMA]
483
Leadership by Example
Leaders living and acting by the company's code of ethics, setting a good example, keeping promises and commitments, and supporting others in adhering to the code of ethics. (Also called "Tone at the Top.") [CMA]
484
Learning Curve
A mathematical expression of the phenomenon that incremental unit costs to produce decrease as managers and labor gain experience from practice and as better methods are developed. [CMA]
485
Learning Curve Analysis
A method of estimating costs that are falling due to production efficiencies.
486
Lease
A contract between the owner of property (Lessor) and the user (Lessee) concerning the financial and operating arrangements for the property. [CMA]
487
Leasehold
An asset representing the right of a Lessee (User) to use property. [CMA]
488
Least-Squares Method
A statistical method for defining a line that best fits the data points and reflects the relationship between variables. (Also called Linear Regression.) [CMA]
489
Ledger
A book of accounts; any book of final entry. [CMA]
490
Legal Risk
Potential for loss arising from the uncertainty of legal proceedings, such as bankruptcy, trademark challenges, liability claims, etc. [CMA]
491
Letter of Credit
A binding document from a bank guaranteeing that a buyer's payment will be received on time and for the correct amount. Often used in international trade to eliminate perceived risks. [CMA]
492
Leverage
The extent to which a firm is financed by debt. [CMA]
493
Leveraged Buyout (LBO)
Form of ownership change where a company is taken private; the investor finances a significant percentage of the purchase price of the controlling interest with borrowing. [CMA]
494
Liability
Probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events. [CMA]
495
Life-Cycle Costing
The accumulation of costs for activities that occur over the entire life cycle of a product, including design and development, acquisition, operation, maintenance, and service. [CMA]
496
Line Item Budget
A budget that classifies items of expense by the nature of the expense, such as salaries, fringe benefits, travel, etc. [CMA]
497
Line of Business
A set of operations directed to the production and sale of a distinctive type of goods or services to customers [CMA]
498
Line of Credit
An agreement usually by a bank to make loans, not to exceed a specified total amount, when needed by a customer [CMA]
499
Linear Programming
A mathematical tool used to optimize a function (the objective function) subject to various constraints, all of which are linear. Often used to find the combination of products that will maximize profits or minimize costs [CMA]
500
Liquidation
The process by which a company, or part of a company, is terminated and the assets are redistributed. [CMA]
