download cma hock 2020 part2

download cma hock 2020

download cma hock 2020 part2

Dear Future CMA:
Welcome to HOCK international! You have made a wonderful commitment to yourself
and your profession by choosing to pursue this prestigious credential. The process of
certification is an important one that demonstrates your skills, knowledge, and
commitment to your work.
We are honored that you have chosen HOCK as your partner in this process. We know
that this is a great responsibility, and it is our goal to make this process as efficient as
possible for you. To do so, HOCK has developed the following tools for your use:
A Study Plan that guides you, week by week, through the study process. You
can also create a personalized study plan online to adapt the plan to fit your
schedule. Your personalized plan can also be emailed to you at the beginning of
each week.
The Textbook that you are currently reading. This is your main study source and
contains all of the information necessary to pass the exam. This textbook follows
the exam contents and provides all necessary background information so that you
don’t need to purchase or read other books.
The Flash Cards include short summaries of main topics, key formulas and
concepts. You can use them to review whenever you have a few minutes, but
don’t want to take your textbook along.
ExamSuccess contains original questions and questions from past exams that

are relevant to the current syllabus. Answer explanations for the correct and in-
correct answers are also included for each question.

Practice Essays taken from past CMA Exams that provide the opportunity to
practice the essay-style questions on the Exam.
A Mock Exam enables you to make final preparations using questions that you
have not seen before.

Teacher Support via our online student forum, e-mail, and telephone through-
out your studies to answer any questions that may arise.

Videos using a multimedia learning platform that provide the same coverage as a
live-taught course, teaching all of the main topics on the exam syllabus.
We understand the commitment that you have made to the exams, and we will match
that commitment in our efforts to help you. Furthermore, we understand that your time
is too valuable to study for an exam twice, so we will do everything possible to make
sure that you pass the first time.
I wish you success in your studies, and if there is anything I can do to assist you, please
contact me directly at brian.hock@hockinternational.com.
Sincerely,

 

Table of Contents
Introduction to CMA Part 2 ………………………………………………………………………………….. 1
Section A – Financial Statement Analysis…………………………………………………………….. 2
Introduction to the Financial Statement Analysis Section 2
A.1. Basic Financial Statement Analysis ………………………………………………………………. 3
Earnings Before Interest and Taxes and Earnings Before Taxes Defined 3
Comparative Financial Statement Analysis 4
Vertical Common-Size Financial Statements 5
Horizontal Trend Analysis 7
A.2. Financial Ratio Analysis……………………………………………………………………………… 11
Liquidity Ratios…………………………………………………………………………………………………. 13
Net Working Capital 13
Liquidity Ratios 14
Leverage, Capital Structure, Solvency, and Earnings Coverage Ratios………………… 19
Financial Leverage 20
Operating Leverage 26
Capital Structure and Solvency Ratios 31
Earnings Coverage Ratios 32
Activity Ratios…………………………………………………………………………………………………… 37
Accounts Receivable Activity Ratios 37
Inventory Activity Ratios 40
Accounts Payable Activity Ratios 42
The Operating Cycle and the Cash Cycle 43
Total Asset Turnover Ratio 45
Fixed Asset Turnover Ratio 45
Market Ratios ……………………………………………………………………………………………………. 45
Book Value Per Share 46
Market-to-Book Ratio 47
Earnings Per Share (EPS) 48
EPS Disclosures 69
Price/Earnings (P/E) Ratio 72
Earnings Yield 73
Dividend Yield 73
Dividend Payout Ratio 74
Shareholder Return 74
Profitability Ratios…………………………………………………………………………………………….. 75
Gross Profit Margin Percentage 75
Operating Profit Margin Percentage 76
Net Profit Margin Percentage 77

Table of Contents CMA Part 2

ii © 2019 HOCK international, LLC. For personal use by original purchaser only. Resale prohibited.
EBITDA Margin Percentage 77
Return on Invested Capital 79
A.3. Profitability Analysis ………………………………………………………………………………….. 82
Analyzing Return on Assets 82
Analyzing Return on Equity 84
“Equity,” “Assets,” and “Return” in ROA and ROE 85
Factors in Measuring Income 88
Sustainable Growth Rate 91
Ratios Summary and Example …………………………………………………………………………… 93
Example Financial Statements 93
Ratios 98
Interpretation of Ratios in the Example 101
Benefits and Limitations of Ratio Analysis……………………………………………………….. 106
A.4. Special Issues ………………………………………………………………………………………….. 108
The Impact of Foreign Exchange Fluctuations 108
The Impact of Inflation on Financial Statements and Financial Ratios 125
Adjusting Financial Statements for Accounting Changes and Error Corrections 129
The Difference Between Book Value and Market Value 136
Economic Profit and Accounting Profit 137
Earnings Quality 140
Section B – Corporate Finance ………………………………………………………………………… 145
Introduction to the Corporate Finance Section 145
B.1. Risk and Return ……………………………………………………………………………………….. 146
Return 146
Risk 147
Types of Risk 148
The Relationship Between Risk and Return 151
Capital Asset Pricing Model (CAPM) 152
Portfolio Risk and Return 165
B.2. Long-Term Financial Management…………………………………………………………….. 168
Capital Structure 168
Bonds (Debt Securities) 169
The Term Structure of Interest Rates and the Yield Curve 174
The Bond Instrument 182
Stock (Equity Securities) 195
The Fair Value or Intrinsic Value (Appropriate Price) of a Share of Stock 198
Derivatives 215
Cost of Capital ………………………………………………………………………………………………… 240
Overall Cost of Capital and the Weighted-Average Cost of Capital 240

CMA Part 2 Table of Contents

© 2019 HOCK international, LLC. For personal use by original purchaser only. Resale prohibited. iii
Capital Structure Decisions 257
Inflation, Interest Rates, and Prices of Financial Instruments 265
B.3. Raising Capital …………………………………………………………………………………………. 268
Commercial Bank or Finance Company Loans 269
Venture Capitalists 273
Initial Public Offering (IPO) 273
Primary, Subsequent, and Secondary Offerings 274
Investment Banks 274
Private Placements 278
Crowdfunding Under the Jumpstart Our Business Startups (JOBS) Act 278
Bonds 279
International Bonds 279
Bonds and Rating Agencies 280
Benefits and Limitations of the Various Financing Sources 283
Financial Markets 286
Market Efficiency and the Efficient Market Hypothesis 293
Insider Trading 296
Dividends, Dividend Policy, and Stock Splits 297
Treasury Stock 302
B.4. Working Capital Management……………………………………………………………………. 304
Working Capital Finance 304
The Operating Cycle 310
Cash Flow Management 314
Marketable Securities Management 321
Accounts Receivable Management 328
Inventory Management 332
Short-Term Financing 341
Maturity Matching Approach to Working Capital Management 356
B.5. Corporate Restructuring …………………………………………………………………………… 357
Business Combinations 357
Takeover Strategies and Defenses 362
Divestitures 366
The Discounted Cash Flow Approach to Valuing a Business 371
B.6. International Finance ………………………………………………………………………………… 379
Multinational Corporations (MNCs) 379
Foreign Direct Investment 380
International Buying and Selling 384
Foreign Currency Cross Rates 403
Managing Exchange Rate Risk 406
Use of Foreign Financing to Reduce Costs 414
International Payments 416

Table of Contents CMA Part 2

iv © 2019 HOCK international, LLC. For personal use by original purchaser only. Resale prohibited.
Financing International Trade Transactions 419
Appendix A – Examples of Remeasurement and Translation …………………………….. 422
Appendix B – Present Value Factors………………………………………………………………… 429
Appendix C – Amortization of Bond Discount…………………………………………………… 432
Answers to Questions……………………………………………………………………………………… 433

 

download cma hock 2020
download cma hock 2020

 

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