CERTIFIED MANAGEMENT ACCOUNTANT (CMA) -
PART 1
SECTION B – Planning, Budgeting and Forecasting (Weightage 30%)
S.No Questions Answers
1. What are strategy, A strategy is a set of actions taken by managers of a company to
strategy formulation, increase the company’s performance. The strategy-making process
and strategy includes both strategy formulation and strategy implementation.
implementation? Strategy formulation is the process of selecting strategies.
Strategy implementation is the process of putting the selected
strategies into action.
2. What are the two theories 1) The market theory gives management a passive role and
about management’s role views its function as making reactive decisions in response to
in reaching profit growth? environmental events as they occur.
2) The planning and control theory views the role of
management as an active one that emphasizes the planning
function of management and its ability to control the
activities of the business.
3. What are strategic plans Strategic plans are broad, general, long-term plans (usually five years
and or longer) that are based on the objectives of the organization.
who makes strategic plans? The company’s top management leads the strategic planning effort.
4. What are intermediate A strategic plan is broken down into intermediate or tactical plans
plans and who makes (one to five years), which are designed to implement specific parts of
them? the strategic plan.
Upper and middle managers develop tactical plans.
5. What are short-term plans Short-term or operational plans (one week to one year) are
and developed from the tactical plans.
who makes them? Operational plans focus on implementing the tactical plans to achieve
operational goals and include budgeted amounts.
Middle and lower-level managers develop operational plans.
6. What are the five steps 1) Defining the company’s mission, vision, values, and goals.
in strategic planning? 2) Analyzing the organization’s external competitive
environment to identify opportunities and threats.
3) Analyzing the internal operating environment to identify
strengths, weaknesses, and limitations.
4) Formulating and selecting strategies.
5) Developing and implementing the chosen strategies.
7. What are the four 1) A statement of the company’s mission, or “reason to be.”
components 2) Its vision, or a statement of a desired future state.
of the mission statement? 3) A statement of the organization’s values.
4) A statement of its major goals.
8. What is a goal and what A goal is a precise and measurable future state that the company
are four characteristics of wants to achieve.
good goals? 1) Goals are precise and measurable.
2) Goals should be crucial and address important issues.
3) Goals should be challenging while at the same time be
realistic.
From the Desk of Muhammad Zain – Founder of Zain Academy Page 29 of 154
, CERTIFIED MANAGEMENT ACCOUNTANT (CMA) -
PART 1
4) Goas should specify when they should be achieved in order to
create a sense of urgency.
9. What are opportunities and • Opportunities arise when companies can leverage external
threats? conditions to develop and implement strategies that will
make them more profitable.
• Threats include conditions in the external environment that
pose a danger to profitability.
10. According to Porter, what 1) The risk of entry by potential competitors.
are the five forces that 2) The intensity of rivalry among established companies within
shape competition within an industry.
an industry? 3) The bargaining power of buyers.
4) The bargaining power of suppliers.
5) The closeness of substitutes to an industry’s products.
11. What two situations must 1) Distinctive competencies and the superior efficiency, quality,
exist to have a competitive innovation, and customer responsiveness that result from
advantage? them.
2) The profitability that is derived from the value customers
place on its products, the price that it charges for its products,
and the costs of creating those products.
12. What are the four generic 1) Superior efficiency.
distinctive competencies? 2) Superior quality.
3) Superior innovation.
4) Superior customer responsiveness.
13. What is the value that is A company creates value for customers when it produces and sells its
created for customers? product or performs and sells its service.
The value created is the difference between the utility (U) that the
customer gets from the product and the company’s costs (C) to
produce it.
U − C = Created Value
14. What is consumer surplus? Consumer surplus is the difference between the customer’s utility and
the price.
U − P = Consumer Surplus
15. What are the three factors 1) Barriers to imitation, or factors that make it difficult for a
that determine the competitor to imitate the company’s distinctive
durability of a company’s competencies, such as patents.
competitive advantage? 2) The capability of competitors to imitate the company’s
competitive advantage.
3) How rapidly the industry is changing.
16. What does SWOT stand for Strengths
in SWOT Analysis? Weaknesses
Opportunities
Threats
17. What are the four generic 1. Cost leadership, or having a lower cost structure than all of
competitive strategies? its competitors. This can permit the cost leader to charge a
lower price than the competition, thus attracting more
business, and the increased sales will lead to higher profits.
From the Desk of Muhammad Zain – Founder of Zain Academy Page 30 of 154
, CERTIFIED MANAGEMENT ACCOUNTANT (CMA) -
PART 1
2. Focused cost leadership, or competing within a narrow
market segment using the strategy of cost leadership.
3. Differentiation, which is based on achieving competitive
advantage by providing a product that is different or unique
in some important way. It might be superior
innovation, excellent quality, or responsiveness to customer
needs, because those are the three principal ways to achieve
product differentiation.
4. Focused differentiation, or a business model that specializes
in serving the needs of just one or two market segments or
niches. The focused differentiator positions itself to compete
with the primary differentiator in the market but in only one
or two of the market’s segments.
18. What are the four basic 1) Global standardization
strategies for international 2) Localization
operations? 3) Transnational
4) International
19. What are the five modes of 1) Exporting
entry for a company to 2) Licensing
enter 3) Franchising
into a foreign market? 4) Entering into a joint venture with a host country company
5) Setting up a wholly-owned subsidiary in the host country
20. What are horizontal and • Horizontal integration is a corporate-level strategy that
vertical integration? involves acquiring or merging with competitors to achieve
competitive advantages such as economies of scale.
• In vertical integration, a company expands its operations
either into an industry producing inputs to the company’s
operations or forward into an industry that uses the
company’s products.
21. What are the three 1) How to group tasks into functions, and how to group
decisions that a company functions into business units or divisions.
must make about its 2) How to allocate authority and responsibility to the functions
organizational structure? and divisions.
3) How to increase the coordination or integration between and
among functions and divisions, and how to maintain and
increase them as the structure evolves.
22. What are the four 1) Localization is oriented toward responsiveness to the local
organizational structures markets.
for international 2) International generally combines centralized R&D and
operations? manufacturing with decentralized marketing in each major
geographic area where a company operates.
3) Global standardization is a low-cost strategy.
4) Transnational attempts to achieve both local responsiveness
and cost reductions.
23. What is PEST analysis? PEST analysis is a type of situation analysis.
From the Desk of Muhammad Zain – Founder of Zain Academy Page 31 of 154
, CERTIFIED MANAGEMENT ACCOUNTANT (CMA) -
PART 1
“PEST” stands for Political, Economic, Social, and Technological
factors that are examined in the process of doing strategic planning
for an organization.
24. What are the four 1) Stars
categories 2) Cash cows
of products in the 3) Question marks
BCG Growth-Share Matrix? 4) Dogs
25. What are some • Promote coordination and communication among an
advantages of budgets? organization’s units and activities.
• Provide a framework for measuring performance.
• Provide motivation for managers and employees to achieve
the company’s plans.
• Promote the efficient allocation of organizational resources.
• Provide a means for controlling operations.
• Provide a means to check on progress toward the
organization’s goals.
26. What is a rolling, or A rolling budget is continuously being updated and always covers the
continuous, budget? same amount of time in the future.
27. What are the three main 1) A participative budget is developed from the bottom up.
methods of developing a 2) An authoritative budget is developed from the top down.
budget? 3) A consultative budget is a combination of the authoritative
and participative budget development methods.
28. What are the steps 1) Budget guidelines are set and communicated.
in the budgeting process? 2) Initial budget proposals are prepared by responsibility
centers.
3) Negotiation, review, and approval.
4) Revisions
5) Reporting on variances
6) Using variance reports
29. What is budgetary slack? The difference between the amount budgeted and the amount the
manager actually expects.
It is the practice of underestimating planned revenues and
overestimating planned costs to make the overall budgeted profit
more achievable.
30. What are five methods of 1) Activity analysis
setting standard costs? 2) Historical data
3) Target costing
4) Strategic decisions
5) Benchmarking
31. What are three 1) Required quality of materials.
considerations in setting 2) The quantity needed.
direct material standards? 3) The price per unit of materials.
32. What is the master The master budget (also called the comprehensive budget) is the
budget? culmination and the goal of the budgeting process.
It is a summarized set of budgeted financial statements, including the
budgeted balance sheet, budgeted income statement, and budgeted
statement of cash flows.
From the Desk of Muhammad Zain – Founder of Zain Academy Page 32 of 154
PART 1
SECTION B – Planning, Budgeting and Forecasting (Weightage 30%)
S.No Questions Answers
1. What are strategy, A strategy is a set of actions taken by managers of a company to
strategy formulation, increase the company’s performance. The strategy-making process
and strategy includes both strategy formulation and strategy implementation.
implementation? Strategy formulation is the process of selecting strategies.
Strategy implementation is the process of putting the selected
strategies into action.
2. What are the two theories 1) The market theory gives management a passive role and
about management’s role views its function as making reactive decisions in response to
in reaching profit growth? environmental events as they occur.
2) The planning and control theory views the role of
management as an active one that emphasizes the planning
function of management and its ability to control the
activities of the business.
3. What are strategic plans Strategic plans are broad, general, long-term plans (usually five years
and or longer) that are based on the objectives of the organization.
who makes strategic plans? The company’s top management leads the strategic planning effort.
4. What are intermediate A strategic plan is broken down into intermediate or tactical plans
plans and who makes (one to five years), which are designed to implement specific parts of
them? the strategic plan.
Upper and middle managers develop tactical plans.
5. What are short-term plans Short-term or operational plans (one week to one year) are
and developed from the tactical plans.
who makes them? Operational plans focus on implementing the tactical plans to achieve
operational goals and include budgeted amounts.
Middle and lower-level managers develop operational plans.
6. What are the five steps 1) Defining the company’s mission, vision, values, and goals.
in strategic planning? 2) Analyzing the organization’s external competitive
environment to identify opportunities and threats.
3) Analyzing the internal operating environment to identify
strengths, weaknesses, and limitations.
4) Formulating and selecting strategies.
5) Developing and implementing the chosen strategies.
7. What are the four 1) A statement of the company’s mission, or “reason to be.”
components 2) Its vision, or a statement of a desired future state.
of the mission statement? 3) A statement of the organization’s values.
4) A statement of its major goals.
8. What is a goal and what A goal is a precise and measurable future state that the company
are four characteristics of wants to achieve.
good goals? 1) Goals are precise and measurable.
2) Goals should be crucial and address important issues.
3) Goals should be challenging while at the same time be
realistic.
From the Desk of Muhammad Zain – Founder of Zain Academy Page 29 of 154
, CERTIFIED MANAGEMENT ACCOUNTANT (CMA) -
PART 1
4) Goas should specify when they should be achieved in order to
create a sense of urgency.
9. What are opportunities and • Opportunities arise when companies can leverage external
threats? conditions to develop and implement strategies that will
make them more profitable.
• Threats include conditions in the external environment that
pose a danger to profitability.
10. According to Porter, what 1) The risk of entry by potential competitors.
are the five forces that 2) The intensity of rivalry among established companies within
shape competition within an industry.
an industry? 3) The bargaining power of buyers.
4) The bargaining power of suppliers.
5) The closeness of substitutes to an industry’s products.
11. What two situations must 1) Distinctive competencies and the superior efficiency, quality,
exist to have a competitive innovation, and customer responsiveness that result from
advantage? them.
2) The profitability that is derived from the value customers
place on its products, the price that it charges for its products,
and the costs of creating those products.
12. What are the four generic 1) Superior efficiency.
distinctive competencies? 2) Superior quality.
3) Superior innovation.
4) Superior customer responsiveness.
13. What is the value that is A company creates value for customers when it produces and sells its
created for customers? product or performs and sells its service.
The value created is the difference between the utility (U) that the
customer gets from the product and the company’s costs (C) to
produce it.
U − C = Created Value
14. What is consumer surplus? Consumer surplus is the difference between the customer’s utility and
the price.
U − P = Consumer Surplus
15. What are the three factors 1) Barriers to imitation, or factors that make it difficult for a
that determine the competitor to imitate the company’s distinctive
durability of a company’s competencies, such as patents.
competitive advantage? 2) The capability of competitors to imitate the company’s
competitive advantage.
3) How rapidly the industry is changing.
16. What does SWOT stand for Strengths
in SWOT Analysis? Weaknesses
Opportunities
Threats
17. What are the four generic 1. Cost leadership, or having a lower cost structure than all of
competitive strategies? its competitors. This can permit the cost leader to charge a
lower price than the competition, thus attracting more
business, and the increased sales will lead to higher profits.
From the Desk of Muhammad Zain – Founder of Zain Academy Page 30 of 154
, CERTIFIED MANAGEMENT ACCOUNTANT (CMA) -
PART 1
2. Focused cost leadership, or competing within a narrow
market segment using the strategy of cost leadership.
3. Differentiation, which is based on achieving competitive
advantage by providing a product that is different or unique
in some important way. It might be superior
innovation, excellent quality, or responsiveness to customer
needs, because those are the three principal ways to achieve
product differentiation.
4. Focused differentiation, or a business model that specializes
in serving the needs of just one or two market segments or
niches. The focused differentiator positions itself to compete
with the primary differentiator in the market but in only one
or two of the market’s segments.
18. What are the four basic 1) Global standardization
strategies for international 2) Localization
operations? 3) Transnational
4) International
19. What are the five modes of 1) Exporting
entry for a company to 2) Licensing
enter 3) Franchising
into a foreign market? 4) Entering into a joint venture with a host country company
5) Setting up a wholly-owned subsidiary in the host country
20. What are horizontal and • Horizontal integration is a corporate-level strategy that
vertical integration? involves acquiring or merging with competitors to achieve
competitive advantages such as economies of scale.
• In vertical integration, a company expands its operations
either into an industry producing inputs to the company’s
operations or forward into an industry that uses the
company’s products.
21. What are the three 1) How to group tasks into functions, and how to group
decisions that a company functions into business units or divisions.
must make about its 2) How to allocate authority and responsibility to the functions
organizational structure? and divisions.
3) How to increase the coordination or integration between and
among functions and divisions, and how to maintain and
increase them as the structure evolves.
22. What are the four 1) Localization is oriented toward responsiveness to the local
organizational structures markets.
for international 2) International generally combines centralized R&D and
operations? manufacturing with decentralized marketing in each major
geographic area where a company operates.
3) Global standardization is a low-cost strategy.
4) Transnational attempts to achieve both local responsiveness
and cost reductions.
23. What is PEST analysis? PEST analysis is a type of situation analysis.
From the Desk of Muhammad Zain – Founder of Zain Academy Page 31 of 154
, CERTIFIED MANAGEMENT ACCOUNTANT (CMA) -
PART 1
“PEST” stands for Political, Economic, Social, and Technological
factors that are examined in the process of doing strategic planning
for an organization.
24. What are the four 1) Stars
categories 2) Cash cows
of products in the 3) Question marks
BCG Growth-Share Matrix? 4) Dogs
25. What are some • Promote coordination and communication among an
advantages of budgets? organization’s units and activities.
• Provide a framework for measuring performance.
• Provide motivation for managers and employees to achieve
the company’s plans.
• Promote the efficient allocation of organizational resources.
• Provide a means for controlling operations.
• Provide a means to check on progress toward the
organization’s goals.
26. What is a rolling, or A rolling budget is continuously being updated and always covers the
continuous, budget? same amount of time in the future.
27. What are the three main 1) A participative budget is developed from the bottom up.
methods of developing a 2) An authoritative budget is developed from the top down.
budget? 3) A consultative budget is a combination of the authoritative
and participative budget development methods.
28. What are the steps 1) Budget guidelines are set and communicated.
in the budgeting process? 2) Initial budget proposals are prepared by responsibility
centers.
3) Negotiation, review, and approval.
4) Revisions
5) Reporting on variances
6) Using variance reports
29. What is budgetary slack? The difference between the amount budgeted and the amount the
manager actually expects.
It is the practice of underestimating planned revenues and
overestimating planned costs to make the overall budgeted profit
more achievable.
30. What are five methods of 1) Activity analysis
setting standard costs? 2) Historical data
3) Target costing
4) Strategic decisions
5) Benchmarking
31. What are three 1) Required quality of materials.
considerations in setting 2) The quantity needed.
direct material standards? 3) The price per unit of materials.
32. What is the master The master budget (also called the comprehensive budget) is the
budget? culmination and the goal of the budgeting process.
It is a summarized set of budgeted financial statements, including the
budgeted balance sheet, budgeted income statement, and budgeted
statement of cash flows.
From the Desk of Muhammad Zain – Founder of Zain Academy Page 32 of 154
