Plain-English definitions of the terms for CMA study. Simplified for learning; IMA’s materials are authoritative.
| Term | Definition |
|---|---|
| Management accounting | Information used internally for planning and decisions. |
| Contribution margin | Sales revenue minus variable costs. |
| Break-even point | The sales level where profit is zero. |
| Fixed cost | A cost that does not change with output. |
| Variable cost | A cost that changes with output. |
| Standard cost | An expected cost used as a benchmark. |
| Variance | The difference between actual and expected. |
| Budget | A financial plan for a future period. |
| Forecast | An estimate of future financial outcomes. |
| ROI | Return on investment. |
| Residual income | Income above a required return on capital. |
| NPV | Net Present Value of a set of cash flows. |
| IRR | The discount rate that makes NPV zero. |
| Working capital | Current assets minus current liabilities. |
| Cost of capital | The required return to fund the business. |
| Internal control | Processes safeguarding assets and reporting. |
| Decision analysis | Choosing among alternatives using relevant data. |
| Risk management | Identifying and mitigating financial risks. |
| Performance management | Measuring and improving organisational performance. |
| Relevant cost | A future cost that differs between alternatives. |