CMA Exam Study Notes: Planning & Budgeting Concepts

CMA Exam Study Notes

CMA Exam: The Planning & Budgeting Process

There are various types of budgets such as flexible, zero-based, and static. Something “not being in the budget” is a common reason all of us have heard being mentioned at one time or another. A budget is prepared well ahead of the period that it comprises, and it is basically based on historical data, assumptions and forecasts.

However, the budget is not mainly for the sole purpose of limiting what can be accomplished. It is meant to be a guideline, and a planning tool to follow in order to attain an enterprise’s intended objectives and goals.

Planning is the procedure of mapping out the future of an enterprise in an unpredictable and dynamic world to achieve intended goals. Planning comprises of selecting enterprise goals, predicting results under alternative ways of attaining those goals, determining how to achieve the intended goals, and communicating how to achieve the goals to the whole enterprise.

After the implementation of the plans and the budget, as the period emerges, the budget provides both control and feedback. The budgeting process is intimately related to the planning process in an enterprise. Important planning decisions by management are needed prior to the formulation of a budget for a particular period. Moreover, the development of the budget may require some adjustments in previously conceived short-term plans.

CMA Exam: Maximizing Shareholder Wealth

Business managers trying to maximize shareholder wealth are actually trying to enhance the stock price. As the stock price rises, the wealth of the individual who holds the stock increases. Furthermore, when the stock price rises, the value of the enterprise also rises simultaneously.

All commercial enterprises have definite objectives and goals. The topmost objective of all enterprises is to achieve superior performance in comparison with their top competitors. Superior performance guarantees increased company profitability.

When profits are rising, shareholder value will automatically rise. The ultimate goal of a for-profit company is to maximize shareholder value. The shareholders are the owners of a company.

It is the shareholders who provide risk capital with the anticipation that the managers will adhere to strategies that will deliver them an excellent return on their investment. Hence, managers have a responsibility to invest company profits in a manner that maximizes shareholder value.

Achieving and maintaining both profitability, as well as profit growth, is unquestionably one of the biggest challenges for managers today. The main expectations of shareholders are higher profitability and sustainable profit growth.

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Nathan Liao

Hi, I’m Nathan Liao (aka the CMA Coach)! For the last 10 years, over 82,000 accounting and finance pros came knocking at my door seeking guidance and help. If you’re also aiming to conquer the CMA exam on your very first try—without wasting away time or money—you’ve found your ultimate guide. Dive in deeper to discover more about me and the dedicated team that powers CMA Exam Academy. Click here and let’s embark on this journey together!

10 Comments on “CMA Exam Study Notes: Planning & Budgeting Concepts”

  1. Dear Nathan,

    I Am interested to do the CMA exam but I have minimal knowledge in accounting.

    Please advise which CMA review course is the most suitable for me.


    1. Hi Taqi,

      I recommend you to opt for the complete coaching course, which is designed for accountants at all levels.

      I’ve had students with no prior accounting experience who passed the CMA exam on their first attempt after completing this coaching course. I’m confident that you’ll succeed in your exam too if you follow the program in this course.

      If you have any other questions, please don’t hesitate to reach out.

    1. Hi! If you need a test bank with retired exam questions to practice on answering MCQs related to this topic, check out our test bank with adaptive learning technology here.

      Let me know if you need anything else. 🙂

  2. hi
    i want to start preapration for jan intake from where to start ??? i mean guide me some books allow me to access some notes……….????/

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