CFM certification will not be available soon
The ICMA Board of Regents tells that the CFM program will no longer be offered as of Dec 31, 2007 because of the inability "to find a sustained audience." They plan to focus on the CMA certification. "This new focus will enhance the value of the CMA." said Dennis Whitney, vice president-ICMA, CMA/CFM.
The CFM certification program was established approximately 10 years ago, and more than 4,100 management accounting professionals have earned the CFM designation. The ICMA and its parent, the Institute of Management Accountants (IMA®), will continue to support all CFM holders with appropriate member services, recognition of the CFM achievement, and the maintenance of certification records.
"This was a difficult decision for the Board, but we believe that the benefits to be gained by focusing solely on the enhancement of the CMA program will, in the long run, make the decision worthwhile. We again congratulate those who have earned the CFM and assure them of our continuing support." said John Brausch, chair, ICMA Board of Regents, CMA/CFM.
Those who are currently CMAs and those who are currently enrolled in the CFM program, will continue to have the opportunity to take the CFM examination until December 31, 2007. New enrollees who are not yet CMAs will be accepted into the CFM program until December 31, 2006 and will also have until the end of 2007 to take the CFM examination.
Read Frequently Asked Questions (.pdf) about these changes here.
August 23, 2006
Covariance and Calculation of Portfolio Variance
Now, let's go to the next step - calculation of the expected return, the variance and the standard deviation of our portfolio, consisting of the two assets: 60% of the asset A and 40% of the asset B. Future returns of the assets A and B are considered as a random variables R A и RB.
Expected return of the asset A is 10% and the standard deviation is 8.66%. Expected return of the asset B is 15%, the standard deviation is 12%.
The calculation of the portfolio expected return is a fairly straightforward. But the calculation of the standard deviation and variance of the portfolio is more complicated, because portfolio variability (standard deviation) is not the weighted-average of the variabilities of the individual assets. Diversification reduces the variability of the portfolio, because the prices of different assets vary differently. In many cases, the decrease in price of one asset is compensated by the price growth for another.
August 17, 2006
Calculation of the coefficient of variation
Let’s consider the two asset portfolio with 60% of the asset A and the 40% of the asset B. Each security’s future return is considered as a random variable (RA and RB). Our portfolio is a weighed combination of assets. The return of a portfolio is also a random variable and we can calculate portfolio expected return and the variance of the portfolio.
First, let’s calculate the expected return and the variance for asset A. Assume, that the asset A has the following estimated rate of return distribution:
Rate of Return Probability
The expected rate of return for RA is:
August 9, 2006
Answering the question asked in the comment, I decided to publish the link to the helpful article. “Business strategy” article outlines the different approaches to analyzing business units, product lines, ways to grow the business and so on.
I learned the definitions of star, cash cow, dog and question mark (BCG Growth Share Matrix) from the article, that was very helpful.
August 4, 2006
Revised CMA Part 3 - passed!
Last Tuesday I passed Revised CMA part 3 exam “Strategic Management” with a score of 540.
I began the serious preparation in the middle of May, so it took more than two months. The understanding of concepts did not seem difficult to me, since some concepts were partially covered in part 1 “Business Analysis” and part 2 “Management Accounting and Reporting” materials (planning, bonds, ratios, etc.), and the Hock textbook presents the theory in a very clear way, as usual.
For the purpose of time saving during the preparation, I did not give much attention to the real options (only several pages that were in the Hock materials) and the calculation of covariance, hoping for only general questions on these topics.
While initially it seemed that third exam wouldn’t be very difficult, I read a lot of messages from IMA email exchange that part 3 “Strategic Management” of the Revised exam was the hardest... and it definitely was. So I was warned and decided to focus on trying to make calculations more accurate and faster, and better understanding the concepts. This exam became a real challenge for me.
April 4, 2006
New HOCK Student Forums
I am glad to inform you, that Hock international announces New HOCK Student Forums. As mentioned in my blog many times, I like Hock's study materials for its intelligible explanations of the concepts. Thus, CMA/CFM candidates receive new useful on-line study resource. You have to be a Hock student in order to ask the questions, but you can read all forum's topics for free. I am sure that the amount of helpful information will increase very quickly, because Hock International, especially Lynn Roden, pays much attention to the communication with students, helping in study, answering the questions.
February 3, 2006
CMA or CPA
What Do You Want to Do?
"If you want exposure to many industries and public auditing skills, CPA is the way to go"
"If you want to hang your hat in the same office every day and make a difference with one company, the CPA is good, but the CMA is extremely relevant."
Are You Qualified?
What’s the Pay Differential?
Will You Be Competitive?
What Are Less-Obvious Advantages?
Then, you can take a small quiz “CPA, CMA or MBA? Which Credential Is Right for You?” and read the similar article “CPA or MBA?” by the same author.
December 28, 2005
Simplex Algorithm. Example #2
In the previous example we considered the solution of linear programming problem using the simplex method. We modified initial problem into the standard maximization problem with non-negative right-hand side of the constraints equations.
Let us consider more general case of solving standard maximization problem with arbitrary right-hand side of the constraints.
Initial linear programming (LP) problem:
4х1 + 15х2 + 12х3 + 2х4 -> min
2x2 + 3x3 + x4 >= 1
x1 + 3x2 + x3 - x4 >= 0
x1, x2, x3, x4 >=0
Convert initial LP problem to maximization LP problem:
-4х1 - 15х2 - 12х3 - 2х4 -> max
-2x2 - 3x3 - x4 <= -1
-x1 - 3x2 - x3 + x4 <= 0
x1, x2, x3, x4 >=0
Let S1, S2 >= 0 are slack variables.
Rewrite the constraint inequalities as equations by adding these variables:
-4х1 - 15х2 - 12х3 - 2х4 -> max (objective function)
0x1 - 2x2 - 3x3 - x4 + 1s1 + 0s2 = -1 (constraint equations)
-x1 - 3x2 - x3 + x4 + 0s1 + 1s2 = 0
x1, x2, x3, x4, s1, s2 >=0
Set up the initial simplex tableau (Click to see full size image):
December 18, 2005
Submit an article
Web visibility is a great advantage for professionals, so you can try your writing skills here. Maybe your articles in this blog will be the first step to your own professional web resource.
Lately I've been very busy at work and I can't pay as much attention to this blog as I'd like to. That's why I want to remind you the following - you can always send me your own articles for publication in this blog.
I'll be glad to receive articles with the descriptions of your personal exam experience, thoughts about the certification importance and comparison of different financial certifications.
The articles, context of which consists of brief, clear and elegant statement of some theoretical aspects, simple explanations of complicated notions are also interesting for me. You can also send visual examples, which are properly illustrating the theory.
It often happens so, that some theoretical fragment doesn't "want" to be learned, but then a kind of insight happens and everything becomes clear. Tell me about issues, which seemed to be very complicated at first and the perfect solutions of such a problem you managed to find.
It'll be also very interesting to get to know about your ways of learning great number of information, concerning formulas, theory, and legislation.
Don't forget about the data, which will be published about you as the author, your site reference, and anything else you'd like to say about yourself.
December 6, 2005
Quantity variance is the sum of mix and yield variances
The Quantity (Efficiency or Usage) Variance is the difference between the actual material (labor) usage and the standard usage for this level of output, multiplied by standard price.
Quantity Variance = (Standard Quantity for Actual Output - Actual Output) * Standard Price, or
Quantity Variance = (SQ - AQ) * SP
When there is more than one input, we calculate Quantity (Efficiency) Variance for each input individually:
In this situation, the Quantity (Efficiency) Variance may be caused by two different factors: