CIMA Certification Exam Prep Workshop from Chicago Booth

I am very happy to report that I passed the CIMA exam! Although I was part of the educational program at another school, there is no way I could have passed without the Chicago Booth review program and having been also granted access to the Chicago Booth CIMA program educational materials and live session videos. Kathleen’s voice was a constant companion as I listened to classes driving and even while on family vacation. Thank you so very much!

- Alan P. Jesiel, CFP®, CIMA®, Vice President, Senior Relationship Strategist, PNC Wealth Management

The University of Chicago has a well-planned approach to teaching the CIMA curriculum. All of the important concepts are covered in a clear, concise format. The professors really want to make sure you understand the material and go to great lengths to provide intuition behind some of the math concepts. The class is very interactive and the faculty make themselves easily accessible throughout the class. I strongly recommend this program to anyone considering attaining the designation.

- Todd Muentzer, CIMA®, ETF Specialist

This was a great overall experience.  Kathleen does a great job presenting and reviewing the content.  It was also beneficial to connect with other students preparing for the exam.

- Jon Maldonado, Financial Advisor, UBS Financial Services

Excellent program with in-depth analysis of calculation needed for course material.

- Robert Filetti, Robert Baird

This class was far above my expectations.  This is a great value for the cost.

- Alicia Frye, Regional Business Consultant, Symmetry Partners

I got the passing score I needed to finally achieve my CIMA credentials. I was and am still ecstatic about this accomplishment and absolutely credit it to the Chicago Booth workshop and team for helping me get here. I would tell anyone interested in the CIMA program or who is trying to finish the certification process that the Booth workshop is the way to go.

- Jen Litton, CDFA, CIMA®

Having the two day review class at Booth is a major differentiator from the other education programs. Having a two day intensive review upon completion of the material helped me identify areas of weakness that I needed to focus on before the exam and embolden my confidence in the material I knew well coming into the exam.

- Greg Goin CFP®, CIMA®, CLU®, CRPC® Advisory Solutions Director

There are very few people that I have met that have a true depth of knowledge in their field.  Kathleen is one of them.  She is amazing in her understanding of the concepts.

- Program past participant

Sample Entrance Exam

Read about the new Word Police training manual, Word Court, by Word Police Commissioner Barbara Wallraff.

Join a conversation on Word Police and Word Court in Atlantic Unbound's reader forum, Post & Riposte.

Read recent Word Court columns from The Atlantic Monthly, and browse the Word Fugitives archive, in The Court Record.

Sample Entrance Exam

Word Police exams consist of questions similar to the ones below. Here beneath each question we've told you which answer is correct, and explained why.

When you are taking an actual exam, once you've answered all five questions, press the "Submit answers" button to have your responses scored. If you're not sure of the answer to any question, why not take your best guess? (No points are deducted for wrong answers.) You'll need to get at least four answers right to be allowed to proceed. On the next page, you will be asked a final question that you must answer correctly in order to pass the exam.

The actual exams provide a clue about the intent of the questions that isn't available here -- namely, that each of them is the test for a particular squad or division. The questions on the entrance exam for any given squad will have to do with that squad's specialty. So, for example, on the entrance exam for the Number Unit, the focus of the questions will tend to be grammatical number (say, "the Word Police is ..." or "the Word Police are ..."?).

Fewer Less Whatever

Fewer is for things that can be counted ("one crime, two crimes ..."; "The fewer crimes the better"). Less is for things that pile up as amounts, not numbers of items, and aren't countable ("There hasn't been much criminal activity lately"; "There's been less criminal activity than usual"). Because crimes falls into the former class of things, fewer is the only correct choice here. (See pages 191-192 in Word Court.)

Between you and him Between he and the Word Police Force Between you and he

Any pronoun that comes after between ought to be one that can be used as a grammatical object (as in "The Word Police want us"), not one that is used as a subject (for example, "We want to join the Word Police"). He is a subjective pronoun, so neither the second nor the third answer can be correct. You can be either kind of pronoun, and him is objective, so "between you and him" is the right answer. (See pages 130-134 in Word Court.)

"It's a dull officer who spends all their time shining their badge." "It's a dull officer who spends all her time shining her badge." "It's a dull officer that spends all its time shining its badge."

An officer can't be plural. Nor is an officer neuter (its). An officer certainly can be female, though, so "... spends all her time ..." is fine. The second answer is the correct one. (See pages 28-32 in Word Court.)

"A Word Police officer must see that poetic justice is done everyday." "A Word Police officer can't concern himself with poetic justice on an every day basis." "A Word Police officer must at least try to see that poetic justice is done every day."

Once again, the real issue here is which of these statements is worded correctly. See those variations of everyday? Everyday, one word, is an adjective, and so when that's the form used, it's supposed to be modifying a noun. Every day is an adverb or a noun phrase. In the first answer, the adjective everyday is being used as if it were an adverb, modifying a verb; and in the second one, the adverb every day is being used as if it were an adjective, modifying a noun. Only in the third answer does the adverbial form match an adverbial function; this answer is correct. (See pages 190-191 in Word Court.)

Yes No

Alright is a very informal spelling. Standard English calls for all right. So no, it's not all right, thank you very much. No, indeed. (See page 153 in Word Court.)

Income Statement: How to Read and Use It

An income statement is one of the three important financial statements used for reporting a company’s financial performance over a specific accounting period. The other two key statements are the balance sheet and the cash flow statement.

The income statement focuses on the revenue, expenses, gains, and losses of a company during a particular period. Also known as the profit and loss (P&L) statement or the statement of revenue and expense, an income statement provides valuable insights into a company’s operations, the efficiency of its management, underperforming sectors, and its performance relative to industry peers.

The income statement is an integral part of the company performance reports that must be submitted to the U.S. Securities and Exchange Commission (SEC). While a balance sheet provides the snapshot of a company’s financials as of a particular date, the income statement reports income through a specific period, usually a quarter or a year, and its heading indicates the duration, which may read as “For the (fiscal) year/quarter ended June 30, 2021.”

Theresa Chiechi © Investopedia 2022

The income statement focuses on four key items: revenue, expenses, gains, and losses. It does not differentiate between cash and non-cash receipts (sales in cash vs. sales on credit) or cash vs. non-cash payments/disbursements (purchases in cash vs. purchases on credit). It starts with the details of sales and then works down to compute net income and eventually earnings per share (EPS). Essentially, it gives an account of how the net revenue realized by the company gets transformed into net earnings (profit or loss).

The following are covered in the income statement, though its format may vary, depending upon the local regulatory requirements, the diversified scope of the business, and the associated operating activities:

Revenue realized through primary activities is often referred to as operating revenue. For a company manufacturing a product, or for a wholesaler, distributor, or retailer involved in the business of selling that product, the revenue from primary activities refers to revenue achieved from the sale of the product. Similarly, for a company (or its franchisees) in the business of offering services, revenue from primary activities refers to the revenue or fees earned in exchange for offering those services.

Revenue realized through secondary, noncore business activities is often referred to as nonoperating, recurring revenue. This revenue is sourced from the earnings that are outside the purchase and sale of goods and services and may include income from interest earned on business capital parked in the bank, rental income from business property, income from strategic partnerships like royalty payment receipts, or income from an advertisement display placed on business property.

Also called other income, gains indicate the net money made from other activities, like the sale of long-term assets. These include the net income realized from one-time nonbusiness activities, such as a company selling its old transportation van, unused land, or a subsidiary company.

Revenue should not be confused with receipts. Payment is usually accounted for in the period when sales are made or services are delivered. Receipts are the cash received and are accounted for when the money is received.

A customer may take goods/services from a company on Sept. 28, which will lead to the revenue accounted for in September. The customer may be given a 30-day payment window due to his excellent credit and reputation, allowing until Oct. 28 to make the payment, which is when the receipts are accounted for.

A business's cost to continue operating and turning a profit is known as an expense. Some of these expenses may be written off on a tax return if they meet Internal Revenue Service (IRS) guidelines.

These are all expenses incurred for earning the average operating revenue linked to the primary activity of the business. They include the cost of goods sold (COGS); selling, general, and administrative (SG&A) expenses; depreciation or amortization; and research and development (R&D) expenses. Typical items that make up the list are employee wages, sales commissions, and expenses for utilities such as electricity and transportation.

These are all expenses linked to noncore business activities, like interest paid on loan money.

These are all expenses that go toward a loss-making sale of long-term assets, one-time or any other unusual costs, or expenses toward lawsuits.

While primary revenue and expenses offer insights into how well the company’s core business is performing, the secondary revenue and fees account for the company’s involvement and expertise in managing ad hoc, non-core activities. Compared with the income from the sale of manufactured goods, a substantially high-interest income from money lying in the bank indicates that the business may not be using the available cash to its full potential by expanding the production capacity, or that it is facing challenges in increasing its market share amid competition.

Recurring rental income gained by hosting billboards at the company factory along a highway indicates that management is capitalizing upon the available resources and assets for additional profitability.

Mathematically, net income is calculated based on the following:

Net Income = (Revenue + Gains) - (Expenses + Losses)

To understand the above formula with some real numbers, let’s assume that a fictitious sports merchandise business, which additionally provides training, is reporting its income statement for a recent hypothetical quarter.

Image by Sabrina Jiang © Investopedia 2022

It received $25,800 from the sale of sports goods and $5,000 from training services. It spent various amounts listed for the given activities that total of $10,650. It realized net gains of $2,000 from the sale of an old van, and it incurred losses worth $800 for settling a dispute raised by a consumer. The net income comes to $21,350 for the given quarter. The above example is the simplest form of income statement that any standard business can generate. It is called the single-step income statement as it is based on a simple calculation that sums up revenue and gains and subtracts expenses and losses.

However, real-world companies often operate on a global scale, have diversified business segments offering a mix of products and services, and frequently get involved in mergers, acquisitions, and strategic partnerships. Such a wide array of operations, diversified set of expenses, various business activities, and the need for reporting in a standard format per regulatory compliance leads to multiple and complex accounting entries in the income statement.

Listed companies follow the multiple-step income statement, which segregates the operating revenue, operating expenses, and gains from the nonoperating revenue, nonoperating expenses, and losses, and offers many more details through the income statement produced this way.

Essentially, the different measures of profitability in a multiple-step income statement are reported at four different levels in a business's operations: gross, operating, pretax, and after-tax. As we’ll see shortly in the following example, this segregation helps in identifying how the income and profitability are moving/changing from one level to the other. For instance, high gross profit but lower operating income indicates higher expenses, while higher pretax profit and lower post-tax profit indicate loss of earnings to taxes and other one-time, unusual expenses.

Let’s look at an example based on the 2021 annual income statements of two large, publicly listed, multinational companies from different sectors: technology (Microsoft) and retail (Walmart).

The focus in this standard format is to calculate the profit/income at each subhead of revenue and operating expenses and then account for mandatory taxes, interest, and other nonrecurring, one-time events to arrive at the net income that applies to common stock. Though calculations involve simple additions and subtractions, the order in which the various entries appear in the statement and their relationships often get repetitive and complicated. Let’s take a deep dive into these numbers for a better understanding.

The first section, titled Revenue, indicates that Microsoft’s gross (annual) profit, or gross margin, for the fiscal year ending June 30, 2021, was $115.86 billion. It was arrived at by deducting the cost of revenue ($52.23 billion) from the total revenue ($168.09 billion) realized by the technology giant during this fiscal year. Just over 30% of Microsoft’s total sales went toward costs for revenue generation, while a similar figure for Walmart in its fiscal year 2021 was about 75% ($429 billion/$572.75 billion). It indicates that Walmart incurred much higher cost than Microsoft to generate equivalent sales.

The next section, called Operating Expenses, again takes into account Microsoft’s cost of revenue ($52.23 billion) and total revenue ($168.09 billion) for the fiscal year to arrive at the reported figures. As Microsoft spent $20.72 billion on R&D and $25.23 billion on SG&A expenses, total operating expenses are computed by summing all these figures ($52.23 billion + $20.72 billion + $25.23 billion = $98.18 billion).

Reducing total operating expenses from total revenue leads to operating income (or loss) of $69.92 billion ($168.09 billion - $98.18 billion). This figure represents the earnings before interest and taxes (EBIT) for its core business activities and is again used later to derive the net income.

A comparison of the line items indicates that Walmart did not spend anything on R&D and had higher SG&A and total operating expenses than Microsoft.

The next section, titled Income from Continuing Operations, adds net other income or expenses (like one-time earnings), interest-linked expenses, and applicable taxes to arrive at the net income from continuing operations ($61.27 billion) for Microsoft, which is nearly 60% higher than that of Walmart ($13.67 billion).

After discounting for any nonrecurring events, it’s possible to arrive at the value of net income applicable to common shares. Microsoft had a much higher net income of $61.27 billion compared with Walmart’s $13.67 billion.

Earnings per share are computed by dividing the net income figure by the number of weighted average shares outstanding. With 7.55 billion outstanding shares for Microsoft, its 2021 EPS came to $8.12 per share ($61.27 billion ÷ 7.55 billion). With Walmart having 2.79 billion outstanding shares that fiscal year, its EPS came to $4.90 per share ($13.67 billion ÷ 2.79 billion).

Microsoft had a lower cost for generating equivalent revenue, higher net income from continuing operations, and higher net income applicable to common shares compared with Walmart.

Though the primary purpose of an income statement is to convey details of profitability and business activities of the company to the stakeholders, it also provides detailed insights into the company’s internal activities for comparison across different businesses and sectors. By understanding the income and expense components of the statement, an investor can appreciate what makes a company profitable.

Based on income statements, management can make decisions like expanding to new geographies, pushing sales, expanding production capacity, increasing the use of or the outright sale of assets, or shutting down a department or product line. Competitors also may use them to gain insights about the success parameters of a company and focus areas such as lifting R&D spending.

Creditors may find income statements of limited use, as they are more concerned about a company’s future cash flows than its past profitability. Research analysts use the income statement to compare year-on-year and quarter-on-quarter performance. One can infer, for example, whether a company’s efforts at reducing the cost of sales helped it improve profits over time, or whether management kept tabs on operating expenses without compromising on profitability.

(1) Revenue, (2) expenses, (3) gains, and (4) losses. An income statement is not a balance sheet or a cash flow statement.

Operating revenue is realized through a business' primary activity, such as selling its products. Non-operating revenue comes from ancillary sources such as interest income from capital held in a bank or income from rental of business property.

The income and expense components can help an investor learn what makes a company profitable (or not). Competitors can use them to measure how their company compares on various measures. Research analysts use them to compare performance year-on-year and quarter-on-quarter.

An income statement provides valuable insights into various aspects of a business. It includes readings on a company’s operations, the efficiency of its management, the possible leaky areas that may be eroding profits, and whether the company is performing in line with industry peers.