Decision making across the business cycle
A CIMA case study

Page 1: Introduction

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CIMA, the Chartered Institute of Management Accountants, is the world’s leading body for management accountants. Management accountants can provide management information and insights as well as financial data to help managers make decisions. However, CIMA qualifications are not just for professional accountants. CIMA members may work across any part of an organisation, not just in...
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Page 2: The business cycle

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Gross Domestic Product (GDP) is the value of all the goods and services produced in an economy over a period of time. When GDP rises, economic activity is increasing. This is called economic growth. The level of activity fluctuates over time. Periods of high growth are followed by periods of slow growth. Sometimes the economy experiences negative growth when there is a fall in GDP. These...
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Page 3: Boom

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A boom is a sustained period of strong economic growth. During this time confidence in the market is high. This leads to high levels of demand and consumer spending. Businesses increase their output and may be working at full capacity. It is during this phase that existing businesses tend to increase their spending on new capital. Many new firms also start up. Due to the level of business...
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Page 4: Downturn and recession

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A downturn is a slowdown in economic activity. High levels of inflation in a boom can lead to businesses becoming uncompetitive. Inflation increases uncertainty as rising costs and prices are difficult to predict. In order to try to control demand when inflation is high, the government can increase taxes. In addition to this, the Bank of England can raise interest rates. These actions encourage...
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Page 5: Recovery

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The term 'green shoots' is used to refer to the first signs of economic recovery. During a recession, businesses and consumers lose confidence. 'Green shoots' appear when consumers start to spend a little bit more. Businesses respond perhaps after a short time lag by producing more goods and services. They will start to invest in new machinery. More jobs will be created or reinstated. Unemployment...
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Page 6: Conclusion

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The CIMA Professional Qualification is relevant to many different industries. It covers key skills not just for management accountants, but for managers at all levels working across a company. CIMA training enables management accountants and managers to make sound strategic decisions. This understanding and skill helps managers to work effectively in complex times across the whole business...
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