Free CMA-Strategic-Financial-Management: CMA Part 2: Strategic Financial Management Exam Questions and Answers

The production process of a company s main product yields a by-product Production costs or $700,000 are incurred during this process and $300,000 m additional costs are incurred to finalize the main product. The by-product can be sold for $200 000 without further processing A manager proposed the conversion of the by- product into another product that would cost $100,000 and generate revenue of $250,000. When deciding on this proposal the company should

• AA. select an approbate cost allocation method to allocate the $1 100 000 joint costs
• BB. evaluate whether other nonfinancial factors outweigh the Si 50.000 in incremental income
• CC. treat the $100,000 conversion cost as the marginal cost 1o produce the new product
• DD. ignore the $200 000 sales revenue for the by-product because it Is irrelevant

Sigma industries is considering purchasing Lambda Products in a cash transaction Sigma financial analysts Dave conducted an extensive amount of negotiation and due diligence and nave summarized the following financial information for management. • Assets having a 10-year remaining life can be acquired for $22 million • Assets are to De depreciated over their remaining life on a straight-line basis for both book and tax purposes • Current liabilities of Lambda amounting to S3 million must be assumed by Sigma • Lambda operations are expected to produce annual pre-tax cash Don of S7 million for the remaining 10 years of operation • A16% return on investment is required by Sigma for acquisitions of this type • Sigma's marginal Income tax rate is 35% What is the net present value to Sigma of the Lambda acquisition rounded to the nearest thousand?

• AA. $6, 921,000)
• BB. $712,000
• CC. $3,712,000

As the number of stocks in a portfolio increases, unsystematic risk

• AA. decreases and systematic risk decreases
• BB. increases, and systematic risk increases
• CC. decreases and systematic risk does not change
• DD. increases, and systematic risk does not change

A management accountant overheard the company's procurement manager discussing a kickback payment for one of the company s recent projects. The procurement manager promised to pay a share to the other person II the arrangement was kept confidential According to the IMA Statement of Ethical Professional Practice which one of the following is the most appropriate action for the management accountant to take?

• AA. Take no action since the incident is not related to the accounting department
• BB. Report the information directly to a nigh-level company executive since it is a serious matter
• CC. Call the company's ethics helpline and report the matter anonymously
• DD. Discuss the incident with his or her own attorney and consider disassociating from the company

Abex Employment Agency has requested an increase in the firm's line of credit, and the bank is reviewing Abex's sales and collections history Although the firm's sales have increased the bank is concerned about the credit quality of the firm's customers Based on the following information calculate the average collection period for the firm Use a 365-day year in your calculations.

• AA. 80 days
• BB. 88 days
• CC. 99 days
• DD. 101 days

The CFO at GameX, a handheld game manufacturer has asked a financial analyst to provide an analysis and evaluation of the company versus three of its competitors. The analyst prepared the following report. Based or the analysis the analyst is justified to write in his evaluation mat in order to Improve its position in the market. GameX should

• AA. reduce its debt load
• BB. increase its inventory

L&H Sports owns and operates several stadiums used for baseball and soccer games Management is considering installing machines that would be used to roast peanuts on the premises. This equipment would allow L&H to sell freshly roasted peanuts rather than the pre-roasted peanuts that are currently sold Marketing studies suggest that this feature would increase peanut sales. The roasters can be purchased in several sizes, and the annual rental fees and operating costs vary with the size of the roaster Information about the roasters is shown below. L&H currently sells pre-roasted peanuts for $0 60 pet bag. Management plans to sell the freshly roasted peanuts for a higher price but at no more than a 10% increase. The demand for freshly roasted peanuts is estimated to be 250, 000 bags pet year. Which roaster should L&H purchase to maximize its profit?

• AA. Economy
• BB. Regular
• CC. Super

If a CMA is asked to conduct a financial assessment of a company owned by a close relative, what would be the proper response under the credibility standard of the IMA Statement of Ethical Professional Practice?

• AA. Advise all parties of a potential conflict of interest
• BB. Keep information confidential except when authorized By the relative
• CC. Communicate the existence of a constraint that might preclude responsible judgment
• DD. Provide an assessment that is timely and accurate despite the personal relationship

In March 20X2, an investor purchased a government bond with a face value of $100 that matures in 30 years. The issue price was $94 and the bond offered a yield to maturity of 5.6% One year later, the investor sold the bond at a price of S105 after receiving an interest payment of $6. The total return is

• AA. 5.6%
• BB. 6.0%
• CC. 11.7%
• DD. 18.1%

A furniture retail company uses the LIFO inventory method Due to the nigh inflation rate in me past year, the company's

• AA. current ratio may be overstated
• BB. quick ratio may be understated
• CC. net income may be understated
• DD. quick ratio may be overstated