IMANET IMANET-CMA Online Practice Questions and Exam Preparation

IMANET IMANET-CMA Online Questions & Answers

• Question 1151:

  According to the growth-share matrix model for business portfolio analysis, a divest strategy

  A. Is necessary for a question mark with potential to be a star.
  B. Is used for strong cash cows.
  C. Is normally used for question marks and dogs that reduce the firm's profitability.
  D. Maximizes short-term net cash inflow.
  C. Is normally used for question marks and dogs that reduce the firm's profitability.

  ---

  Explanation

  A dwest strategy is normally used for question marks and dogs that reduce the flrrrs profitability. The proceeds of sale or liquidation are then invested more favorably.

• Question 1152:

  A proposed investment is not expected to have any salvage value at the end of its 5-year life. Because of realistic depreciation practices, the net carrying amount and the salvage value are equal at the end of each year. For present value purposes, cash flows are assumed to occur at the end of each year. The company uses a 12% after-tax target rate of return.

  

  The profitability index is

  A. .61
  B. .42
  C. .86
  D. 1425
  D. 1425

  ---

  Explanation

• Question 1153:

  In contrast to just-in-time manufacturing,materials requirement planning is a

  A. Push system
  B. Pull system
  C. Automated system
  D. Manual system
  A. Push system

  ---

  Explanation

  MRP is a push system,that is,the demand for raw materials is driven by the forcasted demand for the final product,which can be programmed into the computer.this is in contrast with just-in-time manufacturing,which is a pull system,meaning items are pulled though production by current demand,not pushed through by anticipated demand.

• Question 1154:

  When a company increases its degree of financial leverage (DFL).

  A. The equity beta of the company falls.
  B. The systematic risk of the company falls.
  C. The systematic risk of the company rises.
  D. The standard deviation of returns on the equity of the company rises.
  D. The standard deviation of returns on the equity of the company rises.

  ---

  Explanation

  The DFL equals the percentage change in earnings available to common shareholders divided by the percentage change in net operating income When the DFL rises. fixed interest charges and the riskiness of the firm rise. As a result, the variability of the returns to equity holders will increase. In other words, the standard deviation of returns on the equity of the company rises.

• Question 1155:

  In planning and controlling capital expenditures, the most logical sequence is to begin with?

  A. Analyzing capital addition proposals.
  B. Making capital expenditure decision.
  C. Analyzing and evaluating all promising alternatives.
  D. Identifying capital addition projects and other capital needs.
  D. Identifying capital addition projects and other capital needs.

  ---

  Explanation

  Capital budgeting is a long-term planning process for investments. This process beings with the identification of capital needs, that is of projects required to achieve organization goals. The next step is to search for specific investments. The third step is to acquire and analyze information about the potential choices. The fourth step is to select specific investments after considering both qualitative and quantitative factors. The fifth step is to finance the undertakings. Yhe final step is implementation and monitoring.

• Question 1156:

  Which strategy for a global marketing organization balances local responsiveness and global integration?

  A. Global
  B. Multinational
  C. Glocal
  D. Transnational
  C. Glocal

  ---

  Explanation

  A glocal strategy combines some elements of local responsiveness or adaptation with some elements of global integration. Successful telecommunications firms are examples of balancing these elements. Local responsiveness is indicated when local product tastes and preferences, regulations, and barrier are significant. Global integration is indicated when demand is homogenous and economies of productive scale are large.

• Question 1157:

  According to John Maynard Keynes, the three major motives for holding cash are for

  A. Transactional, psychological, and social purposes.
  B. Speculative, fiduciary, and transactional purposes.
  C. Speculative, social, and precautionary purposes.
  D. Transactional, precautionary, and speculative purposes.
  D. Transactional, precautionary, and speculative purposes.

  ---

  Explanation

  John Maynard Keynes, founder of Keynesian economics, concluded that there were three major motives for holding cash: for transactional purposes as a medium of exchange. Precautionary purposes and speculative purposes (but only during deflationary periods).

• Question 1158:

  The working capital financing policy that subjects the firm to the greatest risk of being unable to meet the firm's maturing obligations is the policy that finances

  A. Fluctuating current assets with long-term debt.
  B. Permanent current assets with long-term debt.
  C. Permanent current assets with short-term debt.
  D. Fluctuating current assets with short4erm debt.
  C. Permanent current assets with short-term debt.

  ---

  Explanation

  Fluctuating current assets can often be financed with short-term debt because the periodic liquidation of the assets provides funds to pay off the debt. However, financing permanent current assets with short-term debt is a risky strategy because the assets may not be liquidated in time to pay off the debt at maturely.

• Question 1159:

  Conversion cost pricing

  A. Places minimal emphasis on the cost of materials used in manufacturing a product.
  B. Could be used when the customer furnishes the material used in manufacturing a product.
  C. Places heavy emphasis on indirect costs and disregards consideration of direct costs.
  D. Places heavy emphasis on direct costs and disregards consideration of indirect costs.
  B. Could be used when the customer furnishes the material used in manufacturing a product.

  ---

  Explanation

  Conversion costs consist of direct labor and factory overhead, the costs of converting raw materials into finished goods. Normally, a company does not consider only conversion costs in making pricing decisions, but if the customer were to furnish the raw materials, conversion cost pricing would be appropriate.

• Question 1160:

  Commercial paper

  A. Has a maturity date greater than 1 year.
  B. Is usually sold only through investment banking dealers.
  C. Ordinarily does not have an active secondary market
  D. Has an interest rate lower than Treasury bills.
  C. Ordinarily does not have an active secondary market

  ---

  Explanation