IMANET IMANET-CMA Online Practice Questions and Exam Preparation

IMANET IMANET-CMA Online Questions & Answers

• Question 311:

  The budget data for the Bid well Company appear below.

  

  If the Bid well Company is subject to an effective income tax rate of 40%, the number of units Bid well must sell to earn an after-tax profit of $90,000 is?

  A. 100,000 units.
  B. 120.000 units
  C. 102. 858 units.
  D. 145,000 units
  B. 120.000 units

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  Explanation

  Because the tax rate is 40%, the $90.000 after-tax profit is 60% of pre-tax income. Thus, toll earn an income of $90,000 after tax, the pre-tax income must be $150000 ($90,000 .6), Dividing the fixed costs of $210,000 plus the desired before-tax income of $150,000 by the $3 contribution margin per unit gives a breakeven point of 120,000 units,

• Question 312:

  Book rate of return is an unsatisfactory guide to selecting capital projects because

  I. It uses accrual accounting numbers.

  II.

  It compares a single project against the average of capital projects. Ill. It uses cash flows to gauge the desirability of the project.

  A. l only.
  B. l and ll.
  C. Ill only.
  D. l, II,and III.
  B. l and ll.

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  Explanation

  A common misstep in regard to capital budgeting is the temptation to gauge the desirability of a project by using accrual accounting numbers instead of cash flows. Net income and book value are affected by the company's choices of accounting methods. A project's true rate of return cannot be dependent on bookkeeping decisions. Another distortion inherent in comparing a single project's book rate of return to the current one for the company as a whole is that the latter is an average of all of a firm's capital projects. Embedded in that average number may be a handful of good projects making up for a large number of poor investments.

• Question 313:

  Short-term securities issued by the Federal Housing Administration are known as

  A. Agency securities
  B. Bankers' acceptances.
  C. Commercial paper
  D. Repurchase agreements.
  A. Agency securities

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  Explanation

  A short-term secunt1t issued by a corporation or agency created by the U.S. government, such as the Federal Housing Administration, is an agency security (agency issue). Among the largest issuers of agency securities (excluding the Treasury) are the Federal Home Loan Banks, the Federal National Mortgage Association (Fannie Mae), and the other entities that provide credit to farmers and home buyers. Other issuers of home mortgage- backed securities include the Government National Mortgage Association (Ginnie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).

• Question 314:

  A firm buys like-new computer equipment from bankrupt companies and resells it in foreign markets at prices significantly below those charged by competitors. The firm is

  A. Engaged in dumping.
  B. Engaged in price discrimination.
  C. Operating in a gray market.
  D. Operating in a black market.
  C. Operating in a gray market.

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  Explanation

  In a gray market, products imported from one country to another are sold by persons trying to make a profit from the difference in retail prices between the two countries, In essence, the seller firm in this case was exploiting a price difference between markets.

• Question 315:

  A firm in a declining industry ordinarily adopts one of four strategies. A firm that follows a?

  A. Quick divestment strategy should have divested during the maturely phase.
  B. Leadership strategy may assume that success will enable it to subsequently pursue a harvest strategy.
  C. Harvest strategy seeks a pocket of stable demand.
  D. Niche strategy is engaged in a gradual liquidation.
  B. Leadership strategy may assume that success will enable it to subsequently pursue a harvest strategy.

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  Explanation

  A leadership strategy is pursued by a firm that believes it can achieve market share gains to become the dominant firm. An assumption is that additional investment can be recovered A second assumption is that success will put the firm in a better position to hold its ground or subsequently to follow a harvest strategy, This strategy may entail aggressive pricing. marketing, or other investments that raise the stakes for competitors; reducing competitors' exit barriers by acquisitions of their capacity or products, assuming their contracts, and producing spare parts and generic versions of goods for them; demonstrations of strength and risk*vet to remain in the industry and publicizing accurate data about the reality of future decline so as to dispel competitors' uncertainly.

• Question 316:

  The retail petroleum industry consists of a few large firms that sell a standardized product. Which of the following best describes this industry?

  A. Monopoly
  B. Oligopoly
  C. Monopolistic competition
  D. Pure competition
  B. Oligopoly

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  Explanation

  An oligopoly consists of a few large firms. If products are standardized, competition may be based solely on price. If products are partially differentiated, each firm may attempt to lead the industry regarding a given attribute, e.g., price,

• Question 317:

  All of the following steps should be taken to help minimize risk and maximize profits associated with expanding into foreign markets except?

  A. Breaking branding partnerships.
  B. Understanding how diverse markets can come together to form a global branding landscape.
  C. Developing integrated marketing communications.
  D. Developing local guidelines so that local sales and profit goals are met.
  A. Breaking branding partnerships.

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  Explanation

  The firm may create branding partnerships. Global firms often form alliances with local distribution channels to increase the profitability while decreasing their marketing costs.

• Question 318:

  What form of marketing assumes most people in the same demographic will react similarly to one marketing message?

  A. Direct marketing.
  B. Proactive marketing.
  C. Services marketing.
  D. Mass marketing.
  D. Mass marketing.

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  Explanation

  Mass marketing group's people into large categories based solely on their demographic traits, e.g., age, income, gender, or education level. It assumes most people in the same category will react similarly to one marketing message. Mass marketers rely primarily on mass media (television and print) to reach their targets in large numbers.

• Question 319:

  Acme Corporation is selling $25 million of cumulative, non-participating preferred stock. The issue will have a par value of $65 per share with a dividend rate of 6%.The issue will be sold to investors for $68 per share, and issuance costs will be $4 per share The cost of preferred stock to Acme is

  A. 5. 42%.
  B. 5. 74%.
  C. 6. 00%.
  D. 6. 09%.
  D. 6. 09%.

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  Explanation

  The company will receive the use of on $64 per share. The annual dividend requirement is 6% of $65, or $390 per share. Dividing the $3. 90 by the $64 received results in a financing cost of 6. 09%.

• Question 320:

  From an investor's viewpoint, the least risky type of bond in which to invest is a(n)

  A. Debenture bond
  B. Deep discount bond.
  C. Income bond
  D. Secured bond.
  D. Secured bond.

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  Explanation

  A secured bond is backed by tangible property, making it the safest type for the investor four listed.