IMANET IMANET-CMA Online Practice Questions and Exam Preparation

IMANET IMANET-CMA Online Questions & Answers

• Question 321:

  Which of the following statements is true with regard to a vertically integrated acquisition?

  A. A grocery store chain that purchase a diary and begins to make milk-base products under its own brand is forward integrated
  B. A movie producer that acquires a chain of theaters is backward integrated
  C. a clothing manufacturer that acquires a chain of clothing stores is forward integrated
  D. A soda maker that purchases its leading competitor is backward integrated
  C. a clothing manufacturer that acquires a chain of clothing stores is forward integrated

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  Explanation

  Vertical integration occurs upstream (backward) by acquiring suppliers or downstream (forward) by acquiring wholesalers and retailers. An example of forward integration is clothing manufacturer's acquisition of a chain of clothing stores in which to sell kits products.

• Question 322:

  Differentiated marketing covers the market by

  A. Mass distribution and advertising of one offering.
  B. Selling different versions of a product to multiple segments.
  C. Offering different products in different segments.
  D. Leveraging a communalist across multiple segments.
  C. Offering different products in different segments.

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  Explanation

  Pull market coverage may be achieved by differentiated or undifferentiated marketing. Differentiated marketing covers the market by offering different products in different segments. Sales are higher than under undifferentiated marketing, but costs (product modification1 inventory, manufacturing1 administration1 and promotion) are higher.

• Question 323:

  Kline Corporation is expanding its plant, which requires an investment of $8 million in new equipment. Kline's sales are expected to increase by $6 million per year as a result of the expansion. Cash investment in current assets averages 30% of sales, and accounts payable and other current abilities are 10% of sales, What is the estimated total cash investment for this expansion?

  A. $6. 8 million.
  B. $8.6 million.
  C. $9.2 million.
  D. $9.8 million.
  C. $9.2 million.

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  Explanation

  For capital budgeting purposes, the net investment is the net outlay or cash requirement. This amount includes the cost of the new equipment, minus any cash recovered from the trade or sale of existing assets. The investment required also includes funds to proide for increases in working capital, for example, the additional receivables and inventories resulting from the acquisition of a new manufacturing plant. The investment in working `capital is treated as an initial cost of the investment, although twill be recovered at the end of the project (its salvage value equals its initial cost). For Kline, the additional current assets will be 30% of sales, but current liabilities can be used to fund assets to the extent of 10% of sales. Thus, the initial investment in working capital will equal 20% of the $6 million in sales, or $1,200,000. The total initial cash outlay will consist of the $8 million in new equipment plus $1,200,000 in working capital, a total of $9.2 million.

• Question 324:

  If the average age of inventory is 60 days, the average age of the accounts payable is 30 days, and the average age of accounts receivable is 45 days, the number of days in the cash flow cycle is

  A. 135 days.
  B. 90 days.
  C. 75 days.
  D. 105 days.
  C. 75 days.

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  Explanation

  The cash flow cycle begins when the firm pays for merchandise it has purchased and ends when the firm receives cash from the sale of the merchandise. Inventory is held for an average of 60 days prior to sale, but the average age of accounts payable is 30 days. Consequently, the average time between outlay and sale is 30 days. Receivables are collected an average of 45 days after sale, so the length of the cash flow cycle is 75 days (30 + 45).

• Question 325:

  A company needs special gears. The machinery to make the gears can be rented for $100000 for 1 year, but the company can buy the gears and avoid the rental cost. Because the demand for the gears may be high (0.6 probability) or low

  (0.4 probability) and contribution margins vary, the company prepared the following decision tree:

  

  Which of the following statements is true?

  A. The expected value of making is $20,000.
  B. The expected value of buying is $70000.
  C. Making the gears is the best choice.
  D. Buying the gears is the best choice.
  B. The expected value of buying is $70000.

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  Explanation

• Question 326:

  Henderson, Inc. has purchased a new fleet of trucks to deliver its merchandise. The trucks have a useful life of 8 years and cost a total of $500,000. Henderson expects its net increase in after4ax cash flow to be $150,000 in Year 1, $175,000 in Year 2, $125,000 in Year 3, and $100,000 in each of the remaining years. What is the payback reciprocal for Henderson's fleet of trucks?

  A. 29%
  B. 25%
  C. 0. 24%
  D. 20%
  A. 29%

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  Explanation

  The payback reciprocal for an investment is found by dividing 1 by the payback time. The pay back time for this investment is 3. Syears, and the pay back reciprocal is 1 divided by3. 5, or29%.

• Question 327:

  When making a decision to increase the robotic automation equipment in an existing face lily, a firm takes all of the following into consideration except

  A. Economies of scale.
  B. Opportunity cost.
  C. Technological efficiency.
  D. The initial cost of the current facility.
  D. The initial cost of the current facility.

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  Explanation

  A firm considers such factors as price, relationships with suppliers, product demand, avoidable future costs, and economies of scale, opportunity costs, technological efficiency, and the capital-labor ratio when evaluating the purchase of new equipment. The cost of the current facility would not be relevant because it is a sunk cost.

• Question 328:

  Which of the following is not a component of the value chain?

  A. Primary activities
  B. Secondary activities
  C. Support activities
  D. The product
  B. Secondary activities

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  Explanation

  The value chain is a model for depicting the way in which every function in a company adds value to the final product. Primary activities deal with the product directly. Support activities lend aid to the primary activity functions.

• Question 329:

  Which of the following statements is/are true about choosing a course of action?

  I. Future cash flows of the potential courses of action must be compared.

  II.

  Qualitative factors must be considered.

  Ill. Nonfinancial quantitative factors do not have to be considered.

  A. lonly.
  B. l and ll.
  C. Ill only.
  D. l,ll and lll.
  B. l and ll.

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  Explanation

  The selection of the best available solution is the objective of the decision-making process. The choice involves not only comparing the future cash flows of the potential courses of action1 but also considering qualitative and nonfinancial quantitative factors. Qualitative factors include relationships with employees, suppliers, and customers. Nonfinancial quantitative factors include rate of defective output and manufacturing lead time.

• Question 330:

  The practice of determining the best way to supply products to the intermediary sellers or the final market is

  A. Distribution logistics
  B. Product adaptation.
  C. Distribution through an administered channel
  D. Distribution through a contractual channel.
  A. Distribution logistics

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  Explanation

  Distribution logistics is the problem of determining the best way to supp products to the 7 intermediary sellers or the final market. The firm tries to balance considerations of high service to customers with the consideration of holding down costs