IMANET IMANET-CMA Online Practice Questions and Exam Preparation

IMANET IMANET-CMA Online Questions & Answers

• Question 361:

  The marketing communications mix may contain five promotional tools. Which tool is defined as any paid form of no personal presentation and promotion of ideas, goods, or services by an identified sponsor?

  A. Sales promotion.
  B. Adverb sing.
  C. Personal selling.
  D. Direct marketing.
  B. Adverb sing.

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  Explanation

  Advertising is defined by Philip Kilter (Marketing Management) as "any paid form of no personal presentation and promotion of ideas, goods, or services by an identified sponsor." It may occur on many platforms: television, radio, films, the Internet, packaging, billboards, point-of-purchase displays, brochures, videos, trademarks, and others.

• Question 362:

  If a call option is "out-of-the-money"

  A. It is not worth exercising.
  B. The value of the underlying asset is less than the exercise price.
  C. The option no longer exists
  D. It is not worth exercising, and the value of the underlying asset is less than the exercise pence
  D. It is not worth exercising, and the value of the underlying asset is less than the exercise pence

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  Explanation

  When the value of the asset underlying a call option is less man the exercise pence of me the option is out-of the-money, witch means it is not worth exercising.

• Question 363:

  A company has a current ratio of 1 .9 and a quick ratio of .5. Which of the following transactions will increase both ratios?

  A. Pay off $10,000 of current liabilities.
  B. Borrow $10,000 on a short-term note.
  C. Transfer $10,000 of inventory to a vendor in full payment of a $10,000 account payable.
  D. Sell inventory for cash at a loss.
  C. Transfer $10,000 of inventory to a vendor in full payment of a $10,000 account payable.

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  Explanation

  This question is somewhat tricky because one of the ratios is less than 1.0, while the other is greater than 1.0. If the current ratio is greater than 1.0, then paying off a current liability will increase the ratio. Thus, both answers (A) and (C) will increase the current ratio. However, transferring cash to a creditor will decrease the quick ratio if the present ratio is less than 1.0. Thus, only the transfer of a non-quick asset to a creditor will increase the quick ratio. For example, if the total of current assets was $190,000 and quick assets totaled $50,000, then current liabilities would have been $100,000. Transferring $10,000 of inventory would change the totals to $180,000 for current assets and $90,000 for current liabilities. Quick assets would remain at $50,000. The new current ratio would be 2. 0 ($180,000 + $90,000), and the new quick ratio would be .556 ($50,000 + $90,000).

• Question 364:

  According to Author D. Little, a competitor firm that can act independently and sustain its long-term status irrespective of the behavior of others holds which of the following competitive positions?

  A. A dominant position
  B. A strong position
  C. A favorable position
  D. A tenable position
  B. A strong position

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  Explanation

  Evaluating a competitor's market position is necessary to judge how and whether to challenge it. A firm that is in a strong competitive position can act independently and sustain its long-term status irrespective of the behavior of others.

• Question 365:

  If Vp is the value of a put option, Vc is the value of a call option, Vs is the value of the stock, and Pve is the present value of the exercise price, what is the formula for the put- call theorem for European options?

  A. Vs = Pve – Vp -Vc
  B. Vs + Vp – Vc = Pve
  C. Vs / Pve = Vp / Vc
  D. Pve = Vs – Vp - vc
  B. Vs + Vp – Vc = Pve

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  Explanation

  For European option, given market equilibrium for all relevant prices ( no arbitrage possibilities) , equal exercise prices for the put and the call, and the same expiration date, the put-call parity theorem states that a fixed relation applies to the market values of the put and call options on a security. For example, a strategy of selling one call option, buying one share of the stock, and buying one put option should result in a risk-free return. The gain (loss) from the stock and the put should equal gain (loss) on the call. If Vs is the value of the stock, Vp is the value of the put, Vc is the value of the call, and Pve is the present value of the exercise price (the time interval is the time to expiration), the formula for put-call parity may be stated as follows: Vs + Vp ?Vc = Pve

• Question 366:

  The tax impact of equipment depreciation affects capital budgeting decisions. Currently, the Modified Accelerated Cost Recovery System (MACRS) is used as the depreciation method for most assets for tax purposes. The MACRS method of depreciation for assets with 3, 5. 7. and 1 0-year recovery periods is most similar to which one of the following depreciation methods used for financial reporting purposes?

  A. Straight-line.
  B. Units-of-production.
  C. Sum-of-the-years'-digits.
  D. 200% declining-balance.
  D. 200% declining-balance.

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  Explanation

  MACRS for assets with lives of 10 years or less is based on the 200% declining-balance method of depreciation. Thus, an asset with a 3-year life would have a straight-line rate of 33-113%. or a double- declining-balance rate of 66-2/3%.

• Question 367:

  The type of risk that is not diversifiable and affects the value of a portfolio is

  A. Purchasing-power risk.
  B. Market risk.
  C. Nonmarket risk.
  D. Interest-rate risk.
  B. Market risk.

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  Explanation

  Prices of all stocks, even the value of portfolios, are correlated to some degree with broad swings in the stock market. Market risk is the risk that changes in a stock's price will result from changes in the stock market as a whole. Market risk is commonly referred to as no diversifiable risk.

• Question 368:

  The statement of income for Dimmell Co presented below represents the operating results for me fiscal year just ended Dimmell had sales of I .800 tons of product during the current year. The manufacturing capacity of Dimmers facilities is 3,000 tons of product.

  

  Dimmell has a potential foreign customer that has offered to buy 1.500 tons at $450 per ton. Assume that all of Dimmell's costs would be at the same levels arid rates as in 2002. Whet net income after taxes would Dimmell make if it took this order and rejected some business from regular customers so as not to exceed capacity'?

  A. $297,500
  B. $252. 000
  C. $211,500
  D. $256,500
  C. $211,500

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  Explanation

• Question 369:

  Calamity Cauliflower Corporation is considering undertaking a capital project. The company would have to commit $24,000 of working capital in addition to an immediate outlay of $160,000 for new equipment. The project is expected to generate $100.000 of annual income for 10 years. At the end of that time, the new equipment, which will be depreciated on a straight-line basis, is expected to have a salvage value of $10,000. The existing equipment that would be sold to make room for the project has a historical cost of $220,000 and accumulated depreciation of $208,000. It has an estimated remaining useful life of 2 years and the remaining book value is being depreciated on a straight-line basis A scrap dealer has agreed to buy it for $8,000. The company's effective tax rate is 40%. Calamity Cauliflowers expected net cash inflow for the first year of the project is

  A. $100,000
  B. $65,200
  C. $60,000
  D. $54,800
  B. $65,200

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  Explanation

  The annual expected net cash inflow from a capital project consists of the after-tax cash inflow from operations {f$100.000 gross cash inflow--($100,000 x .40) income tax expense] = $60,000} plus the depreciation tax shield [($15,000 annual depreciation expense on new equipment --$2,000 annual depreciation expense on old equipment) x .40 $5. 2O0],_or $65,200.

• Question 370:

  Which of the following is a true statement about packaging?

  A. A customer ordinarily will not pay more for a better package
  B. The package advertises the firm's and brand's image
  C. Packaging identifies and describes the product and gives usage instructions
  D. The package only provides the benefits associated with shipping and product protection
  B. The package advertises the firm's and brand's image

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  Explanation

  Packaging is an element of the product strategy. It consists of designing and producing the container. The package also advertises the firm's and the brand's image. An effective package makes a good general impression, attracts attention, is descriptive, and instills confidence.Moreover, a customer may pay more for a better(more convenient, dependable, or prestigious) package. Thus, an invention of a new type of package may provide greater customer value, e.g., a better way of dispensing the product.