IMANET IMANET-CMA Online Practice Questions and Exam Preparation

IMANET IMANET-CMA Online Questions & Answers

• Question 601:

  The method that divides a project's annual after--tax net income by the average investment cost to measure the estimated performance of a capital investment is the

  A. Internal rate of return method.
  B. Accounting rate of return method.
  C. Payback method.
  D. Net present value (NPV) method.
  B. Accounting rate of return method.

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  Explanation

  The accounting rate of return uses undiscounted net income (not cash flows) to determine a rate of profitability. Annual after-tax net income is divided by the average carrying amount (or the initial value) of the investment in assets.

• Question 602:

  The chart displays the

  A. Arithmetic mean of each computer complaint
  B. Relative frequency of each computer complaint.
  C. Median of each computer complaint.
  D. Absolute frequency of each computer complaint.
  D. Absolute frequency of each computer complaint.

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  Explanation

  This Pareto diagram depicts the frequencies of complaints in absolute terms. It displays the actual number of each type of complaint.

• Question 603:

  The process model used in a theory of constraints (TOO) analysis is called

  A. Just-in-time.
  B. Drum-buffer-rope.
  C. Materials requirements planning.
  D. Lean production.
  B. Drum-buffer-rope.

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  Explanation

  Production flow through a constraint is managed using the drum-buffer-rope (DBR) system. The drum (i.e., the beat to which a production process marches) is the bottleneck operation. The constraint sets the pace for the entire process. The buffer is a minimal amount of work-in-process input to the drum that is maintained to ensure that it is always in operation. The rope is the sequence of activities preceding and including the bottleneck operation that must be coordinated to avoid inventory buildup.

• Question 604:

  Exchange rates are determined by

  A. Each industrial country's government
  B. The International Monetary Fund.
  C. Supply and demand in the foreign exchange market.
  D. Exporters and importers of manufactured goods.
  C. Supply and demand in the foreign exchange market.

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  Explanation

  Although currencies can be supported by various means for short periods, the primary determined of exchange rates is the supply of, and demand for, the various currencies. Under current international agreements, exchange rates are allowed to "float ". During periods of extreme fluctuations, however, governments and control banks may intervene to maintain stability in the market.

• Question 605:

  For one of its divisions, Buona Fortune Company has fixed costs of $300,000 and a van able-cost percentage equal to 60% of its $10 per unit selling price. It would like to earn a pre-tax income 01 $90,000 per year from the division. What is the breakeven point in dollars?

  A. $300,000
  B. $500,000
  C. $750,000
  D. $1,050,000
  C. $750,000

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  Explanation

  Breakeven point is calculated by dividing the fixed costs ol $300,000 by the contribution margin percentage, which was 40%. Dividing $300,000 by .4 results in a breakeven point of $750,000.

• Question 606:

  Which pricing objective is stated as a percentage ratio of profits to sales?

  A. Image enhancement
  B. Stabilization.
  C. Target margin maximization.
  D. Achievement of market share.
  C. Target margin maximization.

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  Explanation

  Pricing objectives include profit maximization. Classical economic theory assumes all firms a Lays select the price that results in the highest profit. An alternative objective is target margin moralization. This objective is stated as a percentage ratio of profits to sales.

• Question 607:

  A widely used approach that is used to recognize uncertainly about individual economic variables while obtaining an immediate financial estimate of the consequences of possible prediction errors is

  A. Expected value analysis.
  B. Learning curve analysis.
  C. Sensitivity analysis.
  D. Regression analysis.
  C. Sensitivity analysis.

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  Explanation

  Sensitivity analysis recognizes uncertainly about estimates by making several calculations using varying estimates. For instance, several forecasts of net present value (NPV) might be calculated under various assumptions to determine the sensitivity of the NPV to changing conditions or prediction errors. Changing or relaxing the assumptions about a certain variable or group of variables may drastically alter the NPV, resulting in a much riskier asset than was originally forecast.

• Question 608:

  Which of the following is not a category of relevant cash flows?

  A. Annual net cash flows.
  B. Project termination cash flows.
  C. Incremental cash flows.
  D. Net initial investment.
  C. Incremental cash flows.

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  Explanation

  Relevant cash flows are a much more reliable guide when judging capital projects, since only they provide a true measure of a project's potential to affect shareholder value. The relevant cash flows can be divided into three categories: (1) net initial investment, (2) annual net cash flows, and (3) project termination cash flows. An incremental cash flow is the difference in cash received or disbursed resulting from selecting one option instead of another. It is not a category of relevant cash flows.

• Question 609:

  An Asset with high risk will have a (n)

  A. Low expected return
  B. Lower price than an assets with low risk
  C. Increasing expected rate of return
  D. High standard deviation of returns
  D. High standard deviation of returns

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  Explanation

  The greater the standard deviation of the expected return, the riskier the investment. a large standard deviation implies that the range of possible return is wide,i.e.,the probability distribution is broadly dispersed.converely,the smaller the standard deviation, the tighter the probability distribution and the lower the risk.

• Question 610:

  A consultant recommends that a company hold funds for the following two reasons:

  Reason #1: Cash needs can fluctuate substantially throughout the year. Reason #2: Opportunities for buying at a discount may appear during the year.

  

  A. Option A
  B. Option B
  C. Option C
  D. Option D
  C. Option C

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  Explanation

  The three motives for holding cash are as a medium of exchange, as a precautionary measure, and for speculation. Reason #1 can be classified as a precautionary measure, and Reason #2 can be classified as holding cash for speculation.