IMANET IMANET-CMA Online Practice Questions and Exam Preparation

IMANET IMANET-CMA Online Questions & Answers

• Question 661:

  FLE Corporation had income before taxes of $50000. Included in the calculation of this amount was depreciation of $6,000, a charge of $7,000 for the amortization of bond discounts, and $5,000 for interest paid. The estimated pretax cash flow for the period is

  A. $50000
  B. $57,000
  C. $37000
  D. $63000
  D. $63000

  ---

  Explanation

  To determine cash flow for the period, all noncash expenses should be added to income. Adding the $6,000 of depreciation and the $7,000 of discount amortization to $50,000 of income produces a pretax cash flow of $63,000. Interest is not added back to income because it requires a cash payment,

• Question 662:

  The level of safely stocking inventory manage mend depends on all of the following except the

  A. Level of uncertainty of the sales forecast.
  B. Level of customer dissatisfaction for back orders.
  C. Cost of running out of inventory.
  D. Cost to reorder stock.
  D. Cost to reorder stock.

  ---

  Explanation

  The level of safety stock is based on the delivery lead time and the variability of sales during the lead time. The cost of stock outs, usually in the form of opportunity costs, is also considered. Safety stocks are irrelevant to the economic order quantity. Thus, the cost to reorder, which is incorporated into the EQO model, does It not affect the level of safety stock.

• Question 663:

  If a $1,000 bond sells for $1,125, which of the following statements are true?

  I. The market rate of interest is greater than the coupon rate on the bond.

  II. The coupon rate on the bond is greater than the market rate of interest.

  III. The coupon rate and the market rate are equal

  IV.

  The bond sells at a premium.

  V.

  The bond sells at a discount.

  A. I and IV
  B. I and V
  C. II and lV
  D. II and V
  C. II and lV

  ---

  Explanation

  The excess of the price over the face value is a premium. A premium is paid because the coupon rate on the bond is greater than the market rate of interest. In other words, because the bond is paying a higher rate than other similar bonds, its price is bid up by investors.

• Question 664:

  While auditing a marketing department, the internal auditor discovered that the product life cycle model was used to structure the marketing mix. Under such a philosophy, the opportunity for cost reductions would be greatest in which stage of the cycle?

  A. Introduction stage.
  B. Growth stage.
  C. Maturity stage.
  D. Decline stage.
  B. Growth stage.

  ---

  Explanation

  During the growth stage, the opportunity for reductions id at its maximum because production volume is increasing at a high rate. Thus, fixed costs are being spread over more unit of production, and the benefits of the learning curve are being realized.

• Question 665:

  the rational decision-making process is most often typified by

  A. Perfect information.
  B. Bounded rationality.
  C. Selection of optimum decisions.
  D. Choice of the least risky solution.
  B. Bounded rationality.

  ---

  Explanation

  Rarely can decision makers know all possible courses of action, the variables that will affect them, and their precise outcomes. Decision makers face limitations of time, money, technical methods, and creativity. Accordingly, they are restricted to a bounded rationality. Because rationality is inherently limited, decisions invariably 1entail some risk.

• Question 666:

  Shelf registration of a security is a procedure affixing a front

  A. Register an issue pen on its securities for a specified penned of time.
  B. Control both the issue price and the secondary market price of its securities by registering these prices for a specified period of time.
  C. Register a secant for a specified period of time and then sell the securities on a piecemeal basis
  D. Freeze the market price of its new issues of securities for a specified penned of time,
  C. Register a secant for a specified period of time and then sell the securities on a piecemeal basis

  ---

  Explanation

  SEC Rule 415 allows corporations to file registration statements covering a stipulated amount of securities that may be issued over the 2-year effective penned of the statement The securities are placed on the shelf and issued at an opportune moment without the necessity of tiling a new registration statement, observing a 20-day waiting period, or prepping a new prospectus The issuer is required only to provide updating amendments or to refer investors to quarter and annual statements tiled with the SEC. Shelf registration is most advantageous to large corporations that frequent offer securities to the pubic.

• Question 667:

  The high cost of short--term financing has recently caused a company to reevaluate the terms of credit it extends to its customers. The current policy is 11101 net 60. If customers can borrow at the prime rate, at what prime rate must the company change its terms of credit in order to avoid an undesirable extension in its collection of receivables?

  A. 2%
  B. 5%
  C. 7%
  D. 8%
  D. 8%

  ---

  Explanation

• Question 668:

  In practice, dividends

  A. Usually exhibit greater stability than earnings.
  B. Fluctuate more widely than earnings.
  C. Tend to be a lower percentage of earnings for mature firms.
  D. Are usually changed every year to reflect earnings changes.
  A. Usually exhibit greater stability than earnings.

  ---

  Explanation

  Dividend policy determines the portion of net income distributed to stockholders. Corporations normally try to maintain a stable level of dividends, even though profits may fluctuate considerably, because many stockholders buy stock with the expectation of receiving a certain dividend every year. Thus, management tends not to raise dividends if the payout cannot be sustained. The desire for stability has led theorists to propound the information content or signaling hypothesis a change in dividend policy is a signal to the market regarding management's forecast of future earnings. This stability often results in a stock that sells at a higher market price because stockholders perceive less risk in receiving their dividends.

• Question 669:

  A TOC analysis would recommend that Bombastic Bathrooms expend its limited resources mainly to produce which a fixture?

  A. Brass.
  B. Chrome.
  C. Nickel.
  D. Aluminum.
  C. Nickel.

  ---

  Explanation

  Under a theory of constraints analysis, the product with the greatest absolute throughput margin is not of the highest interest. Bottlenecks hold up production, so no matter how great the margin on a product is, if it cannot get through the production process, it cannot earn that margin. The relevant figure is throughput margin per time spent in the constraint. In Bombastic case, the most profitable product using this metric is the nickel fixture ($180?4 hours = $45).

• Question 670:

  Prior to the introduction of the euro, 0 and B Company, a U.S. corporation, is in possession of accounts receivable denominated in Deutsche marks. To what type of risk are they exposed?

  A. Liquidity risk.
  B. Liquidity risk.
  C. Exchange-rate risk.
  D. Price risk.
  C. Exchange-rate risk.

  ---

  Explanation

  Exchange-rate risk is the riskthataforeign currency transaction will be negatively exposed to fluctuations in exchange rates. Because 0 and B Company sells goods to German customers and records accounts 1receh, able denominated in Deutsche marks, 0 and B Company is exposed to exchange-rate risk.