IMANET IMANET-CMA Online Practice Questions and Exam Preparation

IMANET IMANET-CMA Online Questions & Answers

• Question 71:

  In what way can the marketing department be organized to best focus on customer groups?

  A. Products marketed
  B. Markets served
  C. Brands marketed
  D. Geographic areas
  B. Markets served

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  Explanation

  A market-management organization is appropriate when customers may be categorized by their distinct preference and buying habits. Market managers are staff personnel who report to a markets manger. The benefit of this type of organization is its emphasis on relationships with specific classes of customers as s basis for value creation.

• Question 72:

  Moorhead Manufacturing Company produces two products for which the following data have been tabulated. Fixed manufacturing cost is applied at a rate of $1.00 per machine hour. The sales manager has had a $160,000 increase in the budget allotment for advertising and wants to apply the money to the most profitable product. The products are not substitutes for one another in the eyes of the company's customers.

  

  Suppose Moorhead has only 100,000 machine hours that can be made available to produce additional units of XY-7 and BD-4. If the potential increase in sales units for either product resulting from advertising is far in excess of this production capacily, which product should be advertised and what is the estimated increase in contribution margin earned?

  A. Product XY-7 should be produced, yielding a contribution margin of $75,000.
  B. Product XY-7 should be produced, yielding a contribution margin of $133,333.
  C. Product BD-4 should be produced, yielding a contribution margin of $187,500.
  D. Product BD-4 should be produced, yielding a contribution margin of $250,000.
  D. Product BD-4 should be produced, yielding a contribution margin of $250,000.

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  Explanation

• Question 73:

  A depreciation tax shield is

  A. An after-tax cash outflow.
  B. A reduction in income taxes.
  C. The cash provided by recording depreciation.
  D. The expense caused by depreciation.
  B. A reduction in income taxes.

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  Explanation

  A tax shield is something that will protect income against taxation. Thus, a depreciation tax shield is a reduction in income taxes due to a company's being allowed to deduct depreciation against otherwise taxable income.

• Question 74:

  The Dickins Corporation is considering the acquisition of a new machine at a cost of $180,000. Transporting the machine to Dickenss' plant will cost $12,000. Installing the machine will cost an additional $18,000. It has a 10-year life and is expected to have a salvage value of $10,000. Further more, the machine is expected to produce 4,000 units per year with a selling price of $500 and combined direct materials and direct labor costs of $450 per unit. Eederal tax regulations permit machines of this type to be depreciated using the straight-line method over 5 years with no estimated salvage value. Dickins has a marginal tax rate of 40%. What is the approximate payback period on Dickins' new machine?

  A. 1.05years.
  B. 1.S4years.
  C. 1.33years.
  D. 2. 22 years.
  B. 1.S4years.

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  Explanation

  When annual cash inflows are uniform, the payback period is calculated by dividing the initial investment ($210,000) by the annual net cash inflows ($136,800). Dividing $210,000 by $136,800 produces a payback period of 1.54 years.

• Question 75:

  A firm wishing to sell its well-known brand of men's clothing in a certain foreign country redesigned the products because of the greater average size of consumers in that country. However, the firm retained the same basic advertising campaign. According to Keegan's model of adaptation strategies, this firm has adopted a strategy of

  A. Straight extension.
  B. Product adaptation.
  C. Forward invention.
  D. Backward invention.
  B. Product adaptation.

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  Explanation

  Using a product adaptation strategy, a firm makes changes to the product for each market but not its promotion. This can reduce profit potential but may also provide a marketing advantage by taking into account local wants and needs.

• Question 76:

  Dart moor Company's budgeted sales for the coming year are $40,500,000, of which 80% are expected to be credit sales at terms of n/30. Dartmoor estimates that a proposed relaxation of credit standards will increase credit sales by 20% and increase the average collection period from 30 days to 40 days. Based on a 360-day year. the proposed relaxation of credit standards will result in an expected increase in the average accounts receivable balance of

  A. $540,000
  B. $2,700,000
  C. $900,000
  D. $1,620,000
  D. $1,620,000

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  Explanation

  Of the $40,500,000 of sales, 80% are expected to be on credit, a total of $32,400,000. Average daily credit sales are therefore $90,000 ($32,400,000 + 360). If 30 days of sales are outstanding at any one time, the average balance in accounts receivable is $2,700,000. If credit sales increase by 20%, the aforementioned $90,000 average of daily sales will increase to $108,000 ($90,000 x 120%). For an average collection period of 40 days, the average accounts receivable balance will be $4,320,000 ($108,000 x 40). Hence, the expected increase in the balance is $1 ,620,000 ($4,320J00 -- $2700,000).

• Question 77:

  Basic time value of money concepts concern Interest Factors Risk Cost of capital

  A. Yes Yes No
  B. Yes No Yes
  C. No Yes No
  D. No No Yes
  A. Yes Yes No

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  Explanation

  The time value of money is concerned with two issues: (1)the investment value of money, and (2) the risk (uncertainty) inherent in any executor agreement. Thus, a dollar today is worth more than a dollar in the future, and the longer one waits for a dollar, the more uncertain the receipt is. The cost of capital involves a specific, 1application of the time value of money principles; It is not a basic concept thereof.

• Question 78:

  Which one of the following characteristics distinguishes income bonds from other bonds?

  A. The bondholder is guaranteed an income over the life of the security.
  B. By promising a return to the bondholder, an income bond is junior to preferred and common stock.
  C. Income bonds are junior to subordinated debt but senior to preferred and common stock.
  D. Income bonds pay interest only if the issuing company has earned the interest.
  D. Income bonds pay interest only if the issuing company has earned the interest.

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  Explanation

  An income bond is one that pays interest only if the issuing company has earned the interest, although the principal must still be paid on the due date. Such bonds are riskier than normal bonds

• Question 79:

  All of the following may reduce the coupon rate on a bond issued at par except a

  A. Sinking fund
  B. Call provision.
  C. Change in rating from Aa to Aaa.
  D. Conversion option.
  B. Call provision.

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  Explanation

  A bond issued at par may carry a lower coupon rate than other similar bonds in the market if it has some feature that makes it more attractive to investors. For example, a sinking fund reduces default risk. Hence, investors may require a lower risk premium and be willing to accept a lower coupon rate. Other features attractive to investors include covenants in the bond indenture that restrict risky undertakings by the issuer and an option to convert the debt instruments to equity securities. The opportunity to profit from appreciation of the firm's stock justifies a lower coupon rate. An improvement in a bond's rating from Aa to Aaa (the highest possible) also justifies reduction in the risk premium and a lower coupon rate. However, a call provision is usually undesirable to investors. The issuer may take advantage of a decline in interest rates to recall the bond and stop paying interest before maturity.

• Question 80:

  In capital markets, the primary market is concerned with the provision of new funds for capital investments through

  A. New issues of bond and stock securities.
  B. Exchanges of existing bond and stock securities.
  C. The sale of forward or future commodities contracts
  D. New issues of bond and stock securities and exchanges of existing bond and stock securities
  A. New issues of bond and stock securities.

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  Explanation

  The primary market is the market for new stocks and bonds In this market, wherein investment money flows directly to the issuer, securities are initially sold by investment bankers who purchase them from issuers and sell them through an underwriting group. Later transactions occur on securities exchanges or other markets.