IMANET IMANET-CMA Online Practice Questions and Exam Preparation

IMANET IMANET-CMA Online Questions & Answers

• Question 921:

  The process of developing plans for a company's expected operations and controlling the operations to help carry out those plan is?

  A. Preparing a period budget.
  B. Preparing a master budget.
  C. Budgetary control
  D. Participative budgeting.
  C. Budgetary control

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  Explanation

  The budget has same structure as the organization itself. Is made up of a hierarchy of smaller budgets, each representing the plan of a division, department, or other unit in the organizational structure. Successful budgeting requires completion of plan that states organizational goals before the budgeting process. Prevention and detection of deviations from the budget are the control purposes of budgets.

• Question 922:

  Evaluation of sales promotion is done using

  I. Customer surveys.

  II. Scanner sales data. Ill. Supplier surveys.

  IV.

  Experimental results.

  A. I and IV only.
  B. II and Ill only.
  C. I, II, and IV only.
  D. II, Ill, and IV only.
  C. I, II, and IV only.

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  Explanation

  Evaluation of sales promotion is done using scanner sales data (e.g., Nielsen television ratings) to determine the kinds of customers reached their pre-promotion purchases, and their post-promotion behavior. Customer surveys provide additional data, such as how many remember the promotion and their attitudes toward it. Experimental results are determined by changing a promotional variable for different groups, such as the media used to distribute incentives. However, sales promotions are not directed toward a firm's suppliers.

• Question 923:

  Assume that the interest rate is greater than zero. Which of the following cash-inflow streams should you prefer?

  

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

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  Explanation

  The concept of present value gives greater value to inflows received earlier in the stream. Thus, the declining inflows would be superior to increasing inflows, or even inflows.

• Question 924:

  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 925:

  A stock dividend A. Increases the debt-to-equity ratio of a firm.

  B. Decreases future earnings per share.

  C. Decreases the size of the firm.

  D. Increases shareholders wealth

  Correct Answer. B
  B

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  Explanation

  A stock dividend is a transfer of equity from retained earnings to paid-in capital. The debit is to retained earnings and the credits are to common stock and additional paid-in capital. Additional shares are outstanding following the stock dividend, but every shareholder maintains the same percentage of ownership In effect, a stock dividend divides the pie (the corporation) into more pieces, but the pie is still the same size. Hence, a corporation will have a lower EPS and a lower bookvalue per share following a stock dividend, but every shareholder will be just as well off as previously. A stock dividend has no effect except on the composition of the shareholders' equity section of the balance sheet.

• Question 926:

  Customer lifetime value for a particular customer is the

  A. Net present value of the cash flows related to a particular customer.
  B. Sum of the customer's purchases from the firm.
  C. Undiscounted amount of the net cash flows related to a particular customer.
  D. Customer equity.
  A. Net present value of the cash flows related to a particular customer.

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  Explanation

  A firm should estimate customer lifetime value, the net present value of the cash flows (purchases -- costs of acquiring, selling to, and serving the customer) related to a particular customer. This amount indicates whether a given investment in a customer is justified.

• Question 927:

  An indifference curve represents combinations of portfolios having equal utility to the investor. Given that risk and returns are plotted on the horizontal and vertical axes, respectively, and that the investor is risk averse, the curve has

  A. An increasingly steeper slope if the investor is less risk averse.
  B. A decreasingly negative slope if the investor's utility increases.
  C. An increasingly positive slope
  D. A decreasingly positive slope.
  C. An increasingly positive slope

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  Explanation

  An indifference curve represents combinations of portfolios having equal utility to the investor. Given that risk and returns are plotted on the horizontal and vertical axes, respectively, and that the investor is risk averse, the curve has an increasingly positive slope. As risk increase, the additional required return per unit of additional risk also increases. The steeper the slop of an indifference curve, the more risk averse an investor is. The higher the curve, the greater is the investor's level of utility.

• Question 928:

  Exhibit

  

  The budgeted total volume of 250,000 units s based upon Xerbert's aching a market share of 10%. Actual industry volume was 2. 580.000 units. Xerbert's increased volume owing to improved market share is

  A. 100%
  B. 80%
  C. 20%
  D. 4%
  C. 20%

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  Explanation

  Based on the revised industry volume. Herbert should have sold 258,000 units (2. 580,000 x 10%). Because 260,000 were actually sold, the company increased its market share by 2,000, or 20% of the 10,000 (260,000 -- 250,000) increase.

• Question 929:

  A higher degree of operating leverage compared with the industry average implies that the firm

  A. Has higher variable costs.
  B. Has profits that are more sensitive to changes in sales volume.
  C. Is more profitable.
  D. Is less risk.
  B. Has profits that are more sensitive to changes in sales volume.

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  Explanation

  Operating leverage is a measure of the degree to which fixed costs are used in the production process. A company with a higher percentage of fixed costs (higher operating leverage) has greater risk than one in the same industry that relies more heavily on variable costs. The DOL equals the percentage change in net operating income divided by the percentage change in sales. Thus, profits become more sensitive to changes in sales volume as the DOL increases.

• Question 930:

  The annual tax depreciation sense on an asset reduces income taxes by an amount equal to

  A. The firm's average tax rate times the depreciation amount.
  B. One minus the firm's average tax rate trine The depreciator amount.
  C. The forms marginal tax rate times the depreciation amount.
  D. One minus the firm's marginal tax rate times the depreciation amount
  C. The forms marginal tax rate times the depreciation amount.

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  Explanation

  A depreciation deduction will reduce a firm's tax by the amount of the deduction flumes the 1rnarginal tax rate A dollar deducted is offset against the firm's last (marginal) dollar of income