Latest CMA Strategic Financial Management Study Guide [ITPrepare] With Real Questions and Precise Answers

1. A corporation shows the following on its financial statements (in millions).





The corporation has a financial leverage ratio of

2. 1. In an Enterprise Risk Management environment, which one of the following is the best example of risk sharing?

3. Given the financial information shown below, what amounts would be shown for sales revenue and for gross prom, respectively in a common size income statement?

4. Javier makes hand-looted learner dog collars. The materials cost $10 per collar and the collars are sold for $50 each. Javier sells me collars at a local farmer's market mat charges S100 per month for space rental if Javier's income tax rate is 30%, how many collars must Javier sell each year to earn $1,000 net income?

5. Studler’s Restaurant is considering a contract to supply the weal senior citizen center with 10,000 meals. Regular sales at regular prices would be unaffected. The food cost for each meal s S3 Additional costs incurred as a result of the contract would De variable overhead of S 50 and variable selling general and administrative costs of S SO per meal sold. The selling price per meal would be $5, A total of $20,000 in fixed costs would be allocated at $2 per meal. The fixed costs are part of an overall total of $500,000 in annual fixed costs incurred regardless of the contract .

What will be the effect on pretax income if Studiers takes the special order?

6. L&H Sports owns and operates several stadiums used for baseball and soccer games Management is considering installing machines that would be used to roast peanuts on the premises. This equipment would allow L&H to sell freshly roasted peanuts rather than the pre-roasted peanuts that are currently sold Marketing studies suggest that this feature would increase peanut sales.

The roasters can be purchased in several sizes, and the annual rental fees and operating costs vary with the size of the roaster Information about the roasters is shown below.





L&H currently sells pre-roasted peanuts for $0 60 pet bag. Management plans to sell the freshly roasted peanuts for a higher price but at no more than a 10% increase. The demand for freshly roasted peanuts is estimated to be 250, 000 bags pet year .

Which roaster should L&H purchase to maximize its profit?

7. A foreign subsidiary of a U S company has an intercompany loan from the parent company .

Which one of the following statements about the subsidiary's functional currency is true?

8. Clark inc, expects to incur the following selected costs an a new product being planned for introduction early next.

✑ Design an development costs of $100,000 that will be incurred this year. ✑ Marketing costs of $50,000 to be incurred %50 this year %50 year

✑ Manufacturing costs of $500,000 to be incurred next year.

✑ In addition to external market factors, the pricing decision should be based on cost. The product cost that should be used is

9. Alliantz Company, a USA-based manufacturer needs to set up a hedge to protect against dollar exchange rate devaluation. The protection is necessary (or an open balance of $2 478.450 Payment is to be settled in a rare currency 40 days from today excluding transaction fees which investment instrument would be used to provide the best hedge?

10. Which one of the following moral philosophies states that the morality of an action is inherent and not based on the consequences of the action?

11. Essentials inc. operates two segments. Segment A and Segment B information about the revenues and costs for Essentials tot the previous year (by segment) is shown below

The above analysis shows that Segment A is not profitable if Segment A is dropped, the revenues associated with the account will be lost and the related variable costs win be eliminated Also, the space freed by this product line will be rented for $40.000. The operating profit (loss) after dropping Segment A will be

12. A. Utilitarianism

B. Deontology

C. Teleology

D. Relativism

13. Using the dividend discount model, an analyst determines mat Beverly Company's equity is worth $80 per share.

Beverly Company’s required rate of return is 15% and the current risk-free rate is 5% assuming a 0% long-term growth rate, what is Beverly's estimated future annual dividend?

14. A company can by identical raw materials from four suppliers. Each supplier offers a different term of sale .

Which one of the following terms of sale has the highest effective annual interest rate if the company does not take the cash discount?

15. A company is considering investing £1 million for a new machine. The new machine is expected to generate £450,000 incremental before-tax operating cash inflows and £100.000 in additional depreciation expense for each of the next ten years. The company uses the same depreciation assumptions tor book and tax purposes.

If the company's income tax rate is 30%, what is the change in the yearly after-tax cash flow from operations if the company invests in the new machine?

16. An accounting manage' is deciding which performance measurement tool would be most appropriate to compare firms within their company s industry given that the firms vary in size significantly .

Which one of the following analysis methods would be the most appropriate?

17. Amy Curtin sells used cars of a reliable bona Curtin has no knowledge of me history or any or the specific cars She believes that the brand is reliable, and is considering whether it is acceptable to offer only this general Information rather than specific information regarding me cars when trying to complete each sale The company has always preferred to make the sale and worry about any warranty issues later and there are no legal disclosure requirements in their jurisdiction Curtin considers herself to be an ethical person but she does not want to lose out on any potential sales of vehicles that are most likely in good mechanical condition.

Which one of the following statements best represents what Curtin should consider related to the meaning of ethics?

18. A company’s balance sheet information at the end of July is shown below (in$000s).





What is the company's financial leverage ratio?

19. A risk with a high frequency of occurrence but with a low impact, is best managed by which one of the following risk response strategies?

20. Which one of the following statements best describes an offering after an initial public offering where a benchmark stock price will already exist?

21. Delman inc considering upgrading its manufacturing facility, and it is expected that the new equipment will cost $180,000. The project's is considering similar to the risk of the firm's other investments. the after-tax cash inflows attribute to this project are expected to increase by $50,000 every year over the next five years. The firm's marginal tax rate is 30%, its debt-to-equal ratio (using market values) is 60%, and its pre-tax cost of debt and equity are 8% and 12% respectively. the weighted average cost of capital appropriate for evaluating this project is closest to

22. A corporation has $80 million in current assets comprised of $30 million in inventory and $50 million in cash and marketable securities it has current liabilities of $50 million. If the corporation purchases an additional $10 million in inventory with trade credit this would

23. In March 20X2, an investor purchased a government bond with a face value of $100 that matures in 30 years. The issue price was $94 and the bond offered a yield to maturity of 5.6% One year later, the investor sold the bond at a price of S105 after receiving an interest payment of $6. The total return is

24. The production process of a company s main product yields a by-product Production costs or $700,000 are incurred during this process and $300,000 m additional costs are incurred to finalize the main product. The by-product can be sold for $200 000 without further processing A manager proposed the conversion of the by-product into another product that would cost $100,000 and generate revenue of $250,000. When deciding on this proposal the company should

25. Below is the income statement and balance sheet for a retail corporation.





What is the corporation’s return on equity in Year 2?

26. The best discount rate to the use for evaluate of investment opportunities is the

27. If a CMA is asked to conduct a financial assessment of a company owned by a close relative, what would be the proper response under the credibility standard of the IMA Statement of Ethical Professional Practice?

28. Which one or the following costs Is a variable product cost?

29. Abex Employment Agency has requested an increase in the firm's line of credit, and the bank is reviewing Abex's sales and collections history Although the firm's sales have increased the bank is concerned about the credit quality of the firm's customers Based on the following information calculate the average collection period for the firm Use a 365-day year in your calculations.

30. A company has hired a consultant to propose a way to increase the company's revenues. The consultant has evaluated two mutually exclusive projects with me following information provided for each project.





The company uses a discount rate of 9% to evaluate both projects Based on the net present value, the company should invest in

31. Ryan Fitzgerald the vice president of finance for Southwest Development Company is evaluating a proposed expansion plan currently. Southwest Development has $660 million of total assets and the company's equity ratio Is 38% Southwest Development has never issued preferred shares. The company's earnings before interest and taxes (EBIT) are $83 6 million. The interest rate on their debt is 7 2% and the company's tax rate is 30%. The company is planning to expand by investing $110 million. In assets. As result both sales and EBIT will increase by 20%. The expansion will be financed with 40% debt and 60% common equity If Southwest Development proceeds with the expansion what will happen to the company's return on equally (ROE)?

32. Willcox Company plans to sell 100 000 units of Us only product for $300 per unit to its existing customers It has received a new customer request for 10,000 units at a selling price of $2S0 per unit Willcox's cost structure is shown below.





Capacity exists lo produce an additional 10 000 units and accepting the order would have no long-term implications If the order is accepted however a specialized piece of equipment costing S25 000 would need to I purchased If Wilcox accepts the special order its income would increase by

33. A company has incurred $2,500 to produce its four products. These products can either be sold as is or processed further.

The selling prices and additional costs necessary to finish these products ace shown below

34. SSA inc. issues 4% bonds with a lace value of $500,000 when the market rate of interest is 3% for similar bonds. The bonds mature in 10 years, and pay interest every six months .

Which one of the following is closest to the amount of cash SSA will receive upon issued?