Real IMA CMA-Strategic-Financial-Management Exam Questions Study Guide
Updated and Accurate CMA-Strategic-Financial-Management Questions for passing the exam Quickly
NEW QUESTION 12
A corporation's board of directors has just declared its next regular quarterly cash dividend. The record date for this dividend will occur
- A. before the payment date and after the ex-dividend date
- B. before the ex-dividend date and before the payment date
- C. after the ex-dividend date and after the payment date
- D. before the ex-dividend date and after the payment date
Answer: B
NEW QUESTION 13
Calculate QDDs financial leverage ratio show your calculations
Essay
Quality Digital Design (QDD) Inc is a public-traded technology company Selected financial data of QDD for the prior year are as follows
QDD's stock was trading at $160 per share at the beginning of the yea: and at $176 per share by the end of the year. The company paid dividends of S5 per share. The company "s stock had a beta of 1 4 The stock market provided a total return of 12% last year, well above the 3% risk free rate of return QDD is considering the issuance of $200 million of bonds to fund the repurchase of $200 million of its stock.
QDD is evaluating the bond, including its term structure, maturity, and whether it should be callable obtaining the lowest coupon interest is an important objective of QDD. The CFO has estimated that sales for the current year would remain the same as last year and the new bond would add S12 million in annual interest payments.
Answer:
Explanation:
See the explanation for the answer.
Explanation
NEW QUESTION 14
Radal inc. currently has three product lines: stationery computer supplies, and printer cartridges Based on the following information, the company is considering whether to drop the printer cartridge line.
- A. continue the printer cartridge product line to avoid an additional $3.000 decrease in net income
- B. continue the printer cartridge product line to avoid an additional $6.000 decrease in net income
- C. drop the printer cartridge product line as this will result in a $3 000 increase m net income
- D. drop the printer cartridge product line as this will result in a $6,000 increase m net income
Answer: A
NEW QUESTION 15
Define the term structure of interest rates and explain now it could impact QDD's objective of obtaining the lowest coupon rate Essay Quality Digital Design (QDD) Inc is a public-traded technology company Selected financial data of QDD for the prior year are as follows
QDD's stock was trading at $160 per share at the beginning of the yea: and at $176 per share by the end of the year. The company paid dividends of S5 per share. The company "s stock had a beta of 1 4 The stock market provided a total return of 12% last year, well above the 3% risk free rate of return QDD is considering the issuance of $200 million of bonds to fund the repurchase of $200 million of its stock.
QDD is evaluating the bond, including its term structure, maturity, and whether it should be callable obtaining the lowest coupon interest is an important objective of QDD. The CFO has estimated that sales for the current year would remain the same as last year and the new bond would add S12 million in annual interest payments.
Answer:
Explanation:
See the explanation for the answer.
Explanation
* A callable bond allows companies to pay off their debt early and benefit from favorable interest rate drops
* A capable bono benefits the issuer and so investors of these bonds ate compensated vutn a more attractive interest rate than on otherwise similar non-callable bonds However callable bones are more expensive The term structure of interest rates reflects the expectations of market participants about future changes in interest rates and their assessment of monetary policy conditions in general terms yields increase in line with maturity, giving rise to an upard-sloping or normal yield curve
NEW QUESTION 16
Discuss whether QDD stock provided a return that was Better, worse, or the same as its investors would have expected using CAPM snow your calculations Essay Quality Digital Design (QDD) Inc is a public-traded technology company Selected financial data of QDD for the prior year are as follows
QDD's stock was trading at $160 per share at the beginning of the yea: and at $176 per share by the end of the year. The company paid dividends of S5 per share. The company "s stock had a beta of 1 4 The stock market provided a total return of 12% last year, well above the 3% risk free rate of return QDD is considering the issuance of $200 million of bonds to fund the repurchase of $200 million of its stock.
QDD is evaluating the bond, including its term structure, maturity, and whether it should be callable obtaining the lowest coupon interest is an important objective of QDD. The CFO has estimated that sales for the current year would remain the same as last year and the new bond would add S12 million in annual interest payments
Answer:
Explanation:
See the explanation for the answer.
Explanation
As per CAPM Model the return is
3% * 1.2 (12-3)
13 8% TSR-S5'(S176-S160)'$160
TSR-13 12%
The return provided of the company stock was lower as the return provided by the capm model was signify higher than it
NEW QUESTION 17
Which one of the following statements with respect to ethics is correct?
- A. Good ethics stems from formal education
- B. Every organization that follows the law is ethical
- C. One may act legally and still be acting unethically
- D. Ethics and laws are not closely related
Answer: C
NEW QUESTION 18
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
- A. Product D
- B. Product C
- C. Products A
- D. Products B
Answer: A
NEW QUESTION 19
Company A is concerned with its debt status and interested in analyzing how each one of the following activities might affect its to equity ratio. Assuming each activity is independent, which one of following activities is
- A. Changing its inventory method from LIFO to weighted average.
- B. Acquiring a subsidiary and consolidating for year-end financial statements.
- C. Purchase back some of its common stock during the year.
- D. Creating a separate entity to purchase a needed machine and leasing it from this entity.
Answer: B
NEW QUESTION 20
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
- A. $500,000
- B. $525, 000
- C. $650, 000
- D. $550,000
Answer: C
NEW QUESTION 21
Custom Ceramics produces two hand-painted items a large bowl and a large platter. Relevant information for each of these items is shown below
- A. The company should produce only bowls because the sales price per Bowl is higher
- B. The company should produce only bowls because the contribution margin per bowl is higher.
- C. The company should produce only platters because the contribution margin per painting hour is higher
- D. The company should produce only platters because the variable cost per platter is lower
Answer: C
NEW QUESTION 22
IF a company does not have a code of conduct, the company most likely
- A. must find another way to express its ethical principles
- B. can use its statement of values instead to implement ethics in daily decision making
- C. will lack an expressed statement of values regarding ethical behavior
- D. is missing important guidance on ethical decision making
Answer: D
NEW QUESTION 23
A group of nations is considering me formation of a cartel associated with the manufacture and distribution of a product that they each export. Which one of the following outcomes would not be consistent with me formation of a carter?
- A. An increase in the selling price of the manufactured product
- B. An increase in the output of the manufactured product
- C. An increase m the net profits for each of the individual cartel members
- D. A selling price where marginal revenue equals marginal cost
Answer: B
NEW QUESTION 24
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?
- A. Deontology
- B. Teleology
- C. Utilitarianism
- D. Relativism
Answer: A
NEW QUESTION 25
Should OLI accept the proposal from the regional airline? Show your calculations Essay Online Learning Inc. lOLI) is a privately-held company based in the IUC that specializes in providing online courses in English as a Second Language (ESL). OLI is trying to set up a new sales office in a foreign country.
It needs a business license to operate in that country. The license normally lakes six months to obtain. An official of that country said that he could expedite the process for a fee of €300.
OLI estimates the new sales office can bring €300,000 incremental profit annually OLI has just launched a new online 40-houi course to help adult ESL learners master basic business English. The price of the new course is €500 per student, the variable cost is €300 per student, and the total fixed cost of the new course is
€300.000 per year OLI spent €200.000 to develop the new course before launching it. There are many online course providers in the marketplace, and each has its own feature However, OLI's highly qualified staff and good reputation have enabled it to charge a premium price compared to its major competitors. Recent market research indicates that if OLI raises the price of its new business English course by 10V the student enrollment would decrease by 5V A regional airlines company in Asia has approached OLI and offered to enroll 1.000 of its employees in the new course if OLI would agree to a special price of €350 per employee If OLI accepts this offer, an additional €10,000 onetime cost would be required to temporally expand its capacity to accommodate the new students.
Answer:
Explanation:
See the explanation for the answer.
Explanation
Yes the order can be accepted as the price offered is above the variable cost of 300, hence it will make a contribution of 50 per enrollment and should be accepted
NEW QUESTION 26
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
- A. 8.0%
- B. 8.2%
- C. 10.5%
- D. 9.6%
Answer: D
NEW QUESTION 27
With respect to the COSO Enterprise Risk Management Integrated Framework (2017), which one of the following statements is true regarding Governance & Culture and Performance?
- A. Governance & Culture is a principle and Performance is a component of the Integrated Framework
- B. They are both principles of the Integrated Framework
- C. Performance is a principle and Governance & Culture is a component of the Integrated Framework
- D. They are both components of the Integrated Framework
Answer: D
NEW QUESTION 28
A company plans to purchase equipment for $110 000. The equipment is expected to generate an annual cash flow o( $44 500 (of the next three years The company has a predetermined hurdle rate of 9% Using the internal rate of return (IRR). should the company purchase this equipment?
- A. Yes, the IRR is less than the hurdle rate
- B. No, the IRR is greater than the hurdle rate
- C. No, the IRR is less than the hurdle rate
- D. Yes, the IRR is greater than the hurdle rate
Answer: D
NEW QUESTION 29
Explain why facilitating payments can create possible ethical and legal issues tor a company Essay Online Learning Inc. lOLI) is a privately-held company based in the IUC that specializes in providing online courses in English as a Second Language (ESL). OLI is trying to set up a new sales office in a foreign country.
It needs a business license to operate in that country. The license normally lakes six months to obtain. An official of that country said that he could expedite the process for a fee of €300.
OLI estimates the new sales office can bring €300,000 incremental profit annually OLI has just launched a new online 40-houi course to help adult ESL learners master basic business English. The price of the new course is €500 per student, the variable cost is €300 per student, and the total fixed cost of the new course is
€300.000 per year OLI spent €200.000 to develop the new course before launching it. There are many online course providers in the marketplace, and each has its own feature However, OLI's highly qualified staff and good reputation have enabled it to charge a premium price compared to its major competitors. Recent market research indicates that if OLI raises the price of its new business English course by 10V the student enrollment would decrease by 5V A regional airlines company in Asia has approached OLI and offered to enroll 1.000 of its employees in the new course if OLI would agree to a special price of €350 per employee If OLI accepts this offer, an additional €10,000 onetime cost would be required to temporally expand its capacity to accommodate the new students.
Answer:
Explanation:
See the explanation for the answer.
Explanation
it can create ethical and legal issues as in some countries it might be considered as a would and would be illegal and secondly in gives undue favour to the company as compared to the company who has actually waited for 6 months to get the license.
NEW QUESTION 30
A retail company sells numerous products m its one department store. The income statements tot two of these products are shown below
After reviewing the income statements, the president is considering drooping one or both products. Which produces), if any should the company discontinue?
- A. Neither Product A nor Product B
- B. Both Product A and Product B
- C. Product A only
- D. Product B only
Answer: C
NEW QUESTION 31
Southwest Supplies Inc. (SSI) is considering the following two projects with cash-flows discounted at SSI's weighted average cost of capital.
SSI can only afford to invest in one of the projects. Which statement would most likely explain why SSI would choose Project B over project A?
- A. Project B generates significantly more non-cash expenses
- B. Project B results in a higher cumulative accounting income
- C. Project B cash-flows are relatively more certain
- D. Project B cash-flows are to be received sooner
Answer: D
NEW QUESTION 32
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