Based on Official Syllabus Topics of Actual IMA CMA-Strategic-Financial-Management Exam
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NEW QUESTION # 31
A co league claims that morality is usually perceived and interpreted differently by different people so there is no method to judge whether one decision is better than another. This is commonly referred to as
- A. ethical relativity
- B. comparative ethics
- C. moral philosophy
- D. moral relativism
Answer: D
NEW QUESTION # 32
Which one of the following situations describes a secondary offering of stock by a company?
- A. The company repurchases shares of its stock in the open market, but it then later sells these shares in the open market
- B. After completing its initial public offering, the company sells more new shares of its stock
- C. The company has an initial public offering of its stock and its investment bank needs to add mote shares to the initial public offering to meet excess demand by investors
- D. After the lockup period of the initial public offering ends, the company 3 founders sell some of their shares to the public
Answer: D
NEW QUESTION # 33
Discuss whether AMI should use a cost-based or a market-based pricing approach. Explain your answer.
Essay
Food Depot Ltd, (FDL) is a privately-held company that provides catering services to airlines and operates several restaurant chains including fast food, casual dining, and fine dining restaurants, FDL has been profitable in recent years and has a very strong cash position. FDL's newest division. Food_TO-Go is an online meal ordering and delivery platform acquired by FDL two year ago.
In 20X7, sales for the entire company were $1 billion, with 50% of the business coming from the Airline Catering division. FDL is the country 's leading airline catering services provider and control 60% of the market share. However, the outlook of the airline catering industry is gloomy. The compound annual growth rate of the industry for the past five years was only 0.5% as airline networks have increasingly dropped catering on short domestic flights.
The Food-To-division only contribution 5% of FDL's total sales in 20X7 and is far behind in competing for marketing for market share of the online meal ordering and delivery industry, it is estimated that Food-To-Go's sales were only 20% of the industry leader's sales. However, the outlook for the online meal ordering and delivery services industry is bright. The compound annual growth rate of the industry since it started three years ago was 50%. It is estimated the rapid growth of the industry will continue in the foreseeable future.
Susan Willey, the head of Food-To-Go, does not agree that the Airline Catering division is the best-performing division in the company. Wiley argues that ber division bad the highest ROI in 20X7, and it deserves more capital finding. FDL's requested rate of return is 12%. The selected financial data for the Airline Catering division and Food-To-Go division in 20X7 are as follow (in $ millions)
Answer:
Explanation:
See the explanation for the answer.
Explanation
It should continue using market based pricing as the bargaining power is with the company not with me customer the products they make are important for me customers and there is a few competition hence it is an opportunity for Item to charge a premium for their products.
NEW QUESTION # 34
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?
- A. 0
- B. 1
- C. 2
- D. 3
Answer: A
NEW QUESTION # 35
Assuming mere are no other imitations, should AMI accept the one-time order from a financial perspective?
Explain your answer
Essay
Apex Manufacturing lnc. (AMI) is a Canada-based company that manufactures a manufactures and unique part for aircrafts. It has few competitors in the market. The company is exposed to exchange rate risk because about 90% of its products are exported to the U.S, and most of its sales contracts are in U.S. dollars. AMI has the capacity to manufacture 1,500 units of the part per year. For the year just ended. AMI manufactured and sold 1,000 units. The operating results are shown below.
Recently, A new customer made a one-area order of 500 units of the part at $1.200 per unit. The CTO asked the controller to analyze this offer. AMI is considering adjusting its sales price next year in a recent meeting, the CFO suggested to use the market-based approach for pricing decisions, bat the controller insisted that the cost-based approach is more favorable to the company.
Answer:
Explanation:
See the explanation for the answer.
Explanation
As the price offered is $1200 which is greater than the contribution per unit of $1000, the project should be accepted.
It will increase the profits of me company by $100,000
(500 X $200)
NEW QUESTION # 36
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 # 37
Below is the income statement and balance sheet for a retail corporation.
What is the corporation's debt to total capital in year 2?
- A. 71%
- B. 41%
- C. 6%
- D. 19%
Answer: D
NEW QUESTION # 38
London Corporation has in the following cost structure for two of its product.
Assume that me current sales level is 15,000 units of Product A and 5,000 units of Product B Using cost-volume-profit analysis which of the following courses of action would maximize profit in the short term?
Assume that fixed costs are sunk costs in the short term.
- A. Continue to make and sell Product A only.
- B. Continue to make and sell Product B only
- C. Continue to make and sell both Product A and Product B
- D. Discontinue making and selling Doth products
Answer: A
NEW QUESTION # 39
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?
- A. It should be the U S dollar if the local currency is hyper inflated
- B. It is the US dollar because the parent company is in the US
- C. It is the U S dollar because the subsidiary has an intercompany loan from the parent company
- D. It should be determined by the management of the U.S. Company
Answer: A
NEW QUESTION # 40
A furniture retail company uses the LIFO inventory method Due to the nigh inflation rate in me past year, the company's
- A. quick ratio may be understated
- B. quick ratio may be overstated
- C. current ratio may be overstated
- D. net income may be understated
Answer: D
NEW QUESTION # 41
Plenary Inc specializes in overnight package delivery. Total packages delivered last year were 10 000.000. and this quantity is expected to remain unchanged in the coming year. Unit contribution margin is $4,50 and total fixed costs are S40.000,000. The firm's 300 delivery truck drivers are seeking a S10 000 raise in annual salary In addition to a current base salary of $45 000 per year, the drivers receive a commission of $0 50 per package delivered If the firm grants the $10,000 salary increase to each driver and seeks to maintain the same level of pre-tax operating profit what is the maximum amount of commission the firm can pay its drivers per package delivered?
- A. $0.35
- B. $0.30
- C. $0.20
- D. $0.0
Answer: C
NEW QUESTION # 42
A company with idle capacity has been contacted by a new customer to supply 10,000 units of its products for a special batch order its costs are as follows.
The company's normal soling price is SI00 per unit but the customer is wiling to pay only S70 pet unit Should the company accept the special order''
- A. Yes, because the special order will increase operating profit by S100 000
- B. Yes, because the special order will increase operating profit by S250 000
- C. No, because the special order will reduce operating profit by S50 000
- D. No, because the special order will reduce operating profit by $250 000
Answer: C
NEW QUESTION # 43
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 # 44
Which one of the following statements regarding working capital management is not correct?
- A. The cash, inventory accounts payable and accounts receivable components of working capital are constantly changing during the operating cycle
- B. An attempt to minimize carrying costs and shortage costs associated with inventory levels is an objective of working capital management
- C. Increasing costs associated with the manufacture and sale of products will not impact the short-term management of working capital
- D. Seasonal demand for me products can cause working capital problems that must De anticipated and managed
Answer: C
NEW QUESTION # 45
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
- A. project B only
- B. project A and project B
- C. neither project
- D. project A only
Answer: D
NEW QUESTION # 46
The internal audit division of a company is investigating a potential fraud in the Accounts Payable department Someone in the department has been writing checks to fictitious vendors and collecting the cash The primary suspect Is an employee who has own with the company for twelve years and recently lost his Did for promotion to Director of Accounts Payable a position which would have given mm a 25% salary increase This employee has been heard complaining to several other employees in the department that he was cheated out of his raise. Which one of the following elements of the fraud triangle is this employee exhibiting?
- A. Motive
- B. Pressure
- C. Rationalization
- D. Opportunity
Answer: C
NEW QUESTION # 47
How many units should be produced and sow it AMI'S target net income is $600,000? Snow your calculations.
Apex Manufacturing lnc. (AMI) is a Canada-based company that manufactures a manufactures and unique part for aircrafts. It has few competitors in the market. The company is exposed to exchange rate risk because about 90% of its products are exported to the U.S, and most of its sales contracts are in U.S. dollars. AMI has the capacity to manufacture 1,500 units of the part per year. For the year just ended. AMI manufactured and sold 1,000 units. The operating results are shown below.
Recently, A new customer made a one-area order of 500 units of the part at $1.200 per unit. The CTO asked the controller to analyze this offer. AMI is considering adjusting its sales price next year in a recent meeting, the CFO suggested to use the market-based approach for pricing decisions, bat the controller insisted that the cost-based approach is more favorable to the company.
Answer:
Explanation:
See the explanation for the answer.
Explanation
A picture containing text Description automatically generated
NEW QUESTION # 48
Given the financial information shown below, what amounts would be shown for sales revenue and for gross prom, respectively in a common size income statement?
- A. 100% and 45%
- B. 100% and 55%
- C. 100% and 20%
- D. 222% and 225$
Answer: A
NEW QUESTION # 49
A company manufactures two products Product X and Product Y, during a joint process Product Y canoe processed further to create Product Z Relevant data are shown below.
- A. Product Y should he processed further because an additional S5.000 profit can be achieved by processing further
- B. Product y should not be processed further because an additional S35 000 loss can be achieved by processing further
- C. Product Y should be processed further because an additional $45,000 prof* can be achieved by processing further
- D. Product Y should be processed further because me selling once of Product Z Is higher than Product Y
Answer: A
NEW QUESTION # 50
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?
- A. £295, 000
- B. £345, 000
- C. £245,000
- D. £315,000
Answer: B
NEW QUESTION # 51
Slam-Dunk Shoes has 5,000 pairs or damaged shoes in inventory. The cost of these shoes was $51,000. in their present condition, the shoes may be sold at clearance prices for $29,000 Slam-Dunk can have the shoes repaired at a cost of $77,000 after which they can be sold for $100,000. What is the opportunity cost of selling the shoes in their present damaged condition?
- A. $71.000
- B. $77, 000
- C. $23.000
- D. $100, 000
Answer: C
NEW QUESTION # 52
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