IMA CMA Part 2: Strategic Financial Management Sample Questions:

1. 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) net income may be understated
C) current ratio may be overstated
D) quick ratio may be overstated

2. Sigma industries is considering purchasing Lambda Products in a cash transaction Sigma financial analysts Dave conducted an extensive amount of negotiation and due diligence and nave summarized the following financial information for management.
* Assets having a 10-year remaining life can be acquired for $22 million
* Assets are to De depreciated over their remaining life on a straight-line basis for Doth book and tax purposes
* Current liabilities of Lambda amounting to S3 million must be assumed by Sigma
* Lambda operations are expected to produce annual pre-tax cash Don of S7 million for the remaining 10 years of operation
* A16% return on investment is required by Sigma for acquisitions of this type
* Sigma's marginal Income tax rate is 35%
What is the net present value to Sigma of the Lambda acquisition rounded to the nearest thousand?

A) $712,000
B) $6, 921,000)
C) $3,712,000

3. Which one of the following would best ensure the effectiveness of an organization s code of conduct?

A) Require executives and managers to take individual responsibility for practicing ethical behavior
B) Hold periodic employee workshops that illustrate expected behaviors in business situations in which ethical issues may arise
C) Distribute the document internally to staff and externally to suppliers and distributors to increase awareness of ethics considerations
D) Incorporate ethics training for all new employees as a standard part of the orientation process

4. 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) Pressure
B) Motive
C) Opportunity
D) Rationalization

5. Identify and explain two risks that Guda may face after it acquires Blue Moon.
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.

Solutions: