US CMA PART 2 – 100 MCQs (NEW SYLLABUS)
A. Financial Statement Analysis (20 MCQs)
Financial Ratios (10 MCQs)
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A company improves its current ratio from 1.5 to 2.2 by issuing long-term debt and paying off current liabilities. The immediate effect is: A. Improved liquidity and leverage
B. Improved liquidity but worsened leverage
C. Worsened liquidity but improved leverage
D. No change in liquidity or leverage -
Which ratio best measures a firm’s ability to meet interest obligations? A. Current ratio
B. Debt-to-equity
C. Times interest earned
D. Operating margin -
Inventory turnover decreases while sales remain constant. This indicates: A. Improved inventory management
B. Excess inventory buildup
C. Higher gross margin
D. Increased liquidity -
Which ratio is most useful to equity investors? A. Return on assets
B. Return on equity
C. Asset turnover
D. Current ratio -
A firm with high operating leverage will experience: A. Stable profits regardless of sales
B. Higher fixed costs
C. Lower break-even point
D. Lower business risk -
Which ratio reflects market perception of future growth? A. Price-earnings ratio
B. Gross profit ratio
C. Debt ratio
D. Inventory turnover -
Increasing depreciation expense will immediately: A. Increase cash flow
B. Decrease net income
C. Increase revenue
D. Increase working capital -
A decline in asset turnover with stable profit margin implies: A. Improved ROA
B. Declining ROA
C. No change in ROA
D. Improved liquidity -
Which ratio is least affected by accounting policies? A. Net profit margin
B. Current ratio
C. Price-earnings ratio
D. Debt-to-equity -
A firm repurchases shares using cash. What happens to ROE? A. Decreases
B. Increases
C. Remains same
D. Becomes negative
Profitability Analysis (6 MCQs)
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Which item is excluded from sustainable earnings? A. Core operating income
B. Recurring depreciation
C. Gain on sale of land
D. Normal tax expense -
Aggressive revenue recognition results in: A. Lower current income
B. Higher future income
C. Higher current income
D. Stable earnings -
Contribution margin analysis focuses on: A. Fixed costs
B. Variable costs
C. Total costs
D. Sunk costs -
An increase in gross margin with declining net margin suggests: A. Higher selling price
B. Higher operating expenses
C. Lower COGS
D. Lower interest expense -
Which cost is most controllable in the short run? A. Rent
B. Depreciation
C. Direct materials
D. Salaries of executives -
Income smoothing primarily affects: A. Cash flows
B. Earnings volatility
C. Asset valuation
D. Tax rates
Special Issues (4 MCQs)
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Foreign currency translation gains are reported under: A. Revenue
B. Other comprehensive income
C. Operating expense
D. Retained earnings -
Inflation causes FIFO inventory valuation to: A. Understate income
B. Overstate income
C. Understate assets
D. Overstate COGS -
Which method best reflects current replacement cost? A. FIFO
B. LIFO
C. Historical cost
D. Average cost -
In hyperinflationary economies, financial statements should be: A. Left unadjusted
B. Restated using price indices
C. Converted to LIFO
D. Converted to FIFO
B. Corporate Finance (20 MCQs)
Risk & Return (6 MCQs)
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Holding diversified securities primarily reduces: A. Systematic risk
B. Market risk
C. Unsystematic risk
D. Interest rate risk -
Beta measures: A. Total risk
B. Firm-specific risk
C. Systematic risk
D. Credit risk -
Expected return is calculated as: A. Average of returns
B. Weighted average of possible returns
C. Highest possible return
D. Lowest possible return -
A risk-averse investor prefers: A. Higher risk, higher return
B. Lower risk for same return
C. Risk neutrality
D. Speculation -
Which risk cannot be diversified away? A. Business risk
B. Financial risk
C. Market risk
D. Operational risk -
As risk increases, required return: A. Decreases
B. Remains constant
C. Increases
D. Becomes negative
Long-Term Financial Management (8 MCQs)
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An upward-sloping yield curve indicates: A. Recession
B. Falling interest rates
C. Rising interest rates
D. Flat inflation -
WACC represents: A. Cost of equity only
B. Cost of debt only
C. Overall required return
D. Risk-free rate -
Which financing source is cheapest? A. Equity
B. Retained earnings
C. Debt
D. Preferred stock -
Cost of retained earnings equals: A. Cost of debt
B. Cost of equity
C. Risk-free rate
D. Dividend yield only -
Bond prices move ______ interest rates. A. In same direction
B. Opposite direction
C. Independently
D. Randomly -
Zero-coupon bonds: A. Pay annual interest
B. Are issued at discount
C. Are issued at par
D. Have floating rates -
Financial leverage increases: A. Business risk
B. Operating risk
C. Return volatility
D. Sales volume -
Increasing debt increases: A. WACC always
B. Financial risk
C. Operating leverage
D. Asset turnover
Working Capital Management (6 MCQs)
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Primary objective of cash management: A. Maximize cash balance
B. Minimize cash balance
C. Maintain optimal cash level
D. Eliminate cash -
Lockbox systems improve: A. Payment timing
B. Cash inflow speed
C. Inventory turnover
D. Credit risk -
Tight credit policy results in: A. Higher sales
B. Higher bad debts
C. Lower receivables
D. Longer collection period -
EOQ minimizes: A. Ordering cost only
B. Carrying cost only
C. Total inventory cost
D. Purchase cost -
Just-in-time inventory reduces: A. Stock-out risk
B. Carrying cost
C. Ordering cost
D. Supplier dependence -
Aggressive working capital policy implies: A. High liquidity
B. Low risk
C. Higher profitability
D. Excess current assets
C. Decision Analysis (20 MCQs)
CVP Analysis (8 MCQs)
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Break-even point occurs when: A. Revenue = Variable cost
B. Contribution = Fixed cost
C. Profit is maximum
D. Cash flow is zero -
Contribution margin ratio equals: A. Fixed cost / Sales
B. Contribution / Sales
C. Profit / Sales
D. Variable cost / Sales -
Higher fixed costs result in: A. Lower operating leverage
B. Higher break-even sales
C. Lower risk
D. Lower contribution -
Margin of safety measures: A. Profitability
B. Risk exposure
C. Liquidity
D. Cost behavior -
Multi-product CVP uses: A. Individual margins
B. Sales mix
C. Weighted average CM
D. Highest CM -
Operating leverage is highest when: A. Fixed costs are low
B. Variable costs are low
C. Fixed costs are high
D. Sales volume is zero -
If sales increase by 10%, profit increases by 30%. Degree of operating leverage is: A. 2
B. 3
C. 10
D. 30 -
Which assumption is critical for CVP? A. Variable costs per unit constant
B. Sales volume unlimited
C. Fixed costs variable
D. Demand elastic
Marginal Analysis (6 MCQs)
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Sunk costs should be: A. Included
B. Ignored
C. Capitalized
D. Deferred -
Opportunity cost represents: A. Out-of-pocket cost
B. Past cost
C. Foregone benefit
D. Accounting cost -
Special orders should be accepted if: A. Price covers full cost
B. Price covers variable cost
C. Price covers fixed cost
D. Price equals market price -
Relevant costs are: A. Historical
B. Future and differential
C. Fixed
D. Allocated -
Idle capacity pricing decision focuses on: A. Full cost
B. Marginal cost
C. Opportunity cost
D. Sunk cost -
Make-or-buy decisions ignore: A. Avoidable costs
B. Fixed overhead
C. Variable cost
D. Opportunity cost
Pricing (6 MCQs)
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Cost-plus pricing ignores: A. Demand
B. Cost
C. Profit margin
D. Volume -
Target costing starts with: A. Cost
B. Market price
C. Profit
D. Sales volume -
Highly elastic demand means: A. Price increase raises revenue
B. Price increase lowers revenue
C. Demand insensitive
D. No substitutes -
Penetration pricing aims to: A. Maximize short-term profit
B. Enter market quickly
C. Recover R&D costs
D. Reduce competition -
Skimming pricing is suitable when: A. Demand is elastic
B. Competition intense
C. Product is innovative
D. Costs are low -
Life-cycle pricing focuses on: A. Short-term margins
B. Long-term profitability
C. Break-even
D. Variable cost
D. Risk Management (10 MCQs)
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Enterprise risk management integrates: A. Only financial risks
B. Strategic, operational, financial risks
C. Insurance risks only
D. Compliance only -
Risk identification precedes: A. Risk mitigation
B. Risk assessment
C. Risk monitoring
D. Risk reporting -
Risk appetite reflects: A. Maximum risk company can bear
B. Risk avoidance
C. Risk elimination
D. Risk transfer -
Which is a risk response? A. Identification
B. Assessment
C. Mitigation
D. Monitoring -
Hedging primarily reduces: A. Credit risk
B. Market risk
C. Operational risk
D. Compliance risk -
Risk transfer is achieved through: A. Avoidance
B. Insurance
C. Diversification
D. Acceptance -
Residual risk exists: A. Before mitigation
B. After mitigation
C. Before identification
D. Before monitoring -
Key risk indicators help in: A. Identification
B. Monitoring
C. Assessment
D. Mitigation -
Strategic risks arise from: A. Daily operations
B. Poor decisions
C. External environment
D. Accounting errors -
Risk assessment evaluates: A. Probability only
B. Impact only
C. Probability and impact
D. Cost only
E. Investment Decisions (10 MCQs)
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Capital budgeting focuses on: A. Short-term decisions
B. Long-term investments
C. Working capital only
D. Financing only -
Incremental cash flows exclude: A. Opportunity cost
B. Sunk cost
C. Tax effects
D. Working capital -
Depreciation affects: A. Cash flow directly
B. Taxes
C. Revenue
D. Discount rate -
NPV method assumes: A. Reinvestment at IRR
B. Reinvestment at cost of capital
C. No reinvestment
D. Risk-free rate -
Accept project when: A. IRR < WACC
B. NPV = 0
C. NPV > 0
D. Payback exceeds life -
Payback method ignores: A. Liquidity
B. Risk
C. Time value of money
D. Cash flows -
Mutually exclusive projects require: A. Payback
B. IRR only
C. NPV comparison
D. ARR -
After-tax cash flows are relevant because: A. Taxes are sunk
B. Shareholders pay taxes
C. Firm pays taxes
D. Tax rates fixed -
Discount rate reflects: A. Inflation only
B. Risk and time value
C. Cash flows
D. Accounting profit -
Profitability index equals: A. PV / Cost
B. NPV / Cost
C. Cost / PV
D. IRR / WACC
F. Professional Ethics (10 MCQs)
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Integrity requires: A. Maximizing profit
B. Avoiding conflicts of interest
C. Creative accounting
D. Confidential disclosure -
Due diligence means: A. Speed
B. Care and competence
C. Authority
D. Independence -
Fiduciary responsibility focuses on: A. Personal gain
B. Employer interest
C. Public trust
D. Shareholder interest -
IMA ethical principles include: A. Integrity, Objectivity
B. Competence, Confidentiality
C. Credibility
D. All of the above -
Accepting gifts from suppliers violates: A. Integrity
B. Confidentiality
C. Competence
D. Credibility -
Ethical decision-making first step: A. Evaluate alternatives
B. Identify ethical issue
C. Consult IMA
D. Take action -
Whistleblowing is appropriate when: A. Personal benefit
B. Legal violations exist
C. Management disagrees
D. Policy unclear -
Confidential information may be disclosed when: A. Requested by friend
B. Authorized or legally required
C. Competitor asks
D. Media demands -
Failure to maintain objectivity leads to: A. Better decisions
B. Bias
C. Higher profit
D. Compliance -
Ethical behavior enhances: A. Short-term earnings
B. Reputation and trust
C. Tax savings
D. Market share only
F. Mixed Advanced MCQs (10 MCQs)
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Inflation increases nominal but reduces: A. Cash flow
B. Real returns
C. Revenue
D. Profit -
Higher operating leverage means: A. Stable profit
B. High fixed costs
C. Low break-even
D. Low risk -
NPV and IRR conflict occurs due to: A. Timing of cash flows
B. Tax rate
C. Discount rate
D. Accounting profit -
ERM improves: A. Risk elimination
B. Decision quality
C. Cost reduction only
D. Compliance only -
Market value added focuses on: A. Book value
B. Economic profit
C. Accounting profit
D. Cash flow -
A project with positive NPV but long payback should be: A. Rejected
B. Accepted
C. Deferred
D. Ignored -
Ethical climate is responsibility of: A. Employees only
B. Auditors
C. Top management
D. Regulators -
Financial risk increases with: A. Higher sales
B. Higher debt
C. Higher equity
D. Higher liquidity -
CVP analysis is least useful when: A. Costs are linear
B. Sales mix stable
C. Multiple products
D. Demand uncertain -
Ultimate goal of financial management: A. Profit maximization
B. Cost minimization
C. Shareholder value maximization
D. Revenue growth
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