US CMA Part 2 — Strategic Financial Management 100 MCQ Practice Set

US CMA Part 2 — Strategic Financial Management

100 MCQ Practice Set 

Important 2026 format update: For the September/October 2026 window onward, case-based questions become the standard format for English CMA exams in most regions, replacing essays. The underlying tested content does not change.

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SECTION A — FINANCIAL STATEMENT ANALYSIS

Q1.

Current assets are $600,000 and current liabilities are $300,000. What is the current ratio?

A) 0.5
B) 1.0
C) 2.0
D) 3.0

Answer:

Q2.

Current assets are $800,000, inventory is $300,000, and current liabilities are $250,000. What is the quick ratio?

A) 1.5
B) 2.0
C) 2.5
D) 3.2

Answer

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Q3.

Sales are $1,000,000 and average accounts receivable are $125,000. What is the receivables turnover?

A) 4 times
B) 6 times
C) 8 times
D) 10 times

Answer: 

Q4.

COGS is $900,000 and average inventory is $150,000. Inventory turnover is:

A) 4 times
B) 5 times
C) 6 times
D) 8 times

Answer: 

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Q5.

Net income is $100,000 and average total assets are $500,000. ROA equals:

A) 10%
B) 15%
C) 20%
D) 25%

Answer: 

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Q6.

Net income is $120,000 and average equity is $600,000. ROE equals:

A) 10%
B) 15%
C) 20%
D) 25%

Answer: 

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Q7.

A company has sales of $2 million and COGS of $1.2 million. Its gross profit margin is:

A) 20%
B) 30%
C) 40%
D) 60%

Answer 

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Q8.

A company has net income of $90,000 and sales of $900,000. What is its net profit margin?

A) 5%
B) 10%
C) 15%
D) 20%

Answer: 

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Q9.

Market price per share is $72 and EPS is $4. What is the P/E ratio?

A) 12
B) 15
C) 18
D) 20

Answer: 

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Q10.

A company has sales of $1,000,000, net income of $80,000, and average assets of $400,000. What is its ROA?

A) 8%
B) 15%
C) 20%
D) 25%

Answer: 

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Q11.

In a common-size income statement, each item is generally expressed as a percentage of:

A) Total assets
B) Total equity
C) Sales
D) Net income

Answer: 

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Q12.

If inventory turnover increases substantially while sales remain constant, the most likely interpretation is:

A) Inventory is moving more slowly
B) Inventory is being used/sold more efficiently
C) Gross margin must decrease
D) Current liabilities must increase

Answer

Q13.

A company has a debt-to-equity ratio of 2.0. This means:

A) Debt equals equity
B) Debt is twice equity
C) Equity is twice debt
D) Assets equal twice debt

Answer:

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Q14.

If ROE is 18% and the dividend payout ratio is 25%, the sustainable growth rate is:

A) 4.5%
B) 13.5%
C) 18%
D) 24%

Answer:

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Q15.

During a period of rising inventory costs, FIFO generally produces:

A) Lower ending inventory and lower income
B) Higher ending inventory and higher income
C) Higher COGS and higher income
D) No effect on income

Answer:

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SECTION B — CORPORATE FINANCE

Q16.

The risk-free rate is 5%, beta is 1.2, and market return is 11%. CAPM required return is:

A) 10.2%
B) 11.0%
C) 12.2%
D) 13.2%

Answer

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Q17.

A beta of 1.8 indicates that the stock has:

A) No systematic risk
B) Less systematic risk than the market
C) Approximately 80% more systematic sensitivity than the market
D) No business risk

Answer

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Q18.

If the risk-free rate is 4% and market return is 9%, the market risk premium is:

A) 4%
B) 5%
C) 9%
D) 13%

Ans

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Q19.

Pre-tax cost of debt is 10% and tax rate is 30%. After-tax cost of debt is:

A) 3%
B) 7%
C) 10%
D) 13%

Answer:

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Q20.

Debt represents 40% of capital and has an after-tax cost of 6%. Equity represents 60% and costs 12%. WACC is:

A) 7.2%
B) 8.4%
C) 9.6%
D) 10.8%

Answer: 

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Q21.

A company issues new shares directly to investors. This transaction occurs in the:

A) Secondary market
B) Primary market
C) Foreign exchange market
D) Derivatives market

Answer:

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Q22.

Which market primarily involves previously issued securities being traded among investors?

A) Primary
B) Secondary
C) IPO
D) Capital budgeting

Ans

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Q23.

A company has EBIT of $300,000 and interest expense of $100,000. DFL is:

A) 1.0
B) 1.5
C) 2.0
D) 3.0

Answer: 

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Q24.

DOL is 2 and DFL is 1.5. Degree of total leverage equals:

A) 1.33
B) 2.5
C) 3.0
D) 3.5

Answer: 

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Q25.

If DTL is 4 and sales increase by 8%, earnings available to shareholders will approximately change by:

A) 2%
B) 8%
C) 16%
D) 32%

Answer: 

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Q26.

A stock just paid a dividend of $3.00. Growth is expected at 4%, and required return is 10%. Current price is:

A) $30.00
B) $45.00
C) $52.00
D) $52.00?

Answer: 

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Q27.

If a company's beta decreases from 1.5 to 0.9, holding other CAPM factors constant, its required return will generally:

A) Increase
B) Decrease
C) Remain exactly the same
D) Become zero

Answer: 

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Q28.

Which source of financing normally represents an ownership claim?

A) Bonds
B) Bank loan
C) Common stock
D) Accounts payable

Answer: 

Q29.

Financial leverage primarily arises from:

A) Fixed operating costs
B) Fixed financing costs
C) Variable manufacturing costs
D) Inventory turnover

Answer:

Q30.

Operating leverage primarily arises because of:

A) Fixed operating costs
B) Interest expense
C) Dividends
D) Taxes only

Answer:

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SECTION C — BUSINESS DECISION ANALYSIS

Q31.

A company receives a special order for 10,000 units at $28. Variable cost is $20 and there is idle capacity. Incremental profit is:

A) $20,000
B) $50,000
C) $80,000
D) $280,000

Answer:

.

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Q32.

A special order price is $30. Variable cost is $22 and avoidable fixed costs are $20,000 for 5,000 units. Incremental profit is:

A) $20,000
B) $30,000
C) $40,000
D) $50,000

Answer:

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Q33.

Which cost is generally irrelevant when deciding whether to accept a special order?

A) Incremental variable cost
B) Incremental fixed cost
C) Opportunity cost
D) Existing unavoidable fixed cost

Answer: 

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Q34.

A company must choose between making a component for $14 variable cost plus $3 avoidable fixed cost or buying it for $18. What should it do?

A) Make, because relevant cost is $17
B) Buy, because relevant cost is $18
C) Make, because fixed costs never matter
D) Buy, because variable costs are irrelevant

Answer: 

Q35.

If a scarce machine-hour can generate $12 contribution from Product A and $9 from Product B, which product should receive the scarce resource?

A) Product A
B) Product B
C) Both equally
D) Neither

Answer:

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Q36.

A product sells for $50 and has variable cost of $30. Contribution margin ratio is:

A) 20%
B) 30%
C) 40%
D) 60%

Answer:

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Q37.

Fixed costs are $150,000 and contribution margin per unit is $25. Break-even volume is:

A) 4,000
B) 5,000
C) 6,000
D) 7,500

Answer:

.

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Q38.

Selling price is $80, variable cost is $50, and fixed costs are $240,000. Break-even sales dollars are:

A) $480,000
B) $640,000
C) $800,000
D) $960,000

Answer: 

Q39.

Actual sales are $900,000 and break-even sales are $720,000. Margin of safety percentage is:

A) 10%
B) 20%
C) 25%
D) 80%

Answer: 

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Q40.

Fixed costs are $100,000, desired profit is $50,000, and CM ratio is 30%. Required sales are:

A) $333,333
B) $400,000
C) $500,000
D) $600,000

Answer:

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Q41.

Product A has CM of $10 and Product B has CM of $20. If the expected sales mix is 3A:2B, weighted-average CM per unit is:

A) $12
B) $14
C) $16
D) $18

Answer:.

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Q42.

A company has contribution margin of $400,000 and EBIT of $100,000. DOL is:

A) 2
B) 3
C) 4
D) 5

Ans

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Q43.

If DOL = 4 and sales decline by 5%, EBIT will approximately:

A) Increase 20%
B) Decrease 5%
C) Decrease 20%
D) Decrease 25%

Ans

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Q44.

A product sells for $20 and variable cost is $12. Fixed costs are $80,000. How many units are needed for a $40,000 target profit?

A) 5,000
B) 10,000
C) 15,000
D) 20,000

Ans

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Q45.

A joint product sells for $15 at split-off and $22 after further processing. Additional processing cost is $5. The incremental benefit of further processing is:

A) $2
B) $5
C) $7
D) $12

Answer: 

Q46.

When deciding whether to sell a joint product at split-off or process it further, joint costs incurred before split-off are generally:

A) Relevant
B) Avoidable
C) Sunk/irrelevant
D) Opportunity costs

Ans

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Q47.

A segment generates $100,000 contribution margin and has $70,000 avoidable fixed costs. If dropped, the company will:

A) Gain $30,000
B) Lose $30,000
C) Break even
D) Gain $70,000

Answer: 

Q48.

Opportunity cost is best described as:

A) Historical cost
B) Cost that never changes
C) Benefit sacrificed by choosing one alternative over another
D) Depreciation expense

Answer: 

Q49.

A company has idle capacity and receives a special order. Which factor becomes especially important if accepting the order prevents another profitable use of capacity?

A) Sunk cost
B) Opportunity cost
C) Historical cost
D) Book value

Answer: 

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Q50.

Which decision should generally be based on incremental cash flows rather than allocated accounting costs?

A) Special-order decision
B) Make-or-buy decision
C) Product discontinuation decision
D) All of the above

Answer: 

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SECTION D — ENTERPRISE RISK MANAGEMENT

Q51.

A company refuses to enter a market because the associated risk exceeds its acceptable level. This is:

A) Risk acceptance
B) Risk avoidance
C) Risk sharing
D) Risk retention

Answer: 

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Q52.

Purchasing insurance is primarily an example of:

A) Avoidance
B) Transfer/share
C) Acceptance
D) Exploitation

Answer:

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Q53.

Installing additional controls to reduce the probability of fraud represents:

A) Risk reduction
B) Risk acceptance
C) Risk avoidance
D) Risk elimination in every case

Answer: 

Q54.

Risk appetite refers to:

A) Every risk an organization faces
B) The amount/type of risk an organization is willing to pursue
C) The amount of cash held
D) The probability of fraud

Answer: 

Q55.

Risk tolerance generally represents:

A) The complete elimination of risk
B) Acceptable variation around objectives
C) Market capitalization
D) Debt capacity only

Answer: 

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Q56.

Failure of an employee to follow an established processing procedure is primarily:

A) Strategic risk
B) Operational risk
C) Market risk
D) Currency risk

Answer:

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Q57.

A sudden change in foreign exchange rates primarily creates:

A) Currency/market risk
B) Operational risk
C) Compliance risk only
D) Reputation risk only

Answer: 

Q58.

Regulatory penalties resulting from failure to comply with laws represent:

A) Compliance risk
B) Liquidity risk
C) Inventory risk
D) Production risk

Answer: 

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Q59.

A risk register is primarily used to:

A) Calculate EPS
B) Identify and track risks and responses
C) Calculate depreciation
D) Prepare tax returns

Answer: 

Q60.

Capital Adequacy Ratio is calculated as:

A) Assets ÷ Equity
B) Regulatory Capital ÷ Risk-Weighted Assets
C) Debt ÷ Sales
D) Equity ÷ Net Income

Answer: 

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Q61.

Regulatory capital is $120 million and RWA is $1.2 billion. CAR equals:

A) 5%
B) 8%
C) 10%
D) 12%

Answer: 

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Q62.

The fraud triangle consists of:

A) Pressure, opportunity and rationalization
B) Fraud, risk and control
C) Incentive, liquidity and leverage
D) Opportunity, control and monitoring

Answer:

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Q63.

Which factor represents a financial or personal motivation that may encourage fraud?

A) Opportunity
B) Pressure/incentive
C) Rationalization
D) Monitoring

Answer:

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Q64.

An employee believes, "I am only borrowing the money and will return it." This is an example of:

A) Opportunity
B) Pressure
C) Rationalization
D) Control activity

Answer:

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Q65.

Weak segregation of duties primarily increases:

A) Opportunity for fraud
B) Market capitalization
C) Gross margin
D) Dividend yield

Answer: 

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SECTION E — CAPITAL INVESTMENT DECISIONS

Q66.

Initial investment is $200,000 and annual cash inflow is $50,000. Payback period is:

A) 2 years
B) 3 years
C) 4 years
D) 5 years

Answ

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Q67.

Which capital-budgeting method explicitly incorporates the time value of money?

A) Basic payback
B) Accounting rate of return
C) NPV
D) Simple break-even

Answer: 

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Q68.

A project has an NPV of +$50,000. Assuming the cash-flow estimates and discount rate are appropriate, this means:

A) The project earns less than the required return
B) The project adds value relative to the required return
C) The project has no cash inflows
D) IRR must be zero

Ans

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Q69.

If NPV = $0, the project:

A) Earns exactly the required return
B) Has no cash flows
C) Must be rejected
D) Has an IRR of zero

Answer:

Q70.

A project has IRR of 14% and required return of 10%. Under the conventional accept/reject rule, the project should be:

A) Accepted
B) Rejected
C) Deferred automatically
D) Accepted only if NPV is negative

Answer:

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Q71.

A project costs $300,000 and generates $100,000 annually for three years. Ignoring time value, payback is:

A) 2 years
B) 3 years
C) 4 years
D) 5 years

Ans

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Q72.

A major limitation of basic payback is that it:

A) Uses discounted cash flows
B) Ignores cash flows after payback
C) Always produces negative NPV
D) Measures shareholder value directly

Answer: 

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Q73.

Sensitivity analysis generally:

A) Changes many variables simultaneously
B) Changes one key variable while holding others constant
C) Eliminates uncertainty
D) Calculates only accounting profit

Ans

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Q74.

Scenario analysis generally evaluates:

A) Only one variable
B) Complete combinations of assumptions under different scenarios
C) Historical costs only
D) Depreciation only

Answer: 

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Q75.

Monte Carlo simulation is useful because it:

A) Eliminates all risk
B) Models numerous possible outcomes using probability distributions
C) Ignores uncertainty
D) Uses only historical costs

Answer:

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Q76.

Outcomes are $50,000 with probability 20% and $100,000 with probability 80%. Expected value equals:

A) $60,000
B) $70,000
C) $80,000
D) $90,000

Answer:

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Q77.

Which cash flow should generally be included in capital budgeting?

A) Sunk cost
B) Opportunity cost
C) Historical cost
D) Past research expense

Answer:

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Q78.

Which is generally excluded from a capital-budgeting analysis?

A) Incremental operating cash flow
B) After-tax salvage value
C) Sunk cost
D) Working-capital investment

Answer:

Q79.

Working capital required at the beginning of a project is generally:

A) Ignored
B) Included as an investment cash outflow
C) Always treated as revenue
D) Added to depreciation

Answer: .

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Q80.

At the end of a project, recovered working capital is generally treated as:

A) Cash inflow
B) Operating expense
C) Sunk cost
D) Depreciation

Answer:

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SECTION F — PROFESSIONAL ETHICS

IMA's current ethics statement identifies four standards: Competence, Confidentiality, Integrity and Credibility. It also emphasizes honesty, fairness, objectivity and responsibility.

Q81.

Which IMA standard requires members to maintain professional knowledge and skills?

A) Competence
B) Confidentiality
C) Integrity
D) Credibility

Answer: 

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Q82.

Which standard requires confidential information to be protected except when disclosure is authorized or legally required?

A) Competence
B) Confidentiality
C) Integrity
D) Credibility

Answer:

Q83.

"Communicate information fairly and objectively" belongs to:

A) Competence
B) Confidentiality
C) Integrity
D) Credibility

Answer:

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Q84.

A CMA deliberately hides a conflict of interest. Which standard is most directly involved?

A) Competence
B) Confidentiality
C) Integrity
D) Credibility

Answer:

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Q85.

Which is NOT one of the four IMA standards?

A) Competence
B) Confidentiality
C) Independence
D) Credibility

Answer:

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Q86.

A CMA provides inaccurate information because management wants a favorable result. This primarily violates:

A) Competence and/or Credibility
B) Confidentiality only
C) Inventory policy
D) Capital structure policy

Answer:

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Q87.

A CMA is asked to manipulate earnings. The first appropriate action is generally to:

A) Contact the media
B) Follow organizational policies and discuss the issue with the appropriate person
C) Immediately resign
D) Post the issue online

Answer:

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Q88.

If an immediate supervisor is involved in the unethical conduct, the CMA should generally:

A) Stop all work immediately
B) Escalate the matter to the next appropriate level
C) Destroy the records
D) Ignore the matter

Answer: 

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Q89.

Using confidential company information for personal financial gain violates:

A) Competence
B) Confidentiality
C) Credibility only
D) Cost behavior

Ans

Q90.

Which ethical principle is NOT one of IMA's overarching principles?

A) Honesty
B) Fairness
C) Objectivity
D) Profit maximization

Answer:

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SECTION G — INTEGRATED / CBQ-STYLE MCQs

Q91.

A company receives an order for 8,000 units at $24 each. Variable cost is $15. The order requires $20,000 additional fixed cost. There is idle capacity. Net benefit is:

A) $52,000
B) $72,000
C) $92,000
D) $120,000

Answer:.

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Q92.

A project requires $400,000 and produces annual cash flows of $120,000 for five years. PV annuity factor is 3.791. At the required return, NPV equals:

A) $54,920
B) $120,000
C) $454,920
D) $854,920

Answer:

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Q93.

A company has fixed costs of $180,000, selling price of $60 and variable cost of $36. What is the break-even volume?

A) 5,000
B) 7,500
C) 8,000
D) 10,000

Answer: 

Q94.

Using Q93, if actual sales are 10,000 units, the margin of safety is:

A) 1,500 units
B) 2,000 units
C) 2,500 units
D) 3,500 units

Answe

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Q95.

A company has EBIT of $500,000, interest of $100,000 and sales increase by 10%. DFL is:

A) 1.00
B) 1.25
C) 1.50
D) 2.00

Ans

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Q96.

If DOL is 3 and DFL is 1.25, DTL equals:

A) 2.40
B) 3.00
C) 3.75
D) 4.25

Answer

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Q97.

If DTL = 3.75 and sales increase by 10%, earnings available to shareholders will approximately increase by:

A) 3.75%
B) 10%
C) 27.5%
D) 37.5%

Answer: 

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Q98.

A company is considering abandoning a project that has a current salvage value of $80,000. The ability to exit the project represents:

A) Option to expand
B) Option to delay
C) Option to abandon
D) Option to switch

Answer: 

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Q99.

A company has two projects:

• Project A: NPV = $80,000
• Project B: NPV = $50,000

If the projects are mutually exclusive and all other relevant assumptions are satisfied, the NPV method indicates that:

A) Project A has greater calculated value contribution
B) Project B has greater calculated value contribution
C) Both have zero NPV
D) Neither can be evaluated using NPV

Answer: 

Q100.

A CMA faces an ethical dilemma involving questionable financial reporting. Which sequence is most consistent with IMA ethical-resolution guidance?

A) Media → social media → resignation
B) Ignore → wait → resign
C) Follow organizational policies → discuss with appropriate personnel → escalate when necessary
D) Immediately contact competitors

Answer: 

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QUICK ANSWER KEY

Q	Ans	Q	Ans	Q	Ans	Q	Ans
1	C	26	C	51	B	76	D
2	B	27	B	52	B	77	B
3	C	28	C	53	A	78	C
4	C	29	B	54	B	79	B
5	C	30	A	55	B	80	A
6	C	31	C	56	B	81	A
7	C	32	A	57	A	82	B
8	B	33	D	58	A	83	D
9	C	34	A	59	B	84	C
10	C	35	A	60	B	85	C
11	C	36	C	61	C	86	A
12	B	37	C	62	A	87	B
13	B	38	B	63	B	88	B
14	B	39	B	64	C	89	B
15	B	40	C	65	A	90	D
16	C	41	B	66	C	91	A
17	C	42	C	67	C	92	A
18	B	43	C	68	B	93	B
19	B	44	C	69	A	94	C
20	C	45	A	70	A	95	B
21	B	46	C	71	B	96	C
22	B	47	B	72	B	97	D
23	B	48	C	73	B	98	C
24	C	49	B	74	B	99	A
25	C	50	D	75	B	100	C

Key CMA Part 2 habit

Before calculating, ask: "What is the decision? Which information will change because of this decision?"

This is particularly important for special orders, make-or-buy, segment elimination, further processing, scarce resources and capital budgeting.

GMSiSuccess CMA Champions — practice the calculation, but more importantly, practice the interpretation. 🏆

— Prof. Mahaley, Head – GMSiSuccess Mumbai