US CMA Part 2 emphasizes strategic financial management, with Decision Analysis at 25% weightage, making MCQ practice essential for your exam prep.These 100 original, exam-style MCQs cover all specified topics proportionally, for self-study; focus on calculations and key terms like NPV, WACC, and IMA ethics.
## Financial Statement Analysis (20 MCQs)
1. Common-size income statements express all line items as a percentage of:
a) Total assets
b) Net sales
c) Equity
d) Total liabilities
**Answer: mixed MCQ questions CMA Part 2
2. A current ratio of 2.5 indicates:
a) High liquidity risk
b) $2.50 current assets per $1 current liability
c) Poor profitability
d) High leverage
**Answer
3. Debt-to-equity ratio increases when:
a) Assets increase
b) Debt increases relative to equity
c) Profits rise
d) Inventory turns faster
**Answer:
4. Inventory turnover = 8 means average inventory held for:
a) 45.625 days
b) 8 days
c) 365/8 = 45.625 days
d) 8 times sales
**Answer:
5. ROE = 15%, ROA = 10%, equity multiplier = ?
a) 0.67
b) 1.5
c) 2.0
d) 1.0
**Answer:
6. Earnings quality is high when:
a) High accruals vs. cash flows
b) Sustainable core earnings
c) Frequent one-time gains
d) Aggressive revenue recognition
**Answer:
7. Profit margin = Net income / Sales; if sales $1M, NI $150K:
a) 15%
b) 6.67%
c) 1.5%
d) 150%
**Answer:
8. Quick ratio excludes:
a) Cash
b) Receivables
c) Inventory
d) Payables
**Answer:
9. Vertical analysis is:
a) Year-over-year
b) % of base (e.g., sales)
c) Trend over 5 years
d) Peer comparison
**Answer:
10. Interest coverage = EBIT / Interest; EBIT $500K, Int $100K:
a) 5x
b) 50%
c) $400K
d) 20%
**Answer:
11. Asset turnover ratio improves with:
a) Higher sales / assets
b) More debt
c) Lower profits
d) Slower collections
**Answer:
12. Earnings persistence suggests:
a) Volatile one-offs
b) Predictable future earnings
c) High manipulation
d) Declining trends
Answer
13. Price/Earnings ratio high implies:
a) Undervalued
b) High growth expectations
c) Poor liquidity
d) High debt
**Answer:
14. DuPont analysis decomposes ROE into:
a) Profit margin × Turnover × Leverage
b) Liquidity × Activity
c) Current × Quick
d) Debt × Equity
**Answer:
15. Trend analysis uses:
a) Base year = 100%
b) Absolute $
c) Ratios only
d) Common-size only
**Answer:
16. Gross profit margin ignores:
a) COGS
b) Operating expenses
c) Sales
d) Taxes
**Answer:
17. Times interest earned low signals:
a) Leverage risk
b) High profitability
c) Fast growth
d) Low assets
**Answer:
18. Receivables turnover = Sales / Avg AR; improves with:
a) Faster collections
b) More credit sales
c) Higher bad debts
d) Slower payments
**Answer:
19. Operating margin focuses on:
a) Core operations
b) Net income
c) Interest/taxes
d) Non-operating
**Answer:
20. Red flags for earnings quality:
a) Consistent cash flows
b) Rising receivables
c) Stable margins
d) Low accruals
**Answer:
## Corporate Finance (20 MCQs)
21. Risk-return tradeoff means higher risk demands:
a) Lower return
b) Higher expected return
c) No return
d) Fixed return
**Answer:
22. Beta = 1.2 means stock risk is:
a) Market average
b) 20% above market
c) Risk-free
d) Negative
**Answer:
23. WACC = (E/V × Re) + (D/V × Rd × (1-T)); purpose:
a) Hurdle rate for projects
b) Dividend payout
c) Short-term debt cost
d) Equity only
**Answer
24. Optimal capital structure minimizes:
a) WACC
b) Debt
c) Equity
d) Taxes
**Answer:
25. Dividend policy irrelevant per Modigliani-Miller if:
a) No taxes/perfect markets
b) High growth
c) Retained earnings only
d) High payout
**Answer
26. CAPM: Re = Rf + β(Rm - Rf); if Rf=4%, β=1, Rm=10%:
a) 10%
b) 4%
c) 6%
d) 14%
**Answer:
27. Cost of debt is:
a) After-tax yield
b) Pre-tax coupon
c) Equity dividend
d) Preferred yield
**Answer:
28. Leverage increases:
a) ROE volatility
b) Low risk
c) Stable EPS
d) High liquidity
**Answer
29. Residual dividend policy:
a) Pay after capex
b) Fixed % payout
c) Stable dollar
d) No dividends
**Answer:
30. Pecking order theory prefers:
a) Internal funds first
b) Debt then equity
c) Equity first
d) Dividends
**Answer:
31. Cost of preferred stock:
a) Dp / P
b) After-tax
c) Growth adjusted
d) Rd(1-T)
**Answer:
32. High debt signals:
a) Tax advantages
b) Agency costs
c) Both a and b
d) Low WACC always
**Answer:
33. Gordon growth model: P = D1 / (Re - g)
a) Dividend discount
b) For constant growth
c) Zero growth
d) High g > Re
**Answer:
34. Market risk premium is:
a) Rm - Rf
b) Beta
c) WACC
d) Rf
**Answer:
35. Static tradeoff theory balances:
a) Tax shield vs. distress costs
b) Dividends vs. retention
c) Equity vs. preferred
d) Short vs. long debt
**Answer:
36. Retained earnings breakpoint = RE / (E/V)
a) Funds before new equity
b) Dividend limit
c) Debt capacity
d) WACC change
**Answer:
37. Bird-in-hand theory favors:
a) High dividends
b) Retention
c) Debt
d) Repurchase
**Answer:
38. Unsystematic risk is:
a) Diversifiable
b) Market-wide
c) Beta-measured
d) CAPM ignored
**Answer:
39. Target capital structure:
a) Book or market weights
b) Optimal D/E
c) Historical
d) Current only
**Answer:
40. Signaling theory: Dividends signal:
a) Good prospects
b) Poor cash
c) High risk
d) Leverage
**Answer:
## Decision Analysis (25 MCQs)
41. BEP (units) = Fixed costs / CM per unit
Fixed $100K, CM $20:
a) 5,000
b) $100K
c) 20%
d) $2M
**Answer:
42. CM ratio 40%, fixed $200K, target profit $50K sales?
a) $625K
b) $500K
c) $250K
d) $200K
**Answer:
43. Special order: Incremental revenue > incremental cost?
a) Accept
b) Reject
c) Ignore fixed
d) Full cost
**Answer:
44. Make-or-buy: Buy if buy price <
a) Variable + opportunity
b) Full absorption
c) Fixed only
d) Sunk
**Answer:
45. Sell or process further if extra CM > extra costs:
a) Yes
b) No
c) Joint costs matter
d) Always sell
**Answer:
46. Limiting factor: Rank by CM per
a) Scarce resource
b) Sales price
c) Volume
d) Fixed costs
**Answer:
47. Shutdown if CM <
a) Avoidable fixed + penalty
b) All fixed
c) Variable only
d) Contribution zero
**Answer:
48. Price elasticity >1:
a) Elastic, revenue rises with price cut
b) Inelastic
c) Unitary
d) Zero
**Answer:
49. Target costing: Cost =
a) Target price - required margin
b) Historical + inflation
c) Competitor +10%
d) Full cost
**Answer:
50. Relevant costs exclude:
a) Sunk costs
b) Future cash flows
c) Opportunity costs
d) Avoidable fixed
**Answer:
51. Multiproduct BEP weights by:
a) Sales mix CM
b) Units only
c) Fixed allocation
d) Price
**Answer:
52. Margin of safety = Actual - BEP:
a) Profit buffer
b) Fixed costs
c) CM
d) Variable
**Answer:
53. Transfer pricing minimum:
a) Variable + opportunity
b) Market
c) Full cost
d) Zero
**Answer:
54. Product mix: 2 products, constraint 10 hrs, CM/hr P1 $20, P2 $15: Max profit?
a) All P1: $200
b) Mix
c) All P2
d) Equal
**Answer:
55. Idle capacity special order: Accept if price >
a) Variable cost
b) Full cost
c) Fixed
d) Market
**Answer:
56. Life-cycle pricing considers:
a) Total costs over cycle
b) Intro only
c) Maturity
d) Decline
**Answer:
57. Contribution drops 10%: BEP
a) Rises
b) Falls
c) Same
d) Zero
**Answer:
58. Outsourcing decision ignores:
a) Allocated overhead
b) Direct variable
c) Opportunity
d) Avoidable fixed
**Answer:
59. Market-based pricing:
a) Competitor prices
b) Cost-plus
c) Value
d) Marginal
**Answer:
60. Degree of operating leverage high when:
a) High fixed / low variable
b) Low fixed
c) Zero fixed
d) High sales
**Answer
61. Joint product at split-off:
a) Ignore prior costs
b) Allocate
c) Full absorption
d) Variable only
**Answer:
62. Capacity full special order: Reject if price <
a) VC + lost CM
b) VC only
63. Cost-plus pricing risks:
a) Overpricing
b) Ignores demand
c) Both
d) Underdemand
**Answer:
64. BEP sales $500K, CMR 25%: Fixed costs?
a) $125K
b) $2M
c) $375K
d) $100K
**Answer:
65. Relevant revenue in decisions:
a) Incremental only
b) Total sales
c) Historical
d) Projected absolute
**Answer:
## Risk Management (10 MCQs)
66. ERM integrates:
a) Strategy, operations, reporting
b) Finance only
c) Audit silo
d) External only
**Answer:
67. Financial risk includes:
a) Credit, liquidity, market
b) Strategic only
c) Operational
d) Compliance
**Answer:
68. Hedging uses:
a) Derivatives to offset
b) Insurance only
c) Diversification
d) Avoidance
**Answer:
69. Risk appetite is:
a) Acceptable level
b) Zero tolerance
c) High exposure
d) Post-event
**Answer:
70. Operational risk mitigation:
a) Controls, training
b) Debt reduction
c) Hedging
d) Diversify markets
**Answer:
71. Heat map plots:
a) Probability vs. impact
b) Cost vs. time
c) Revenue vs. risk
d) Units vs. price
**Answer:
72. Risk transfer:
a) Insurance/outsourcing
b) Accept
c) Avoid
d) Share internally
**Answer:
73. VaR measures:
a) Potential loss at confidence level
b) Average loss
c) Max loss
d) Probability only
**Answer:
74. Business continuity plans address:
a) Disruptions
b) Financial only
c) Strategic
d) Compliance
**Answer:
75. Risk response: Exploit for opportunities:
a) Pursue positive risks
b) Mitigate threats
c) Accept
d) Avoid
**Answer:
## Investment Decisions (10 MCQs)
76. NPV >0:
a) Accept
b) Reject
c) IRR irrelevant
d) Payback first
**Answer
77. IRR is discount rate where NPV=
a) 0
b) Positive
c) Negative
d) 1
**Answer:
78. Payback ignores:
a) Time value
b) Cash flows post-period
c) Both
d) Initial outlay
**Answer:
79. Ranking conflict NPV vs. IRR due to:
a) Size/timing differences
b) Same size
c) No TVM
d) Equal CF
**Answer:
80. Capital budgeting steps: Identify, estimate, select, monitor
a) Post-audit
b) All
c) Pre only
d) NPV only
**Answer:
81. Equivalent annual annuity for unequal lives:
a) NPV / annuity factor
b) IRR
c) Payback
d) PI
**Answer:
82. PI >1: Accept if
a) Independent
b) Capital rationed
c) Both
d) Reject
**Answer:
83. Inflation in cash flows: Use
a) Nominal rate/nominal CF
b) Real/real
c) Mix
d) Ignore
**Answer:
84. Tax shield on depreciation:
a) Increases NPV
b) After-tax CF
c) Ignore
d) Pre-tax
**Answer
85. Multiple IRRs from:
a) Non-conventional CF
b) Conventional
c) Positive only
d) Zero NPV
**Answer:
## Professional Ethics (15 MCQs)
86. IMA standards: Competence requires:
a) Maintain skills
b) Disclose all
c) Confidentiality always
d) Independence
**Answer:
87. Ethical dilemma resolution:
a) Follow IMA steps: discuss, consult, document
b) Ignore if minor
c) Report externally first
d) Resign immediately
**Answer:
88. Confidentiality exception:
a) Legal requirement
b) Personal gain
c) Colleague ask
d) Always hold
**Answer:
89. Corporate governance ensures:
a) Accountability, transparency
b) Max profit only
c) Short-term
d) No board
**Answer
90. Integrity: Mitigate conflicts via:
a) Disclosure
b) Participation
c) Conceal
d) Accept gifts
**Answer:
91. Credibility: Communicate fairly, objectively:
a) Yes
b) Biased
c) Omit unfavorable
d) Exaggerate
**Answer:
92. Business ethics philosophies: Utilitarianism
a) Greatest good for most
b) Rules absolute
c) Duties
d) Virtues
**Answer:
93. Sarbanes-Oxley requires for public firms:
a) CEO/CFO certify financials
b) No ethics code
c) Audit rotation optional
d) Off-balance ok
**Answer:
94. Whistleblower protection under:
a) SOX
b) IMA only
c) Ignore retaliation
d) Internal only
**Answer:
95. Objectivity compromised by:
a) Bias, undue influence
b) Competence
c) Confidentiality
d) Responsibility
**Answer:
96. Ethical decision framework: Identify, evaluate alternatives, act
a) IMA/NACVA
b) Profit first
c) Peer vote
d)Delay
Answer:
97. Corporate governance best practice:
a) Independent board
b) CEO duality always
c) No audit committee
d) Insider trading ok
**Answer:
98. Competence violation:
a) Outdated knowledge
b) Disclose limits
c) Both ok
d) Delegate all
**Answer:
99. Honesty principle:
a) Truthful actions
b) Fairness only
c) Objectivity
d) Responsibility
**Answer:
100. Resolution if superior pressure:
a) Escalate, document, counsel
b) Comply
c) Resign quietly
d) Conceal
**Answer:
