🔥 GMSiSUCCESS — US CMA PART 2
Strategic Financial Management — Exam Summary & Short Notes plus 100 MCQ Questions ⁉️ with answers .
September/October 2026 & Beyond
1. EXAM PATTERN — MUST KNOW
- Total exam time: 4 hours.
- MCQs: 100 questions — 3 hours.
- CBQs: 2 case-based question sets — 1 hour total.
- Approximately 30 minutes per CBQ set.
- For the current English exam format, candidates must obtain at least 50% of the available points in the MCQ section to proceed to the CBQ section.
- Once the MCQ section is exited, it cannot be revisited.
- From September/October 2026 onward, CBQs are the standard format for English CMA exams in most regions; essays are no longer offered in those exams.
- IMA states that the content and difficulty expectations remain the same; CBQs change the assessment format rather than the underlying syllabus.
Official Part 2 Weightage
- Section A — Financial Statement Analysis: 20%
- Section B — Corporate Finance: 20%
- Section C — Business Decision Analysis: 25%
- Section D — Enterprise Risk Management: 10%
- Section E — Capital Investment Decisions: 10%
- Section F — Professional Ethics: 15%
Exam Mindset
- Do not assume that one particular topic will definitely appear in a particular quantity.
- IMA publishes section weightings, not guaranteed question-by-question distributions.
- Prepare for:
- Calculation
- Interpretation
- Application
- Short business scenarios
- Multi-step calculations
- Ethical judgment
- Data interpretation
- CBQ-style integrated cases.
2. SECTION C — BUSINESS DECISION ANALYSIS
⭐ Official Weight: 25%
A. Special Order Decision
- Accept a special order when:
- There is idle capacity, and
- Incremental revenue > incremental relevant cost.
- Fixed costs that do not change are irrelevant.
- If capacity is limited:
- Consider opportunity cost.
- Formula:
- Incremental Profit = Incremental Revenue − Incremental Costs.
- Positive incremental profit → financially acceptable, assuming no qualitative problem.
Exam Trap
- Do NOT automatically include:
- Allocated fixed overhead
- Historical costs
- Sunk costs.
- Ask:
- "Will this cost change because of the decision?"
Example
- Special order price = $25
- Variable cost = $18
- Idle capacity exists.
- Contribution = $7.
- If fixed costs remain unchanged:
- Accept financially, because incremental contribution is positive.
3. MAKE-OR-BUY DECISION
- Compare:
- Relevant cost of making
- Purchase price.
- Include:
- Avoidable variable costs
- Avoidable fixed costs
- Opportunity cost.
- Exclude:
- Unavoidable fixed costs
- Sunk costs.
Key Formula
- Relevant Cost of Making =
- Variable Costs
- Avoidable Fixed Costs
- Opportunity Cost.
Decision
- Make if:
- Relevant cost of making < purchase price.
- Buy if:
- Purchase price < relevant cost of making.
KEYWORD
- "Avoidable" = relevant
- "Unavoidable" = irrelevant
- "Opportunity cost" = relevant
4. SELL OR PROCESS FURTHER
- Joint costs incurred before split-off are generally sunk/irrelevant to the sell/process-further decision.
- Compare:
- Incremental revenue from further processing
- Incremental processing cost.
Formula
- Incremental Profit = Additional Revenue − Additional Processing Cost.
Example
- Sell at split-off = $10.
- Process further selling price = $15.
- Additional processing cost = $4.
- Additional revenue = $5.
- Incremental profit = $1.
- Process further.
Remember
- Split-off cost → generally irrelevant.
- Future incremental cost → relevant.
5. KEEP OR DROP A SEGMENT
- Dropping a segment eliminates:
- Avoidable costs.
- But dropping the segment also eliminates:
- Contribution margin.
- Decision rule:
Drop if: Avoidable Costs Saved > Contribution Margin Lost
- If unavoidable fixed costs remain:
- They should NOT be treated as savings.
Important
- Qualitative factors may include:
- Customer relationships
- Employee morale
- Strategic importance
- Cross-selling
- Brand impact.
6. CVP ANALYSIS — HIGH PRIORITY
Core Formulas
-
Contribution Margin/unit =
- Selling Price − Variable Cost/unit.
-
Contribution Margin Ratio =
- Contribution Margin / Sales.
-
Break-even units =
- Fixed Costs / CM per unit.
-
Break-even sales =
- Fixed Costs / CM Ratio.
-
Target-profit units =
- (Fixed Costs + Target Profit) / CM per unit.
-
Target-profit sales =
- (Fixed Costs + Target Profit) / CM Ratio.
-
Margin of Safety =
- Actual Sales − Break-even Sales.
-
Margin of Safety % =
- (Actual Sales − BE Sales) / Actual Sales.
Operating Leverage
-
DOL =
- Contribution Margin / EBIT.
-
% Change in EBIT =
- DOL × % Change in Sales.
Example
- DOL = 3.
- Sales increase = 10%.
- EBIT approximately increases by:
- 30%.
7. SALES MIX
- Multiple products require:
- Weighted-average contribution margin.
- Maintain the assumed sales mix.
- Calculate:
- Weighted-average CM/unit.
- Then:
- BE units = Fixed Costs / Weighted-average CM.
Exam Trap
- A change in sales mix can change:
- Overall CM
- Break-even point
- Profitability.
8. CONTRIBUTION MARGIN
- CM = Sales − Variable Costs.
- CM is used to:
- Cover fixed costs
- Then generate profit.
- Higher CM generally means:
- More contribution toward fixed costs and profit.
Important Distinction
- Gross Profit = Sales − COGS
- Contribution Margin = Sales − Variable Costs
Do not confuse the two.
9. SUSTAINABLE GROWTH RATE
Formula
-
SGR =
- ROE × Retention Ratio.
-
Retention Ratio =
- 1 − Dividend Payout Ratio.
-
Dividend Payout Ratio =
- Dividends / Net Income.
Therefore
- Higher retention → potentially higher sustainable growth.
- Higher dividend payout → lower retention → lower SGR, all else equal.
10. SECTION F — PROFESSIONAL ETHICS
⭐ Official Weight: 15%
IMA Standards of Ethical Conduct
Competence
- Maintain professional competence.
- Follow applicable laws, regulations and technical standards.
- Provide accurate, clear, concise and timely information.
Confidentiality
- Keep information confidential.
- Do not disclose without authorization unless legally required.
- Do not use confidential information for unethical or illegal advantage.
Integrity
- Avoid conflicts of interest.
- Avoid activities that prejudice ethical performance.
- Refuse gifts or favors that could influence judgment.
- Communicate objectively.
Credibility
- Communicate information fairly and objectively.
- Disclose relevant information.
- Report deficiencies in information or processes when appropriate.
11. ETHICAL ISSUE RESOLUTION
When an ethical problem occurs:
- Follow organizational policies.
- Discuss the matter with immediate supervisor if appropriate.
- If supervisor is involved:
- Escalate to the next level.
- Seek objective advice where appropriate.
- Consult legal/ethical resources when necessary.
- Consider resignation only when the issue cannot otherwise be resolved.
Exam Trap
- Do NOT immediately resign.
- First use appropriate internal and professional channels.
- Maintain confidentiality.
- Document relevant facts.
12. FRAUD TRIANGLE
Three elements:
- Pressure/Incentive
- Opportunity
- Rationalization
Examples
-
Pressure:
- Debt
- Financial problems
- Performance targets.
-
Opportunity:
- Weak controls
- Lack of supervision
- Excessive system access.
-
Rationalization:
- "I am only borrowing it."
- "The company owes me."
Asset Misappropriation
Examples:
- Cash theft
- Fake vendors
- Payroll fraud
- Inventory theft
- Unauthorized payments.
13. COSO — INTERNAL CONTROL FOUNDATION
Five components:
- Control Environment
- Risk Assessment
- Control Activities
- Information & Communication
- Monitoring Activities
Easy Memory
C-R-C-I-M
Examples
- Control Environment:
- Tone at the top.
- Risk Assessment:
- Identify and assess risks.
- Control Activities:
- Approvals, segregation of duties, reconciliations.
- Information & Communication:
- Relevant information reaches the right people.
- Monitoring:
- Evaluate whether controls continue to operate effectively.
14. CORPORATE SOCIAL RESPONSIBILITY
Consider:
- Shareholders
- Employees
- Customers
- Suppliers
- Community
- Environment
- Regulators.
Exam Approach
When a scenario presents a conflict:
- Identify stakeholders.
- Identify ethical/legal responsibilities.
- Consider long-term consequences.
- Do not evaluate a decision solely on short-term profit.
15. SECTION A — FINANCIAL STATEMENT ANALYSIS
⭐ Official Weight: 20%
Comparative Analysis
- Horizontal analysis:
- Compare changes over time.
- Vertical/common-size analysis:
- Express items as percentages of a base.
Balance Sheet
- Common-size balance sheet:
- Each item / Total Assets.
Income Statement
- Common-size income statement:
- Each item / Sales.
16. LIQUIDITY RATIOS
Current Ratio
- Current Assets / Current Liabilities.
Quick Ratio
- (Cash + Marketable Securities + Accounts Receivable) / Current Liabilities.
Working Capital
- Current Assets − Current Liabilities.
Interpretation
- Higher liquidity generally means greater ability to meet short-term obligations.
- But excessively high liquidity can indicate inefficient use of assets.
17. PROFITABILITY RATIOS
ROA
- Net Income / Average Total Assets.
ROE
- Net Income / Average Equity.
Important
- Use average assets/equity where the question specifies or where the appropriate ratio convention requires it.
18. MARKET RATIOS
EPS
- Earnings Available to Common Shareholders / Weighted-average Common Shares.
P/E Ratio
- Market Price per Share / EPS.
BVPS
- Common Equity / Common Shares Outstanding.
More specifically:
- (Total Equity − Preferred Equity) / Common Shares.
Market-to-Book
- Market Price per Share / Book Value per Share.
Dividend Yield
- DPS / Market Price per Share.
19. EFFICIENCY RATIOS
Inventory Turnover
- COGS / Average Inventory.
Receivables Turnover
- Net Credit Sales / Average Accounts Receivable.
Total Asset Turnover
- Sales / Average Total Assets.
Key Interpretation
- Higher turnover generally indicates more efficient asset utilization, but industry differences matter.
20. SOLVENCY RATIOS
Times Interest Earned
- EBIT / Interest Expense.
Debt-to-Equity
- Total Debt / Total Equity.
Important
- Higher leverage can:
- Increase financial risk.
- Increase potential return to equity holders.
- Do not assume "higher" is automatically better.
21. LIFO VS FIFO
In a rising-price environment
FIFO generally produces:
- Higher ending inventory.
- Lower COGS.
- Higher reported income.
- Higher taxes, assuming other factors remain constant.
LIFO generally produces:
- Lower ending inventory.
- Higher COGS.
- Lower reported income.
- Potentially lower taxes.
KEYWORD
Rising prices → FIFO income generally HIGHER than LIFO income.
22. SECTION B — CORPORATE FINANCE
⭐ Official Weight: 20%
Beta
- Measures systematic risk relative to the market.
Interpretation
- Beta = 1:
- Same systematic risk as market.
- Beta > 1:
- Greater systematic risk.
- Beta < 1:
- Lower systematic risk.
23. CAPM
Formula
Ke = Rf + β(Rm − Rf)
Where:
- Rf = Risk-free rate.
- β = Beta.
- Rm = Expected market return.
- Rm − Rf = Market risk premium.
Exam Trap
- Higher beta → higher required return, all else equal.
- CAPM measures required return based on systematic risk.
24. WACC
Formula
WACC = Wd × Kd(1−T) + Wp × Kp + We × Ke
Where:
- Wd = Weight of debt.
- Kd = Pre-tax cost of debt.
- T = Tax rate.
- Wp = Preferred stock weight.
- Kp = Cost of preferred stock.
- We = Equity weight.
- Ke = Cost of equity.
Key Point
- Debt receives an interest tax shield.
- Therefore:
- After-tax Kd = Kd × (1−T).
25. DIVIDEND GROWTH MODEL
Gordon Growth Model
P₀ = D₁ / (Ke − g)
Therefore:
Ke = D₁/P₀ + g
Where:
- D₁ = next year's dividend.
- Ke = required return.
- g = constant growth rate.
Exam Trap
- The model requires:
- Ke > g.
26. OPERATING LEVERAGE
Formula
DOL = CM / EBIT
- High fixed operating costs → generally higher operating leverage.
- High DOL means:
- Small sales changes can cause larger percentage changes in EBIT.
Example
- DOL = 4.
- Sales increase 5%.
- EBIT approximately increases 20%.
27. FINANCIAL LEVERAGE
DFL
DFL = EBIT / (EBIT − Interest)
Degree of Total Leverage
DTL = DOL × DFL
- Operating leverage affects EBIT.
- Financial leverage affects earnings available to shareholders.
28. PRIMARY VS SECONDARY MARKET
Primary Market
- New securities issued.
- Company/issuer receives funds.
- Examples:
- IPO
- New bond issue.
Secondary Market
- Existing securities traded.
- Investors trade with other investors.
- Examples:
- Stock exchanges.
29. INVESTMENT BANK FUNCTIONS
- Underwriting.
- Capital raising.
- M&A advisory.
- Valuation.
- Deal structuring.
- Financing assistance.
- Market-related services.
Acquisition Scenario
Investment bank may assist with:
- Valuation
- Due diligence
- Financing
- Negotiation
- Deal structure.
30. SECTION E — CAPITAL INVESTMENT DECISIONS
⭐ Official Weight: 10%
Payback Period
Formula
Payback = Initial Investment / Annual Cash Flow
when annual cash flows are equal.
Advantages
- Simple.
- Focuses on liquidity.
- Useful as an initial screening tool.
Limitations
- Ignores time value of money in basic payback.
- Ignores cash flows after payback.
- Does not directly measure shareholder value.
31. DISCOUNTED PAYBACK
- Uses discounted cash flows.
- Recognizes time value of money.
- Still ignores cash flows after the payback point.
32. NPV
Formula
NPV = PV of Cash Inflows − PV of Cash Outflows
Decision Rule
- NPV > 0:
- Project adds value based on the assumptions.
- NPV = 0:
- Project earns the required return.
- NPV < 0:
- Project does not meet the required return.
Key Point
- NPV uses the required return/cost of capital as the discount rate.
33. IRR
- IRR = Discount rate at which:
- NPV = 0
Conventional Project
- IRR > Required Return:
- Financially acceptable.
- IRR < Required Return:
- Financially unacceptable.
IRR Problems
- Multiple IRRs can occur with unconventional cash flows.
- NPV and IRR can conflict in mutually exclusive projects.
- Reinvestment assumptions differ conceptually from NPV.
34. REAL OPTIONS
Important types:
- Option to expand.
- Option to abandon.
- Option to delay.
- Option to switch.
- Option to contract.
Example
- Successful project:
- Option to expand.
- Unsuccessful project:
- Option to abandon.
- Uncertain market:
- Option to delay.
Key Concept
Real options can create additional flexibility and value in uncertain investment environments.
35. RISK ANALYSIS
Sensitivity Analysis
- Change one variable at a time.
- Measures impact on:
- NPV
- Profit
- Cash flow.
Scenario Analysis
- Changes multiple variables together.
- Examples:
- Best case
- Base case
- Worst case.
Monte Carlo Simulation
- Uses probability distributions.
- Generates many possible outcomes.
Expected Value
EV = Σ Probability × Outcome
36. CAPITAL INVESTMENT PROCESS
- Identify investment opportunities.
- Estimate incremental cash flows.
- Determine required return.
- Evaluate projects.
- Select project(s).
- Implement.
- Monitor performance.
- Conduct post-audit.
Cash Flow Focus
For capital budgeting, concentrate on:
- Incremental cash flows.
- Relevant cash flows.
- Opportunity costs.
- Working-capital effects.
- After-tax cash flows.
- Terminal value.
Generally Exclude
- Sunk costs.
37. SECTION D — ENTERPRISE RISK MANAGEMENT
⭐ Official Weight: 10%
Risk Responses
- Avoid
- Reduce
- Share/Transfer
- Accept
Examples
- Avoid:
- Exit a highly risky activity.
- Reduce:
- Improve controls.
- Transfer:
- Insurance/contractual transfer.
- Accept:
- Retain risk within approved tolerance.
38. TYPES OF RISK
Strategic Risk
- Risk arising from strategic decisions or external changes.
Operational Risk
- Process failure.
- System failure.
- Human error.
Financial Risk
- Interest rate risk.
- Credit risk.
- Liquidity risk.
- Currency risk.
Business Risk
- Risk arising from operating activities and uncertainty in business performance.
39. RISK APPETITE VS RISK TOLERANCE
Risk Appetite
- Amount/type of risk an organization is generally willing to pursue or accept.
Risk Tolerance
- Acceptable variation around objectives.
Exam Trap
- Do not treat the terms as identical.
40. RISK IDENTIFICATION TOOLS
- Interviews.
- Workshops.
- Historical data.
- Scenario analysis.
- SWOT analysis.
- Process mapping.
- Risk registers.
- Expert judgment.
41. CAPITAL ADEQUACY
Basic Formula
Capital Adequacy Ratio = Regulatory Capital / Risk-Weighted Assets
Depending on the applicable framework, regulatory capital can include different tiers/components.
Exam Approach
- Understand:
- Capital
- Risk-weighted assets
- Regulatory requirement
- Capital buffer.
42. PRICING & TARGET COSTING
Target Costing
Steps
- Determine market-based target price.
- Determine desired profit.
- Calculate target cost.
- Compare target cost with current cost.
- Identify cost gap.
- Use value engineering/cost management.
- Monitor after launch.
Formula
Target Cost = Target Selling Price − Target Profit
43. VALUE ENGINEERING
- Systematic analysis of product/service functions.
- Objective:
- Reduce unnecessary cost.
- Maintain required functionality.
- Maintain quality/value.
Exam Trap
- Cost reduction should NOT simply mean reducing quality.
- Focus on:
- Function
- Customer value
- Cost.
44. PRICING STRATEGIES
Cost-Based Pricing
- Price based on cost plus desired margin.
Market-Based Pricing
- Customer/market conditions drive pricing.
Penetration Pricing
- Relatively low initial price to gain market share.
Price Skimming
- Relatively high initial price followed by reductions.
Product Life Cycle Pricing
Consider:
- Introduction
- Growth
- Maturity
- Decline.
45. FOREIGN EXCHANGE
Purchasing Power Parity Concept
- Higher inflation relative to another country tends to put downward pressure on a currency's value over time, all else equal.
Currency Appreciation Can Be Influenced By
- Higher relative interest rates.
- Lower relative inflation.
- Capital inflows.
- Strong economic expectations.
- Trade conditions.
Exam Trap
Always identify:
- Which currency is appreciating?
- Which currency is depreciating?
- Are you quoting domestic currency per foreign currency or the reverse?
46. INFLATION
Inflation can affect:
- Purchasing power.
- Interest rates.
- Currency values.
- Investment returns.
- Operating costs.
- Required returns.
Fisher Relationship — Concept
- Nominal interest rate reflects:
- Real rate
- Expected inflation.
Approximate relationship:
Nominal Rate ≈ Real Rate + Expected Inflation
47. HIGH-YIELD DECISION RULES
-
Special Order:
- Incremental revenue > incremental relevant cost.
-
Make/Buy:
- Compare relevant costs.
-
Sell/Process Further:
- Incremental revenue > incremental processing cost.
-
Keep/Drop:
- Compare contribution margin lost with avoidable costs saved.
-
CVP:
- CM covers fixed costs first.
-
NPV:
- Positive NPV adds value based on assumptions.
-
IRR:
- Compare IRR with required return.
-
CAPM:
- Higher beta → higher required return, all else equal.
-
WACC:
- Use after-tax cost of debt.
-
Target Cost:
- Target Price − Target Profit.
-
Sensitivity:
- One variable at a time.
-
Scenario Analysis:
- Multiple variables together.
48. 🔥 MOST IMPORTANT EXAM INTERPRETATION KEYWORDS
When reading a CMA question, underline words such as:
- Relevant
- Incremental
- Avoidable
- Unavoidable
- Sunk
- Opportunity cost
- Idle capacity
- Limited capacity
- After-tax
- Before-tax
- Average
- Beginning
- Ending
- Marginal
- Required return
- Discount rate
- Target profit
- Maximum
- Minimum
- Except
- Not
- Least likely
- Most likely
- Best explanation
Golden Rule
Before calculating, ask:
"What exactly is the question asking me to find?"
49. CBQ STRATEGY — SEPT/OCT 2026 ONWARD
- Read the entire case once before calculating.
- Identify:
- Relevant data.
- Irrelevant data.
- Constraints.
- Decision objective.
- Write down formulas before inserting numbers.
- Check units:
- Per unit
- Total
- Percentage
- Dollar amount.
- Do not carry an early calculation blindly into every later question.
- Re-read the case when a question changes the assumption.
- Expect combinations such as:
- Financial data + ratio interpretation.
- CVP + special order.
- WACC + investment decision.
- Risk + NPV.
- Ethics + business scenario.
- Practice interpreting information rather than only memorizing formulas.
IMA states that CBQs can include different interaction types such as calculations, fill-in-the-blank, drag-and-drop and selection-based questions.
50. FINAL FORMULA SHEET
-
CM/unit
- SP − VC/unit
-
CM Ratio
- CM / Sales
-
BEP units
- FC / CM/unit
-
BEP sales
- FC / CM Ratio
-
Target Profit units
- (FC + Target Profit) / CM/unit
-
Margin of Safety
- Actual Sales − BE Sales
-
SGR
- ROE × Retention Ratio
-
ROE
- NI / Average Equity
-
ROA
- NI / Average Assets
-
BVPS
- Common Equity / Common Shares
-
P/E
- Market Price / EPS
-
Dividend Yield
- DPS / Market Price
-
Current Ratio
- CA / CL
-
Quick Ratio
- (Cash + STI + AR) / CL
-
NWC
- CA − CL
-
Inventory Turnover
- COGS / Average Inventory
-
Times Interest Earned
- EBIT / Interest
-
CAPM
- Rf + β(Rm − Rf)
-
After-tax Kd
- Kd(1−T)
-
WACC
- WdKd(1−T) + WpKp + WeKe
-
DOL
- CM / EBIT
-
DFL
- EBIT / (EBIT − Interest)
-
DTL
- DOL × DFL
-
Dividend Growth
- P₀ = D₁/(Ke−g)
-
Target Cost
- Target Price − Target Profit
-
Payback
- Initial Investment / Annual Cash Flow
-
NPV
- PV Inflows − PV Outflows
-
IRR
- Rate at which NPV = 0
-
Expected Value
- Σ(P × Outcome)
-
Capital Adequacy
- Regulatory Capital / Risk-Weighted Assets
51. 🔥 LAST-DAY REVISION PRIORITIES
FIRST PRIORITY
- Business Decision Analysis — 25%
- Financial Statement Analysis — 20%
- Corporate Finance — 20%
SECOND PRIORITY
- Professional Ethics — 15%
- Enterprise Risk Management — 10%
- Capital Investment Decisions — 10%
Within Decision Analysis, revise:
- CVP.
- Special orders.
- Make-or-buy.
- Sell/process further.
- Keep/drop.
- Contribution margin.
- Sales mix.
- Relevant cost.
- Opportunity cost.
- Sustainable growth.
Within Corporate Finance:
- CAPM.
- Beta.
- WACC.
- Cost of debt.
- Cost of equity.
- Dividend valuation.
- Operating leverage.
- Financial leverage.
Within Financial Statement Analysis:
- Liquidity ratios.
- Profitability ratios.
- Activity ratios.
- Solvency ratios.
- Market ratios.
- Common-size analysis.
- Horizontal analysis.
- FIFO/LIFO effects.
Within Ethics:
- Competence.
- Confidentiality.
- Integrity.
- Credibility.
- Ethical conflict resolution.
- Fraud triangle.
- COSO.
- CSR/sustainability.
Within Investment Decisions:
- NPV.
- IRR.
- Payback.
- Discounted payback.
- Real options.
- Sensitivity.
- Scenario analysis.
- Expected value.
🏆 FINAL CMA PART 2 MESSAGE
Do not study Part 2 as a formula-only subject.
The CMA exam tests whether you can:
- Understand the situation.
- Identify relevant information.
- Select the correct concept.
- Apply the correct formula.
- Interpret the result.
- Make the appropriate financial/business decision.
Remember:
READ → IDENTIFY → FILTER → CALCULATE → INTERPRET → ANSWER
And for every difficult question ask yourself:
"What is the decision? Which information is relevant to that decision?"
That single habit can prevent many CMA calculation mistakes.
My blessings and best wishes to every GMSiSuccess CMA Champion.
Stay calm. Read carefully. Think like a management accountant.
— Prof. Mahaley
Head – GMSiSuccess Mumbai
US CMA Part 2 — Strategic Financial Management
100 MCQ Practice Set with Answers & Explanations
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.
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: C
Explanation: Current Ratio = $600,000 ÷ $300,000 = 2.0.
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: B
Explanation: Quick Ratio = ($800,000 − $300,000) ÷ $250,000 = 2.0.
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: C
Explanation: Assuming sales are credit sales, turnover = $1,000,000 ÷ $125,000 = 8 times.
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: C
Explanation: $900,000 ÷ $150,000 = 6 times.
Q5.
Net income is $100,000 and average total assets are $500,000. ROA equals:
A) 10%
B) 15%
C) 20%
D) 25%
Answer: C
Explanation: ROA = $100,000 ÷ $500,000 = 20%.
Q6.
Net income is $120,000 and average equity is $600,000. ROE equals:
A) 10%
B) 15%
C) 20%
D) 25%
Answer: C
Explanation: ROE = $120,000 ÷ $600,000 = 20%.
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: C
Explanation: Gross profit = $800,000. $800,000 ÷ $2,000,000 = 40%.
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: B
Explanation: $90,000 ÷ $900,000 = 10%.
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: C
Explanation: P/E = $72 ÷ $4 = 18.
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: C
Explanation: ROA = $80,000 ÷ $400,000 = 20%.
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: C
Explanation: Income-statement common-size analysis uses sales/revenue as the base.
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: B
Explanation: Higher turnover generally indicates faster inventory movement.
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: B
Explanation: Debt ÷ Equity = 2.0.
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: B
Explanation: Retention = 75%. SGR = 18% × 75% = 13.5%.
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: B
Explanation: FIFO assigns older, lower costs to COGS during rising prices.
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: C
Explanation: 5% + 1.2(11% − 5%) = 12.2%.
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: C
Explanation: Beta measures sensitivity to market/systematic movements.
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%
Answer: B
Explanation: 9% − 4% = 5%.
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: B
Explanation: 10%(1 − .30) = 7%.
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: C
Explanation: (.40 × 6%) + (.60 × 12%) = 9.6%.
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: B
Explanation: New securities are issued in the primary market.
Q22.
Which market primarily involves previously issued securities being traded among investors?
A) Primary
B) Secondary
C) IPO
D) Capital budgeting
Answer: B
Explanation: Existing securities are traded in the secondary market.
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: B
Explanation: DFL = EBIT ÷ (EBIT − Interest) = $300,000 ÷ $200,000 = 1.5.
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: C
Explanation: DTL = 2 × 1.5 = 3.0.
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: D
Explanation: 4 × 8% = 32%.
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: C
Explanation: D₁ = $3 × 1.04 = $3.12.
P₀ = $3.12 ÷ (.10 − .04) = $52.00.
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: B
Explanation: Lower beta means lower systematic-risk exposure.
Q28.
Which source of financing normally represents an ownership claim?
A) Bonds
B) Bank loan
C) Common stock
D) Accounts payable
Answer: C
Explanation: Common shareholders are owners of the corporation.
Q29.
Financial leverage primarily arises from:
A) Fixed operating costs
B) Fixed financing costs
C) Variable manufacturing costs
D) Inventory turnover
Answer: B
Explanation: Interest and similar financing charges create financial leverage.
Q30.
Operating leverage primarily arises because of:
A) Fixed operating costs
B) Interest expense
C) Dividends
D) Taxes only
Answer: A
Explanation: Fixed operating costs magnify changes in EBIT when sales change.
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: C
Explanation: ($28 − $20) × 10,000 = $80,000.
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: B
Explanation: Contribution = ($30 − $22) × 5,000 = $40,000.
Less avoidable fixed costs $20,000 = $20,000.
Correction: The correct answer is A) $20,000.
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: D
Explanation: An unavoidable cost does not change because of the decision.
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: A
Explanation: Relevant make cost = $14 + $3 = $17, lower than $18.
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: A
Explanation: Allocate the constrained resource to the product with the higher contribution per constrained resource unit.
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: C
Explanation: CM = $20. CM ratio = $20 ÷ $50 = 40%.
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: C
Explanation: $150,000 ÷ $25 = 6,000 units.
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: C
Explanation: CM ratio = $30/$80 = 37.5%.
BEP sales = $240,000 ÷ .375 = $640,000.
Correction: The correct answer is B) $640,000.
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: B
Explanation: ($900,000 − $720,000) ÷ $900,000 = 20%.
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: C
Explanation: ($100,000 + $50,000) ÷ .30 = $500,000.
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: B
Explanation: [(3×$10)+(2×$20)] ÷ 5 = $14.
Q42.
A company has contribution margin of $400,000 and EBIT of $100,000. DOL is:
A) 2
B) 3
C) 4
D) 5
Answer: C
Explanation: $400,000 ÷ $100,000 = 4.
Q43.
If DOL = 4 and sales decline by 5%, EBIT will approximately:
A) Increase 20%
B) Decrease 5%
C) Decrease 20%
D) Decrease 25%
Answer: C
Explanation: 4 × −5% = −20%.
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
Answer: C
Explanation: ($80,000 + $40,000) ÷ ($20 − $12) = 15,000 units.
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: A
Explanation: Additional revenue = $7; processing cost = $5.
Benefit = $2.
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
Answer: C
Explanation: Those costs have already been incurred.
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: B
Explanation: Dropping it loses $100,000 CM but saves $70,000 = $30,000 reduction in profit.
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: C
Explanation: Opportunity cost represents the value of the next-best alternative forgone.
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: B
Explanation: The lost contribution from the alternative use is an opportunity cost.
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: D
Explanation: All involve relevant/incremental information.
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: B
Explanation: Avoidance means eliminating the activity creating the risk.
Q52.
Purchasing insurance is primarily an example of:
A) Avoidance
B) Transfer/share
C) Acceptance
D) Exploitation
Answer: B
Explanation: Risk is transferred to an insurer.
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: A
Explanation: Controls generally reduce likelihood or impact rather than eliminate all risk.
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: B
Explanation: Risk appetite expresses the organization's willingness to take risk.
Q55.
Risk tolerance generally represents:
A) The complete elimination of risk
B) Acceptable variation around objectives
C) Market capitalization
D) Debt capacity only
Answer: B
Explanation: Tolerance defines acceptable deviation from objectives.
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: B
Explanation: Operational risk includes failed processes, people and systems.
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: A
Explanation: Exchange-rate movements create currency risk.
Q58.
Regulatory penalties resulting from failure to comply with laws represent:
A) Compliance risk
B) Liquidity risk
C) Inventory risk
D) Production risk
Answer: A
Explanation: Noncompliance creates compliance/legal risk.
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: B
Explanation: A risk register documents identified risks, assessment and responses.
Q60.
Capital Adequacy Ratio is calculated as:
A) Assets ÷ Equity
B) Regulatory Capital ÷ Risk-Weighted Assets
C) Debt ÷ Sales
D) Equity ÷ Net Income
Answer: B
Explanation: CAR = Regulatory Capital ÷ RWA.
Q61.
Regulatory capital is $120 million and RWA is $1.2 billion. CAR equals:
A) 5%
B) 8%
C) 10%
D) 12%
Answer: C
Explanation: $120M ÷ $1,200M = 10%.
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: A
Explanation: These are the three traditional elements of the fraud triangle.
Q63.
Which factor represents a financial or personal motivation that may encourage fraud?
A) Opportunity
B) Pressure/incentive
C) Rationalization
D) Monitoring
Answer: B
Explanation: Pressure/incentive provides the motivation.
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: C
Explanation: The employee is mentally justifying the misconduct.
Q65.
Weak segregation of duties primarily increases:
A) Opportunity for fraud
B) Market capitalization
C) Gross margin
D) Dividend yield
Answer: A
Explanation: Weak controls can increase the opportunity element of fraud.
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
Answer: C
Explanation: $200,000 ÷ $50,000 = 4 years.
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: C
Explanation: NPV discounts future cash flows.
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
Answer: B
Explanation: Positive NPV indicates value in excess of the required return.
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: A
Explanation: NPV = 0 means PV of inflows equals investment at the required return.
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: A
Explanation: IRR > required return.
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
Answer: B
Explanation: $300,000 ÷ $100,000 = 3 years.
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: B
Explanation: Basic payback ignores cash flows after the recovery point.
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
Answer: B
Explanation: One variable is changed at a time.
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: B
Explanation: Scenario analysis examines combinations such as best case, base case and worst case.
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: B
Explanation: Simulation generates a distribution of possible results.
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: C
Explanation: (.20 × $50,000) + (.80 × $100,000) = $90,000.
Correction: The correct answer is D) $90,000.
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: B
Explanation: Opportunity costs represent incremental economic effects.
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: C
Explanation: Sunk costs have already occurred and cannot be changed.
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: B
Explanation: Incremental working-capital investment is a cash outflow.
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: A
Explanation: Recovery releases previously invested cash.
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: A
Explanation: Maintaining professional expertise is part of Competence.
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: B
Explanation: This is specifically required under Confidentiality.
Q83.
"Communicate information fairly and objectively" belongs to:
A) Competence
B) Confidentiality
C) Integrity
D) Credibility
Answer: D
Explanation: Fair and objective communication is part of Credibility.
Q84.
A CMA deliberately hides a conflict of interest. Which standard is most directly involved?
A) Competence
B) Confidentiality
C) Integrity
D) Credibility
Answer: C
Explanation: Integrity includes mitigating actual conflicts of interest and communicating potential conflicts.
Q85.
Which is NOT one of the four IMA standards?
A) Competence
B) Confidentiality
C) Independence
D) Credibility
Answer: C
Explanation: The four standards are Competence, Confidentiality, Integrity and Credibility.
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: A
Explanation: Professional information should be accurate and fairly communicated.
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: B
Explanation: IMA guidance emphasizes seeking resolution through organizational policies and procedures.
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: B
Explanation: If the supervisor is involved, escalation to an appropriate higher organizational level is generally necessary.
Q89.
Using confidential company information for personal financial gain violates:
A) Competence
B) Confidentiality
C) Credibility only
D) Cost behavior
Answer: B
Explanation: Confidential information must not be used for unethical or illegal advantage.
Q90.
Which ethical principle is NOT one of IMA's overarching principles?
A) Honesty
B) Fairness
C) Objectivity
D) Profit maximization
Answer: D
Explanation: IMA identifies Honesty, Fairness, Objectivity and Responsibility.
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: A
Explanation: Contribution = 8,000 × ($24 − $15) = $72,000.
Less additional fixed cost $20,000 = $52,000.
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: A
Explanation: PV inflows = $120,000 × 3.791 = $454,920.
NPV = $454,920 − $400,000 = $54,920.
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: B
Explanation: CM = $24.
$180,000 ÷ $24 = 7,500 units.
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
Answer: C
Explanation: 10,000 − 7,500 = 2,500 units.
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
Answer: B
Explanation: DFL = $500,000 ÷ ($500,000 − $100,000) = 1.25.
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: C
Explanation: 3 × 1.25 = 3.75.
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: D
Explanation: 3.75 × 10% = 37.5%.
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: C
Explanation: The real option to abandon allows management to terminate a project and recover residual value.
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: A
Explanation: A higher positive NPV indicates greater calculated value addition relative to the required return.
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: C
Explanation: IMA's ethics guidance emphasizes actively seeking resolution through appropriate organizational policies and procedures, with escalation when necessary.
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
