IMA CMA Part 2: Strategic Financial Management Sample Questions:

1. Genco Healthcare has asked ns controller to summarize the company's financial performance for the past two years. The accountant provided the following two years financial ratios for reference.

A) Less liquid mote profitable more solvent
B) More liquid, less profitable mote solvent
C) More Liquid Less profitable less solvent
D) Less liquid mote profitable less solvent

2. Discuss whether AMI should use a cost-based or a market-based pricing approach. Explain your answer.
Essay
Food Depot Ltd, (FDL) is a privately-held company that provides catering services to airlines and operates several restaurant chains including fast food, casual dining, and fine dining restaurants, FDL has been profitable in recent years and has a very strong cash position. FDL's newest division. Food_TO-Go is an online meal ordering and delivery platform acquired by FDL two year ago.
In 20X7, sales for the entire company were $1 billion, with 50% of the business coming from the Airline Catering division. FDL is the country 's leading airline catering services provider and control 60% of the market share. However, the outlook of the airline catering industry is gloomy. The compound annual growth rate of the industry for the past five years was only 0.5% as airline networks have increasingly dropped catering on short domestic flights.
The Food-To-division only contribution 5% of FDL's total sales in 20X7 and is far behind in competing for marketing for market share of the online meal ordering and delivery industry, it is estimated that Food-To-Go's sales were only 20% of the industry leader's sales. However, the outlook for the online meal ordering and delivery services industry is bright. The compound annual growth rate of the industry since it started three years ago was 50%. It is estimated the rapid growth of the industry will continue in the foreseeable future.
Susan Willey, the head of Food-To-Go, does not agree that the Airline Catering division is the best-performing division in the company. Wiley argues that ber division bad the highest ROI in 20X7, and it deserves more capital finding. FDL's requested rate of return is 12%. The selected financial data for the Airline Catering division and Food-To-Go division in 20X7 are as follow (in $ millions)

3. A capital budgeting analysis involves an initial investment of $500. The expected cash inflow in Year 1 is
$300, and the expected cash inflow in Year 2 is $350. Which one of the following equations can get the correct internal rate of return (IRR) of this project?

A) $0 = $300/(1 + IRR) + $350/11 + IRR)2
B) $500 = $300/(1 + IRR) + $350/(1 + IRR)
C) $500 = $300/(1 + IRR) + $350/(1 + IRR)2
D) -$500 = $300'(1 + IRR) + 5350/(1 + IRR)2

4. Which one of the following moral philosophies states that the morality of an action is inherent and not based on the consequences of the action?

A) Deontology
B) Utilitarianism
C) Teleology
D) Relativism

5. Which one of the following statements regarding portfolio diversification is not correct?

A) A well diversified portfolio should include individual stock investments having a balance of positive and negative betas.
B) The standard deviation of a well diversified portfolio's percentage returns should be approximately equal to the standard deviation of the entire stock market's percentage returns.
C) A well diversified portfolio can minimize unsystematic risk
D) A well diversified portfolio can eliminate systematic risk.

Solutions: