Question 1

Southwest Supplies Inc. (SSI) is considering the following two projects with cash-flows discounted at SSI's weighted average cost of capital.

CMA-Strategic-Financial-Management-page49-image10

SSI can only afford to invest in one of the projects. Which statement would most likely explain why SSI would choose Project B over project A?

Options :

A : Project B results in a higher cumulative accounting income

B : Project B generates significantly more non-cash expenses

C : Project B cash-flows are relatively more certain

D : Project B cash-flows are to be received sooner

Answer: D

Question 2

Which one of the following situations describes a secondary offering of stock by a company?

Options :

A : The company has an initial public offering of its stock and its investment bank needs to add mote shares to the initial public offering to meet excess demand by investors

B : After the lockup period of the initial public offering ends, the company 3 founders sell some of their shares to the public

C : The company repurchases shares of its stock in the open market, but it then later sells these shares in the open market

D : After completing its initial public offering, the company sells more new shares of its stock

Answer: B

Question 3

Below is the income statement and balance sheet for a retail corporation.

CMA-Strategic-Financial-Management-page49-image5

What is the corporation’s return on equity in Year 2?

Options :

A : 23%

B : 26%

C : 39%

D : 48%

Answer: D

Question 4

Custom Ceramics produces two hand-painted items a large bowl and a large platter. Relevant information for each of these items is shown below

Options :

A : The company should produce only bowls because the contribution margin per bowl is higher.

B : The company should produce only platters because the variable cost per platter is lower

C : The company should produce only bowls because the sales price per Bowl is higher

D : The company should produce only platters because the contribution margin per painting hour is higher

Answer: D

Question 5

A co league claims that morality is usually perceived and interpreted differently by different people so there is no method to judge whether one decision is better than another. This is commonly referred to as

Options :

A : ethical relativity

B : moral philosophy

C : comparative ethics

D : moral relativism

Answer: D

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