Question 1

A company can by identical raw materials from four suppliers. Each supplier offers a different term of sale. Which one of the following terms of sale has the highest effective annual interest rate if the company does not take the cash discount?

Options :

A : 1/10, net 90

B : 1/30, net 90

C : 1/10, net 45

D : 1/30 net 45

Answer: D

Question 2

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 3

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 4

A corporation shows the following on its financial statements (in millions). CMA-Strategic-Financial-Management-page49-image24 The corporation has a financial leverage ratio of

Options :

A : 0.06

B : 0.50

C : 2.00

D : 3.60

Answer: B

Question 5

Which one or the following costs Is a variable product cost?

Options :

A : Office rent in a temporary staffing company

B : Plant manager s salary for a computer chip manufacturer

C : Payroll taxes based on the hourly wages of plant personnel

D : Promotional materials distributed to raise brand awareness

Answer: C

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