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Financial CMA Exam
Certified Management Accountant (Page 5 )

Updated On: 19-Jan-2026
Page 5 of 270
PDF with 1336 Questions
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Capital budgeting techniques are least likely to be used in evaluating the

  1. Acquisition of new aircraft by a cargo company
  2. Design and implementation of a major advertising program
  3. Adoption of a new method of allocating non-traceable costs to produce lines
  4. Sale by a conglomerate of a n unprofitable division

Answer(s): C

Explanation:

Capital budgeting is the process of planning expenditures for investments that are expected to generate returns over a period of more than one year. Thus, capital budgeting concerns the acquisition or disposal of long-term assets and the financing ramifications of such decisions. The adoption of a new method of allocating non-traceable costs to product lines has no effect on a company's cash flows, does not relate to the acquisition of long- term assets, and is not concerned with financing. Hence, capital budgeting is irrelevant to such a decision.



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The capital budget is a(n)

  1. Plan to ensure that sufficient funds are available for the operating needs of the company
  2. Exercise that sets the long-range goals of the company including the consideration of external influences
  3. Plan that coordinates and communicates a company's plan for the coming year to all departments and divisions
  4. Plan that assesses the long-term needs of the company for pant and equipment purchases

Answer(s): D

Explanation:

Capital budgeting is the process of planning expenditures for long-lived assets. It involves choosing among investment proposals using a ranking procedure. Evaluations are based on various measures involving rate of return on investment.



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Which of the following is a market-oriented definition of a business versus a product- oriented definition of a business?

  1. We make air conditioners and furnaces
  2. We supply energy
  3. We produce movies
  4. We sell men's shirts and pants

Answer(s): B

Explanation:

Business should be defined in market terms, that is, in terms of needs and customer groups. Moreover, a distinction should be made between a target market definition and as strategic market definitions. For example, a target market for a railroad might be freight hauling, but a strategic market might be transportation of any goods and people. Accordingly, stating that a business supplies energy is a market-oriented definition as opposed to the product-oriented definition. Moreover, it is also a strategic market definition.



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The first step in the sales planning process is to

  1. Assemble all the data that are relevant in developing a comprehensive sales plan
  2. Develop management guidelines specific to sales planning, including the sales planning process and planning responsibilities
  3. Prepare a sales forecast consistent with specified forecasting guidelines, including assumptions
  4. Secure management commitment to attain the goals specified in the comprehensive sales plan

Answer(s): B

Explanation:

Sales planning is a starting point for many other plans. The resources required, revenues to be earned, and costs to be incurred depend on sales. The sales plan of an operating unit should include as much specific information from that unit's management as possible, but must conform to the strategic plans or corporate management. Thus, top management must provide a context within which operational managers can prepare their plans. Corporate support includes economic forecasts, overall market sales forecasts, and capital budgets.



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All of the following are characteristics of the strategic planning process except the

  1. Emphasis on the long run
  2. Analysis of external economic factors
  3. Review of the attributes and behavior of the organization's competition
  4. Analysis and review of department budgets

Answer(s): D

Explanation:

Strategic planning is the process of setting the overall organizational objectives and goals, and involves the drafting of strategic plans. Long-range (strategic) planning is based on identifying and specifying organizational goals and objectives, evaluating the strengths and weaknesses of the organization, assessing risk levels, forecasting the future direction and influences of factors relevant to the organization (such as market trend, changes in technology, international competition, and social change), and deriving the best strategy for reaching the objectives given the organization's strengths and weaknesses and the relevant future trends. Analyzing and reviewing department budgets is an aspect of operational management and not a part of strategic planning.



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