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Financial CMA Exam Questions
Certified Management Accountant (Page 7 )

Updated On: 9-Mar-2026
Page 7 of 270
PDF with 1336 Questions
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Which factor most likely encourages entry into an existing market?

  1. Governmental subsidies for new investors.
  2. High product differentiation, principally produced by trademarks.
  3. Knowledge of the industry, with high investments in development.
  4. Low fixed exit costs.

Answer(s): A

Explanation:

Subsidies for new firms’ lower entry barriers. Thus, new firms may enter the industry and intensify competition. Government policy also may affect competition via regulations that encourages or discourage substitutes or affect costs, that gave competitive behavior, or that limit growth. Government also may be a buyer or supplier.



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The concurrent action of basic competitive force as defined by Porter's model determines?

  1. The long-term profitability and the competitive intensity of the industry.
  2. The entrance barriers that potential players must face to get into the industry.
  3. The rivalry inside the industry.
  4. The strategy that a firm should follow to achieve its objectives.

Answer(s): A

Explanation:

Michael E. Porter, a leader in the field of strategic management, has developed a comprehensive model of the structure of industries and competition. One feature is his analysis of the five competitive forces that determine long-term profitability measured by long-term return on investment. This analysis determines the attractiveness of an industry.



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Which of the following is a favorable condition for a firm competing in profitable, expanding industry?

  1. The firm does not have a strong customer base.
  2. A few suppliers who can restrict supply.
  3. Competitors find it difficult to acquire the firm's customers.
  4. The firm has high costs relative to other firms in the industry.

Answer(s): C

Explanation:

A firm that has successfully differentiated its products through developing a desirable image, better services, cost leadership, the features of the product, or other means is in a favorable competitive position Competitors find it difficult to acquire the firm's customers, for example, by price cutting. The reason is that the firm's products are perceived to have few substitutes, and brand loyalty is high. Furthermore, barriers to entry are favorable to the firm. These barriers deter competitors from entering the market. Existing firm can increase market share and emphasize cutting costs and increasing value?



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Which basic force(s) drive (s) industry competition and the ultimate profit potential of the industry?

I). Threat of new entrants.
II). Bargaining power of suppliers.
III). Favorable access to raw materials and labor.
IV). Product differentiation

  1. I only
  2. I and II only
  3. III and IV only
  4. I, II, III, and IV

Answer(s): B

Explanation:

Threat of new entrants and bargaining power of suppliers are among the five basic forces that drive industry competition and the ultimate profit potential industry. This potential is measured in terms of long-term return on invested capital. The other three forces are rivalry among existing firms, threat substitutes and threat of buyers' bargaining power.



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A manufacturing company produces plastic utensils for a particular segment at the lowest possible cost. The company is pursuing a cost?

  1. Leadership strategy
  2. Focus strategy
  3. Differentiation strategy
  4. Containment strategy

Answer(s): B

Explanation:

A cost focus strategy aims at cost leadership in a particular segment, such as a regional market or a specialty product line. The rationale for a focus strategy is that the narrower market can be better served.



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