Certified Management Accountant (CMA) Part 2 Exam 2026:
Professional Certification Practice Test — Strategic Financial
Management, Financial Statement Analysis, Corporate Finance,
Investment Decisions, Risk Management & Professional Ethics —
190 Multiple-Choice Questions with Answers & Detailed Rationales
Section 1: Financial Statement Analysis (Questions 1-30)
Question 1
A company reported a current ratio of 2.5 and a quick ratio of 1.0. If the company’s inventory
is $300,000, what are its current assets?
A. $300,000
B. $500,000
C. $750,000
D. $1,200,000
Correct Answer: B
Explanation: Quick ratio = (Current Assets - Inventory) / Current Liabilities. So, 1.0 = (CA -
$300,000) / CL. Thus, CL = CA - $300,000. Current ratio = CA / CL = 2.5. Substituting CL: CA /
(CA - $300,000) = 2.5. Solving gives CA = $500,000.
Question 2
An analyst is evaluating a firm with a high gross profit margin but a low net profit margin.
Which of the following is the most likely cause for this discrepancy?
A. A significant increase in the cost of goods sold.
B. High operating expenses such as research and development.
C. A large loss from the sale of a major business segment.
D. An increase in the effective corporate tax rate.
,Correct Answer: B
Explanation: Gross profit margin reflects profitability after COGS, while net profit margin
includes all operating and non-operating expenses. High R&D indicates significant operating
costs are the cause.
Question 3
A company’s accounts receivable turnover has decreased from 10 to 8. This trend most likely
indicates:
A. The company has improved its collection efforts.
B. The company is selling more on credit than on a cash basis.
C. The company is extending credit to customers with poorer creditworthiness.
D. The company’s sales have decreased significantly.
Correct Answer: C
Explanation: A decreasing AR turnover ratio suggests it is taking longer to collect receivables.
This often points to relaxed credit policies or sales to less creditworthy customers.
Question 4
Which of the following financial ratios would be most relevant to a short-term creditor, such
as a supplier, deciding whether to extend trade credit?
A. Debt-to-equity ratio.
B. Return on assets.
C. Times interest earned.
D. Acid-test (quick) ratio.
Correct Answer: D
,Explanation: Short-term creditors are primarily concerned with a firm's ability to meet its
immediate obligations. The acid-test ratio is a stringent measure of short-term liquidity.
Question 5
A firm has a return on equity (ROE) of 15% and a return on assets (ROA) of 10%. What can be
inferred about the firm's capital structure?
A. The firm has no debt.
B. The firm uses financial leverage.
C. The firm has a high dividend payout ratio.
D. The firm's profit margin is low.
Correct Answer: B
Explanation: When ROE > ROA, it indicates that the company is effectively using debt
(financial leverage) to magnify the returns to shareholders. The equity multiplier is greater
than 1.
Question 6
A company changes its inventory valuation method from FIFO to LIFO during a period of
rising prices. What is the immediate impact of this change on its financial statements?
A. Net income will increase.
B. Cost of goods sold will decrease.
C. Ending inventory will decrease.
D. The current ratio will increase.
Correct Answer: C
Explanation: In a rising price environment, LIFO assigns the most recent, higher costs to
COGS, leaving older, lower costs in ending inventory. Thus, ending inventory value decreases.
, Question 7
An analyst calculates a company's total asset turnover as 1.5. If the company's net profit
margin is 4%, what is its return on assets (ROA)?
A. 2.0%
B. 4.5%
C. 6.0%
D. 16.5%
Correct Answer: C
Explanation: ROA is the product of net profit margin and total asset turnover. In this case, 4%
* 1.5 = 6.0%. This is a fundamental DuPont analysis identity.
Question 8
Which of the following would a financial analyst interpret as a positive signal about a
company's future prospects?
A. A decreasing dividend payout ratio.
B. A decreasing days' sales in receivables.
C. An increasing inventory turnover period.
D. An increasing debt-to-equity ratio.
Correct Answer: B
Explanation: A decreasing days' sales in receivables means the company is collecting its
receivables faster. This is a sign of efficient working capital management and a positive
signal.
Question 9
A firm reports a high times-interest-earned (TIE) ratio. This indicates that the firm:
Professional Certification Practice Test — Strategic Financial
Management, Financial Statement Analysis, Corporate Finance,
Investment Decisions, Risk Management & Professional Ethics —
190 Multiple-Choice Questions with Answers & Detailed Rationales
Section 1: Financial Statement Analysis (Questions 1-30)
Question 1
A company reported a current ratio of 2.5 and a quick ratio of 1.0. If the company’s inventory
is $300,000, what are its current assets?
A. $300,000
B. $500,000
C. $750,000
D. $1,200,000
Correct Answer: B
Explanation: Quick ratio = (Current Assets - Inventory) / Current Liabilities. So, 1.0 = (CA -
$300,000) / CL. Thus, CL = CA - $300,000. Current ratio = CA / CL = 2.5. Substituting CL: CA /
(CA - $300,000) = 2.5. Solving gives CA = $500,000.
Question 2
An analyst is evaluating a firm with a high gross profit margin but a low net profit margin.
Which of the following is the most likely cause for this discrepancy?
A. A significant increase in the cost of goods sold.
B. High operating expenses such as research and development.
C. A large loss from the sale of a major business segment.
D. An increase in the effective corporate tax rate.
,Correct Answer: B
Explanation: Gross profit margin reflects profitability after COGS, while net profit margin
includes all operating and non-operating expenses. High R&D indicates significant operating
costs are the cause.
Question 3
A company’s accounts receivable turnover has decreased from 10 to 8. This trend most likely
indicates:
A. The company has improved its collection efforts.
B. The company is selling more on credit than on a cash basis.
C. The company is extending credit to customers with poorer creditworthiness.
D. The company’s sales have decreased significantly.
Correct Answer: C
Explanation: A decreasing AR turnover ratio suggests it is taking longer to collect receivables.
This often points to relaxed credit policies or sales to less creditworthy customers.
Question 4
Which of the following financial ratios would be most relevant to a short-term creditor, such
as a supplier, deciding whether to extend trade credit?
A. Debt-to-equity ratio.
B. Return on assets.
C. Times interest earned.
D. Acid-test (quick) ratio.
Correct Answer: D
,Explanation: Short-term creditors are primarily concerned with a firm's ability to meet its
immediate obligations. The acid-test ratio is a stringent measure of short-term liquidity.
Question 5
A firm has a return on equity (ROE) of 15% and a return on assets (ROA) of 10%. What can be
inferred about the firm's capital structure?
A. The firm has no debt.
B. The firm uses financial leverage.
C. The firm has a high dividend payout ratio.
D. The firm's profit margin is low.
Correct Answer: B
Explanation: When ROE > ROA, it indicates that the company is effectively using debt
(financial leverage) to magnify the returns to shareholders. The equity multiplier is greater
than 1.
Question 6
A company changes its inventory valuation method from FIFO to LIFO during a period of
rising prices. What is the immediate impact of this change on its financial statements?
A. Net income will increase.
B. Cost of goods sold will decrease.
C. Ending inventory will decrease.
D. The current ratio will increase.
Correct Answer: C
Explanation: In a rising price environment, LIFO assigns the most recent, higher costs to
COGS, leaving older, lower costs in ending inventory. Thus, ending inventory value decreases.
, Question 7
An analyst calculates a company's total asset turnover as 1.5. If the company's net profit
margin is 4%, what is its return on assets (ROA)?
A. 2.0%
B. 4.5%
C. 6.0%
D. 16.5%
Correct Answer: C
Explanation: ROA is the product of net profit margin and total asset turnover. In this case, 4%
* 1.5 = 6.0%. This is a fundamental DuPont analysis identity.
Question 8
Which of the following would a financial analyst interpret as a positive signal about a
company's future prospects?
A. A decreasing dividend payout ratio.
B. A decreasing days' sales in receivables.
C. An increasing inventory turnover period.
D. An increasing debt-to-equity ratio.
Correct Answer: B
Explanation: A decreasing days' sales in receivables means the company is collecting its
receivables faster. This is a sign of efficient working capital management and a positive
signal.
Question 9
A firm reports a high times-interest-earned (TIE) ratio. This indicates that the firm:
