1
CMA Entrance Exam Questions and Answers 2024
1. If economies of scale are an industry’s primary entry barrier, a new entrant’s major risk
is its inability to
a) get buyers to switch to its products.
b) access superior sources of raw materials for its products.
c) match the pace of innovation of its established rivals.
d) produce in sufficient volume to match the cost advantages of established industry
competitors.
e) ensure quality of its finished products.
2. Conducting an analysis of a company’s financial ratios is beneficial because it
a) is a central component of value-chain analysis.
b) identifies external opportunities for the company to pursue.
c) uncovers critical industry trends.
d) provides insights into a company’s financial position.
e) none of the above.
3. The bargaining power of suppliers decreases when
a) there are many substitutes for the item supplied.
b) there are many buyers in the market.
c) the number of suppliers decreases.
d) buyers cannot integrate backward along the value chain.
e) costs are high for buyers to switch suppliers.
4. A company that currently competes in a single industry is seeking to reduce its
dependency on that industry by expanding into other industries. This company is
using a
a) forward integration strategy.
b) diversification strategy.
c) horizontal integration strategy.
d) differentiation strategy.
e) backward integration strategy.
5. JB Ltd. is a mid-sized company that produces light bulbs which are distributed in
Canada. Which of the following sources of differentiation would be most desirable for
JB Ltd. to preserve a long-term competitive advantage?
a) Reducing its price point below the competition.
b) Expanding its distribution to Europe.
c) Providing superior customer service to its retailers.
d) Updating its packaging to stand out from the market.
e) None of the above.
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6. (-) The levelling and initial decrease in sales growth of a product takes place in which
stage of the product life cycle?
a) The decline stage.
b) The introductory stage.
c) The maturity stage.
d) The growth stage.
e) The product development stage.
7. Speed of product development in uncertain, competitive environments characterizes
today’s competitive landscape. Which of the following organizational structures best
helps a company accelerate the product development process in order to address
rapid technological change?
a) Multidivisional
b) Matrix
c) Functional
d) Strategic Business Unit (SBU)
e) Geographic
8. WH Retail has come to an agreement with one of its suppliers, UT Ltd. to open a new,
independent retail operation called WHUT Stores which would sell only UT products.
Both companies have invested equal amounts of start-up capital, and both companies
share revenues, costs and control of this new store. This is best described as
a) an organic growth strategy.
b) a joint venture.
c) a strategic alliance.
d) forward integration by UT Ltd.
e) an acquisition by WH Retail.
9. When conducting a SWOT analysis, which of the following is NOT an example of an
external threat?
a) Rising rate of national inflation.
b) Increasing intensity of competition in the industry.
c) Reduction in the number of suppliers.
d) Diminishing production process when compared to competitors.
e) Decreasing consumer confidence in the economy.
2
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Risk Management and Governance
10. When considering the effectiveness of a system of internal control, it should be
recognized that inherent limitations do exist. Which of the following is an example of
an inherent limitation in a system of internal control?
a) The effectiveness of procedures depends on the segregation of employee duties.
b) Procedures are designed to assure the execution and recording of transactions in
accordance with management’s authorization.
c) In the performance of most control procedures, there are possibilities of errors
arising from mistakes in judgement.
d) Procedures for handling large numbers of transactions are processed by electronic
data processing equipment.
e) None of the above.
11. (-) The primary responsibility for preventing fraud in an organization lies with
a) management.
b) the internal auditor.
c) security personnel.
d) the audit committee of the board of directors.
e) the external auditor.
12. Internal control consists of the overall plan of organization and the procedures that are
mainly concerned with
a) safeguarding the assets and providing reliable financial records.
b) promoting organizational efficiency and policy adherence.
c) optimizing the use of resources.
d) both a) and b) above.
e) all of a), b) and c) above.
13. The audit committee of a public company helps facilitate good corporate governance
by
a) being comprised of management and staff.
b) evaluating the risk for fraud.
c) allowing management to select and hire the external auditor.
d) managing all financial processes of the company.
e) All of the above.
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14. The returns of various companies over a 5-year period are as follows:
Year Company M Company N Company O Company P
6 (1%) (2%) 6% 10%
7 1% (10%) 7% (6%)
8 3% (6%) 5% (5%)
9 8% 4% 1% 6%
10 10% 8% 8% (1%)
Based only on this historical information, which of the following statements is most
correct?
a) Company M has the least amount of risk.
b) Company P has the greatest amount of risk.
c) Company N has the greatest amount of risk.
d) Company O has the least amount of risk.
e) Both c) and d) above.
15. The responsibility of a Board of Directors at a publicly-traded company does NOT
include
a) providing expert advice to management.
b) represent the shareholders’ best interests.
c) participating in operations management.
d) ensuring the organization meets disclosure requirements.
e) overseeing strategic management.
16. The external auditor uses the audit risk model in determining the nature, timing and
extent of audit procedures. The audit risk model
a) indicates that audit risk is only a function of inherent risk.
b) defines audit risk as a threshold the auditor is willing to accept that the financial
statements may be materially misstated at the start of the audit engagement.
c) indicates the extent to which audit procedures would decline when the auditor
detects an improvement in internal controls.
d) suggests that inherent risk can only be assessed after extensive testing of
transactions.
e) requires exact quantification of all components of the audit risk model.
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CMA Entrance Exam Questions and Answers 2024
1. If economies of scale are an industry’s primary entry barrier, a new entrant’s major risk
is its inability to
a) get buyers to switch to its products.
b) access superior sources of raw materials for its products.
c) match the pace of innovation of its established rivals.
d) produce in sufficient volume to match the cost advantages of established industry
competitors.
e) ensure quality of its finished products.
2. Conducting an analysis of a company’s financial ratios is beneficial because it
a) is a central component of value-chain analysis.
b) identifies external opportunities for the company to pursue.
c) uncovers critical industry trends.
d) provides insights into a company’s financial position.
e) none of the above.
3. The bargaining power of suppliers decreases when
a) there are many substitutes for the item supplied.
b) there are many buyers in the market.
c) the number of suppliers decreases.
d) buyers cannot integrate backward along the value chain.
e) costs are high for buyers to switch suppliers.
4. A company that currently competes in a single industry is seeking to reduce its
dependency on that industry by expanding into other industries. This company is
using a
a) forward integration strategy.
b) diversification strategy.
c) horizontal integration strategy.
d) differentiation strategy.
e) backward integration strategy.
5. JB Ltd. is a mid-sized company that produces light bulbs which are distributed in
Canada. Which of the following sources of differentiation would be most desirable for
JB Ltd. to preserve a long-term competitive advantage?
a) Reducing its price point below the competition.
b) Expanding its distribution to Europe.
c) Providing superior customer service to its retailers.
d) Updating its packaging to stand out from the market.
e) None of the above.
,2
6. (-) The levelling and initial decrease in sales growth of a product takes place in which
stage of the product life cycle?
a) The decline stage.
b) The introductory stage.
c) The maturity stage.
d) The growth stage.
e) The product development stage.
7. Speed of product development in uncertain, competitive environments characterizes
today’s competitive landscape. Which of the following organizational structures best
helps a company accelerate the product development process in order to address
rapid technological change?
a) Multidivisional
b) Matrix
c) Functional
d) Strategic Business Unit (SBU)
e) Geographic
8. WH Retail has come to an agreement with one of its suppliers, UT Ltd. to open a new,
independent retail operation called WHUT Stores which would sell only UT products.
Both companies have invested equal amounts of start-up capital, and both companies
share revenues, costs and control of this new store. This is best described as
a) an organic growth strategy.
b) a joint venture.
c) a strategic alliance.
d) forward integration by UT Ltd.
e) an acquisition by WH Retail.
9. When conducting a SWOT analysis, which of the following is NOT an example of an
external threat?
a) Rising rate of national inflation.
b) Increasing intensity of competition in the industry.
c) Reduction in the number of suppliers.
d) Diminishing production process when compared to competitors.
e) Decreasing consumer confidence in the economy.
2
,3
Risk Management and Governance
10. When considering the effectiveness of a system of internal control, it should be
recognized that inherent limitations do exist. Which of the following is an example of
an inherent limitation in a system of internal control?
a) The effectiveness of procedures depends on the segregation of employee duties.
b) Procedures are designed to assure the execution and recording of transactions in
accordance with management’s authorization.
c) In the performance of most control procedures, there are possibilities of errors
arising from mistakes in judgement.
d) Procedures for handling large numbers of transactions are processed by electronic
data processing equipment.
e) None of the above.
11. (-) The primary responsibility for preventing fraud in an organization lies with
a) management.
b) the internal auditor.
c) security personnel.
d) the audit committee of the board of directors.
e) the external auditor.
12. Internal control consists of the overall plan of organization and the procedures that are
mainly concerned with
a) safeguarding the assets and providing reliable financial records.
b) promoting organizational efficiency and policy adherence.
c) optimizing the use of resources.
d) both a) and b) above.
e) all of a), b) and c) above.
13. The audit committee of a public company helps facilitate good corporate governance
by
a) being comprised of management and staff.
b) evaluating the risk for fraud.
c) allowing management to select and hire the external auditor.
d) managing all financial processes of the company.
e) All of the above.
, 4
14. The returns of various companies over a 5-year period are as follows:
Year Company M Company N Company O Company P
6 (1%) (2%) 6% 10%
7 1% (10%) 7% (6%)
8 3% (6%) 5% (5%)
9 8% 4% 1% 6%
10 10% 8% 8% (1%)
Based only on this historical information, which of the following statements is most
correct?
a) Company M has the least amount of risk.
b) Company P has the greatest amount of risk.
c) Company N has the greatest amount of risk.
d) Company O has the least amount of risk.
e) Both c) and d) above.
15. The responsibility of a Board of Directors at a publicly-traded company does NOT
include
a) providing expert advice to management.
b) represent the shareholders’ best interests.
c) participating in operations management.
d) ensuring the organization meets disclosure requirements.
e) overseeing strategic management.
16. The external auditor uses the audit risk model in determining the nature, timing and
extent of audit procedures. The audit risk model
a) indicates that audit risk is only a function of inherent risk.
b) defines audit risk as a threshold the auditor is willing to accept that the financial
statements may be materially misstated at the start of the audit engagement.
c) indicates the extent to which audit procedures would decline when the auditor
detects an improvement in internal controls.
d) suggests that inherent risk can only be assessed after extensive testing of
transactions.
e) requires exact quantification of all components of the audit risk model.
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