IMANET CMA Exam - Topic 2 Question 96 Discussion

Actual exam question for IMANET's CMA exam

Question #: 96
Topic #: 2

In smaller businesses in which the management of cash is but one of numerous functions performed by the treasurer. Various cost incentives and diversification arguments suggest that surplus cash should be invested in

ACommercial paper.

BBankers' acceptances.

CMoney market mutual funds.

DCorporate bonds.

Show Suggested Answer

Suggested Answer: D

The estimated incremental after-tax operating cash flows for each year of a capital project consist of two components: the after-tax cash inflows from operations and the depreciation tax shield arising from the purchase of new equipment. The first of these for Pauley can be calculated as follows:

Pauley's total after-tax operating cash inflow for each year of the project's life is thus $36,000 ($30,000 + $6,000). Ii the final year of the project, two additional cash flows must be taken into account, the after-tax proceeds from the disposal of the equipment purchased for the project, and the recovery of working capital devoted to the project. These two additional cash flows can be calculated as follows:

Pauley's total after-tax cash inflow for the final year of the project's life is thus $49,000

($36,000 + $13,000).

by Josefa at Sep 07, 2024, 05:49 AM

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Noble

6 months ago

Totally agree, money market funds are the way to go!

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Earleen

6 months ago

Wait, are we sure about bankers' acceptances? Seems risky.

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Eloisa

6 months ago

Commercial paper is super liquid, good choice!

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Arlie

7 months ago

I think corporate bonds offer better returns.

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Elenor

7 months ago

Money market mutual funds are usually a safe bet!

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Charlena

7 months ago

I keep thinking about commercial paper as a low-risk option, but I wonder if it really aligns with the diversification argument mentioned in the question.

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Cora

7 months ago

I feel like bankers' acceptances could be a solid choice for short-term investments, but I can't recall the specific benefits compared to the others listed.

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Aliza

7 months ago

I remember practicing a question about investing surplus cash, and I think corporate bonds were mentioned as a longer-term investment. Not sure if that's the best choice here, though.

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Valentin

8 months ago

I think money market mutual funds might be a good option since they offer liquidity and safety, but I'm not entirely sure if they provide the best returns.

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Corinne

8 months ago

I'm a bit confused by this question. There are a lot of factors to consider, and I'm not sure I fully understand the differences between the investment options. I'll need to review my notes before answering.

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Karina

8 months ago

Okay, I've got this. The key is to find the investment that balances low cost, low risk, and diversification. Based on that, I think the answer is C - money market mutual funds.

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Ming

8 months ago

Hmm, I'm not totally sure about this one. The question mentions "various cost incentives and diversification arguments," so I'll need to carefully consider the pros and cons of each investment option.

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Crista

8 months ago

This question seems straightforward - it's asking about the best way for a smaller business to invest surplus cash. I'll need to think about the key factors like cost, risk, and diversification.

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Val

8 months ago

Ah, I think I've got it! Forensic Sorter is the tool that can create MD5 hashes of drives, partitions, and files. I'm confident that's the right answer.

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Xuan

1 year ago

If I were the treasurer, I'd invest in a nice tropical island. Surplus cash? More like 'surfs up' cash, am I right?

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Caitlin

11 months ago

D) Corporate bonds.

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Pamella

11 months ago

C) Money market mutual funds.

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Isreal

12 months ago

A) Commercial paper.

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Kanisha

1 year ago

I heard the treasurer's job is so boring, they have to juggle cash and bonds just to stay awake. Maybe they should try stand-up comedy instead!

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Bok

1 year ago

Corporate bonds? Really? That's a bit too risky for a small business, don't you think? Stick to the simpler options, my friend.

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Thaddeus

11 months ago

B) Bankers' acceptances.

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Roxane

11 months ago

C) Money market mutual funds.

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Brandon

12 months ago

A) Commercial paper.

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Emerson

1 year ago

Money market mutual funds are the way to go! They're easy to set up and provide a nice balance of safety and returns.

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Silvana

12 months ago

I agree, money market mutual funds are a great option for investing surplus cash.

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Malinda

12 months ago

C) Money market mutual funds.

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Aleshia

1 year ago

A) Commercial paper.

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Clare

1 year ago

Bankers' acceptances are a solid option too, but they might be a bit too complex for a small business treasurer to manage effectively.

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Annamaria

12 months ago

B) Bankers' acceptances might be too complex for a small business treasurer to handle effectively.

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Gianna

1 year ago

C) Money market mutual funds could be a good choice for diversification and ease of management.

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Kenneth

1 year ago

A) Commercial paper sounds like a simple and safe option for small businesses.

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Paola

1 year ago

Commercial paper is a great choice for smaller businesses looking to invest surplus cash. It's low-risk and provides a decent return.

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Shawna

1 year ago

D) Corporate bonds could be a good option for diversifying the investment portfolio.

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Jannette

1 year ago

B) Bankers' acceptances might be a bit riskier, but could offer higher returns.

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Joana

1 year ago

C) Money market mutual funds could also be a good choice for smaller businesses.

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Malcom

1 year ago

A) Commercial paper sounds like a safe option for investing surplus cash.

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Phillip

1 year ago

User 2

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Naomi

1 year ago

User 1

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Queenie

1 year ago

I prefer investing in commercial paper, it's a safer option for surplus cash.

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Effie

1 year ago

I agree with Aliza, money market mutual funds offer a good return and liquidity.

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Aliza

1 year ago

I think surplus cash should be invested in money market mutual funds.

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