IMANET CMA Exam - Topic 6 Question 121 Discussion

Actual exam question for IMANET's CMA exam

Question #: 121
Topic #: 6

[All CMA Questions]

The prospect for the long-term profitability of an existing firm is greater when

AThe firm operates in an industry with a steep learning curve in its production process.

CNew entrants are encouraged by government policy.

BThe costs of switching suppliers is low.

DDistribution channels are willing to accept new products.

Show Suggested Answer

Suggested Answer: A

The prospects of long-term profitability are contingent upon the industry's exit and entry barriers. The entry of new firms in a market decreases the prospect for long-term profitability. When a firm operates in an industry that has a steep learning curve, it is more difficult for new firms to enter the market. Thus, the prospects of long-term profitability are greater for an existing firm.

by Ernest at Jan 24, 2026, 07:06 PM

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Dalene

5 days ago

I remember a practice question about market share and profitability; maybe that's related? If a firm has a larger market share, it could lead to better long-term profits.

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Minna

10 days ago

I think the profitability is greater when the firm has a strong competitive advantage, but I'm not entirely sure how to define that clearly.

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Vivienne

15 days ago

This question seems straightforward. I'd focus on analyzing the firm's financial health, growth potential, and competitive position. That should give me a good sense of its long-term profitability.

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Elvera

20 days ago

I'm a bit unsure about this one. I guess I'd try to assess the firm's adaptability to changes in the market. The more flexible and innovative it is, the better its long-term prospects.

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Gracia

25 days ago

Okay, to approach this, I'd look at the firm's cost structure, market share, and barriers to entry. If it has a sustainable competitive edge, that would boost its long-term profitability.

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Carey

1 month ago

Hmm, this seems like a tricky one. I'd need to think about factors like the industry, competition, and the firm's competitive advantages. That would help me evaluate the long-term outlook.

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Dottie

1 month ago

I think I'd start by considering the firm's current financial performance and growth trends. If it's already profitable and growing, that's a good sign for long-term prospects.

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