A customer default would expose a company to a $2,000,000 loss before recovery. Management estimates a 3% probability of default and a 40% loss given default after collateral recovery. What is the position's probability-weighted expected loss?
A. $60,000
B. $800,000
C. $24,000
D. $1,940,000
Source: PRIMARY -- Supervisory Guidance on Model Risk Management, model outputs and uncertainty discussion (https://www.federalreserve.gov/boarddocs/srletters/2011/sr1107a1.pdf)
A controller discovers that the company breached a debt covenant before year-end. The CFO directs the controller to omit the breach from a report prepared for the audit committee and says disclosure can wait until refinancing is complete. What is the controller's most appropriate initial response under IMA's ethical framework?
A. Omit the breach because the CFO has exclusive authority over every communication sent to the audit committee, regardless of materiality
B. Send the incomplete report and the covenant details to external parties immediately, before using any internal discussion or governance channel
C. Explain the ethical concern to the CFO and follow the organization's established escalation policy if it is not resolved
D. Resign immediately, destroy all working notes, and make no documented attempt to use the organization's prescribed ethical-resolution process or governance escalation channels
Source: PRIMARY -- Resolving Ethical Issues; Integrity; Credibility (https://www.imanet.org/about-ima/ethics-center/statement-of-ethical-professional-practice)
An analyst is comparing two companies using return on average assets. One company reports net income of $480,000, beginning total assets of $5,700,000, and ending total assets of $6,300,000. Using net income divided by average total assets, what return on assets should the analyst report?
A. 8.0%
B. 7.6%
C. 8.4%
D. 16.0%
Source: PRIMARY -- Appendix A, Return on Total Assets (https://openstax.org/books/principles-financial-accounting/pages/a-financial-statement-analysis)
A manufacturer averages 55 days of inventory, collects receivables in 32 days, and pays suppliers in 40 days. Assuming those measures are comparable, what is its cash conversion cycle?
A. 23 days
B. 87 days
C. 127 days
D. 47 days
Source: PRIMARY -- Section 19.1, The Cash Cycle, equation 19.4 (https://openstax.org/books/principles-finance-2e/pages/19-1-what-is-working-capital)
Which action best demonstrates the IMA ethical standard of competence when a management accountant is assigned a valuation using an unfamiliar option-pricing model?
A. Use the unfamiliar model without review because merely accepting the assignment establishes sufficient technical competence for any resulting valuation
B. Replace the option-pricing model with a familiar discounted-cash-flow method even when that substitute does not represent the instrument's economic features
C. Delegate the entire valuation to another employee and disclaim all responsibility for reviewing the assumptions, method, result, or resulting communication
D. Obtain appropriate training or expert assistance, disclose relevant limitations, and perform the work under applicable technical standards
Source: PRIMARY -- Principles and Standards — Competence (https://www.imanet.org/about-ima/ethics-center/statement-of-ethical-professional-practice)
