Practice Test Geeks(CMA) Certified Market Analyst Practice Test
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Economic & Financial Analysis Flashcards

7 cards from real CMA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Economic & Financial Analysis flashcards as text

  1. Which of the following statements about the efficient market hypothesis (EMH) is CORRECT under the semi-strong form?

    Answer: Fundamental analysis using public information cannot consistently beat the market

    Under semi-strong form EMH, all publicly available information is already reflected in prices, so fundamental analysis cannot consistently generate alpha.

  2. A company issues new equity to fund a major acquisition. Assuming the acquisition is fairly priced, what is the MOST likely immediate effect on existing shareholders?

    Answer: EPS is diluted due to the increase in shares outstanding

    Issuing new shares increases the share count, diluting existing shareholders' EPS if the acquisition does not immediately generate proportional additional earnings.

  3. Which scenario best illustrates the concept of 'moral hazard' in financial markets?

    Answer: A bank takes excessive risks because it expects a government bailout

    Moral hazard occurs when one party takes on greater risk because they believe the negative consequences will be borne by another party, such as taxpayers via a bailout.

  4. An analyst is comparing two companies with similar revenues. Company A has high operating leverage and Company B has low operating leverage. Which statement is MOST accurate?

    Answer: Company A's profits will fluctuate more than Company B's during economic cycles

    High operating leverage means a higher proportion of fixed costs, causing operating income to amplify changes in revenue — more volatile across business cycles.

  5. Under the Capital Asset Pricing Model (CAPM), a stock with a beta of 1.5, a risk-free rate of 3%, and a market risk premium of 6% has an expected return of:

    Answer: 12.0%

    CAPM: E(R) = Rf + β × (Rm − Rf) = 3% + 1.5 × 6% = 3% + 9% = 12%.

  6. Which of the following best describes 'stagflation' and its challenge for monetary policymakers?

    Answer: Simultaneous high inflation and high unemployment, making standard policy tools ineffective

    Stagflation combines high inflation and high unemployment — raising rates to fight inflation worsens unemployment, while cutting rates to boost employment worsens inflation.

  7. A market analyst is performing a sensitivity analysis on a DCF model. Which input, if varied, typically has the GREATEST impact on the estimated intrinsic value?

    Answer: Terminal growth rate assumption

    The terminal growth rate drives the terminal value, which typically represents 60-80% of total DCF value, making it the most impactful single input in sensitivity analysis.