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100+ Free CMA Final Paper 14 (SFM) Practice Questions

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Key Facts: CMA Final Paper 14 (SFM) Exam

100 marks

Paper Total

ICMAI Syllabus 2022

3 hours

Exam Duration

ICMAI Syllabus 2022

5 sections

Syllabus Structure

ICMAI Syllabus 2022

35%

Largest Section (SAPM)

ICMAI Syllabus 2022

40% / 50%

Paper / Group Pass

ICMAI Exam Rules

Group III

CMA Final Group

ICMAI Syllabus 2022

CMA Final Paper 14 (Strategic Financial Management) is a 100-mark, 3-hour Group III descriptive paper under ICMAI Syllabus 2022. The five sections are weighted Section A Investment Decisions 25%, Section B Security Analysis and Portfolio Management 35%, Section C Financial Risk Management 20%, Section D International Financial Management 15% and Section E Digital Finance 5%. Pass criteria are 40% in the paper and 50% aggregate in the group. ICMAI publishes an official MCQ Bank for practice; this free set of 100 MCQs mirrors the section weightings for revision.

Sample CMA Final Paper 14 (SFM) Practice Questions

Try these sample questions to test your CMA Final Paper 14 (SFM) exam readiness. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.

1A project requires an initial outlay of Rs.10,00,000 and is expected to generate uniform annual cash inflows of Rs.2,50,000 for 6 years. At a 10% discount rate (PVIFA 10%, 6 years = 4.355), what is the project's Net Present Value (NPV)?
A.Rs.88,750
B.Rs.5,00,000
C.Rs.10,88,750
D.Rs.2,50,000
Explanation: NPV = (Annual inflow x PVIFA) - Initial outlay = (2,50,000 x 4.355) - 10,00,000 = 10,88,750 - 10,00,000 = Rs.88,750. A positive NPV indicates the project adds value and should be accepted.
2Under the Internal Rate of Return (IRR) method, a conventional independent project is accepted when:
A.IRR is less than the cost of capital
B.IRR is greater than the cost of capital
C.IRR equals zero
D.IRR equals the payback period
Explanation: IRR is the discount rate at which NPV equals zero. An independent project is accepted when its IRR exceeds the firm's required rate (cost of capital), because the project earns more than the cost of financing it.
3When NPV and IRR give conflicting rankings for two mutually exclusive projects, which method should be relied upon and why?
A.IRR, because percentages are easier to interpret
B.Payback, because it is simplest
C.NPV, because it directly measures the absolute addition to shareholder wealth
D.Accounting Rate of Return, because it uses profits
Explanation: For mutually exclusive projects, NPV is theoretically superior because it measures the absolute rupee value added to shareholder wealth and assumes reinvestment at the cost of capital. IRR can mislead due to its reinvestment assumption and scale/timing differences.
4A non-conventional project has cash flows that change sign more than once over its life. This situation may give rise to:
A.A guaranteed single IRR
B.A negative payback period
C.An undefined NPV
D.Multiple IRRs
Explanation: Descartes' rule of signs implies that a cash-flow stream with more than one sign change can produce multiple IRRs (one per sign change). In such cases the IRR rule becomes ambiguous and NPV or modified IRR (MIRR) is preferred.
5The Profitability Index (PI) of a project is 1.25. This indicates that:
A.The present value of inflows is 1.25 times the initial outlay, so the project is acceptable
B.The project should be rejected
C.NPV is exactly zero
D.The IRR equals 25%
Explanation: PI = PV of inflows / Initial outlay. A PI of 1.25 means inflows are 25% greater than the outlay in present-value terms, so NPV is positive and the project is acceptable. PI above 1 implies acceptance.
6Under capital rationing with divisible projects, projects should be selected to:
A.Choose only the project with the highest IRR
B.Maximise total NPV within the budget constraint, ranking by profitability index
C.Choose the project with the shortest payback
D.Accept all projects regardless of the budget
Explanation: Under single-period capital rationing with divisible projects, ranking by Profitability Index and selecting until the budget is exhausted maximises total NPV per rupee of scarce capital. The goal is wealth maximisation subject to the funding limit.
7In capital budgeting under risk, the Certainty Equivalent (CE) approach adjusts for risk by:
A.Increasing the discount rate above the risk-free rate
B.Ignoring risky cash flows altogether
C.Multiplying risky cash flows by certainty-equivalent coefficients and discounting at the risk-free rate
D.Adding a risk premium to every cash flow
Explanation: The CE approach converts uncertain cash flows into their certain equivalents using coefficients (0 to 1) that decline with greater risk, then discounts these at the risk-free rate. This separates risk adjustment (in the numerator) from the time-value adjustment (in the denominator).
8The Risk-Adjusted Discount Rate (RADR) method incorporates project risk by:
A.Reducing cash flows by a certainty coefficient
B.Discounting at the risk-free rate only
C.Lowering the discount rate for riskier projects
D.Adding a risk premium to the risk-free rate to derive a higher discount rate for riskier projects
Explanation: RADR = Risk-free rate + Risk premium. Riskier projects are discounted at higher rates, lowering their present value to compensate investors for bearing additional risk. The adjustment occurs in the denominator.
9The coefficient of variation is used to compare the risk of two investment projects because it measures:
A.Risk per unit of expected return (standard deviation divided by mean)
B.Absolute total risk only
C.The correlation between projects
D.The payback period adjusted for risk
Explanation: Coefficient of variation = Standard deviation / Expected value. It expresses relative risk per unit of return, allowing a fair comparison between projects with different expected values or scales. A lower CV indicates a better risk-return trade-off.
10Sensitivity analysis in capital budgeting primarily helps a manager identify:
A.The exact probability distribution of NPV
B.Which input variable has the greatest impact on a project's NPV
C.The optimal capital structure
D.The certainty-equivalent coefficients
Explanation: Sensitivity analysis changes one input at a time (e.g., sales volume, price, cost) to see how the project's NPV responds, revealing the variables to which the outcome is most sensitive. It identifies critical risk drivers but does not assign probabilities.

About the CMA Final Paper 14 (SFM) Exam

CMA Final Paper 14, Strategic Financial Management (SFM), is a Group III paper under ICMAI Syllabus 2022. It covers investment decisions, security analysis and portfolio management, financial risk management with derivatives, international financial management and digital finance across a 100-mark, three-hour written examination.

Assessment

Question count not published by the exam provider

Time Limit

3 hours (180 minutes)

Passing Score

Minimum 40% in the paper and 50% aggregate in the group

Exam Fee

Covered under the CMA Final group examination fee; Paper 14 is not separately priced (The Institute of Cost Accountants of India (ICMAI))

CMA Final Paper 14 (SFM) Exam Content Outline

25%

Section A: Investment Decisions

Capital budgeting (NPV, IRR, MIRR, PI), evaluation of risky proposals (RADR, certainty equivalent, sensitivity, simulation, decision trees), real options, leasing decisions and securitisation.

35%

Section B: Security Analysis and Portfolio Management

Equity and bond valuation, duration and convexity, mutual funds and NAV, Markowitz portfolio theory, CAPM and APT, performance evaluation (Sharpe, Treynor, Jensen) and the efficient market hypothesis.

20%

Section C: Financial Risk Management

Risks in financial markets and financial derivatives: forwards, futures, options, swaps, FRAs, caps, hedging, Value at Risk, the Greeks and option pricing.

15%

Section D: International Financial Management

International financial environment, foreign exchange markets, parity conditions (PPP, IRP, IFE), transaction/translation/operating exposure, GDR/ADR financing and foreign project appraisal.

5%

Section E: Digital Finance

Digital finance ecosystem, blockchain, UPI and digital payments, robo-advisory, CBDC, AI and big-data applications, and regulation and governance.

How to Pass the CMA Final Paper 14 (SFM) Exam

What You Need to Know

  • Passing score: Minimum 40% in the paper and 50% aggregate in the group
  • Assessment: Question count not published by the exam provider
  • Time limit: 3 hours (180 minutes)
  • Exam fee: Covered under the CMA Final group examination fee; Paper 14 is not separately priced

Keys to Passing

  • Work through all 100 available questions
  • Review every answer and explanation
  • Track weak areas and revisit them
  • Use our AI tutor for tough concepts

CMA Final Paper 14 (SFM) Study Tips from Top Performers

1Allocate the most time to Section B (35%) and Section A (25%), which together carry 60% of the paper.
2Practise derivatives, capital budgeting and portfolio numericals with full workings, since SFM is heavily computational.
3Memorise key formulas (NPV, CAPM, duration, put-call parity, IRP, PPP) and the conditions under which each applies.
4Do not neglect the new Digital Finance section; its 5% weight offers easy conceptual marks.
5Use ICMAI's official MCQ Bank and past papers to time yourself for the 3-hour written format.
6Maintain an error log tagged by section to focus revision on weak areas.

Frequently Asked Questions

How many sections does CMA Final Paper 14 have and how are they weighted?

Under ICMAI Syllabus 2022, Paper 14 has five sections: Investment Decisions (25%), Security Analysis and Portfolio Management (35%), Financial Risk Management (20%), International Financial Management (15%) and Digital Finance (5%).

Is CMA Final Paper 14 a multiple-choice exam?

No. The actual ICMAI examination for Paper 14 is a 100-mark descriptive written paper of 3 hours. However, ICMAI publishes an official MCQ Bank for Paper 14, and this free 100-question set mirrors the syllabus for objective practice and revision.

What is the passing requirement for CMA Final Paper 14?

A candidate must secure a minimum of 40% marks in Paper 14 and an aggregate of 50% across the papers in Group III to clear the group, as per ICMAI examination rules.

Which group does Paper 14 belong to in CMA Final?

Paper 14, Strategic Financial Management, is part of Group III of the CMA Final course under the ICMAI Syllabus 2022 structure.

What topics carry the most weight in Paper 14?

Security Analysis and Portfolio Management is the largest section at 35%, followed by Investment Decisions at 25% and Financial Risk Management at 20%. International Financial Management is 15% and Digital Finance is 5%.

Does ICMAI provide free study material for Paper 14?

Yes. ICMAI provides official study notes and an MCQ Bank for Paper 14 free to registered CMA Final students through the students section of the ICMAI website.