Part 4, the Business Applications section of the CMA^® exam, is unique among the exam parts. Part 4 is different because:

• It consists of business-oriented essays, rather than multiple-choice questions

• It covers all the topics from parts 1, 2, and 3, as well as organizational management, organization communication, behavioral issues, and ethical considerations.

• It can only be taken after a candidate has passed parts 1, 2, and 3.

• It is the only exam part where a candidate will not know their results immediately after completing the test. Instead, the essays are read and graded by subject-matter experts and results are mailed 6-10 weeks after the test.

Candidates have three hours to complete Part 4, and the number of questions varies based on the essays included in the particular test form. All questions include a description of a situation, for which a written answer is then required. Typically, Part 4 questions use words such as “discuss,” “explain,” “compare and contrast,” and “identify.” Questions also include a suggested time limit for completing the answer.

Following are some sample questions (suggested time for each is 30 minutes):

Question #1

FullRange, Inc., produces complex chips for personal electronic products such as music recording devices. A common product defect that occurs in production, however, is a “drift” caused by failure to maintain precise heat levels during the production process. Production managers maintain that rejects from the testing program can be reworked to acceptable levels, but based on an analysis of customer complaints, George Wilson, the cost accountant, and the quality control engineer have ascertained that the normal rework does not bring the chips up to standard. While the rework process could be changed to correct the problem, a cost-benefit analysis shows that this is not feasible. Moreover, market analysis shows that that the problem will have a significant economic impact on the company's reputation and customer satisfaction if not corrected.

Wilson has included the chip failure and rework problem in his quarterly report prepared for the Board of Directors, including highlighting the potentially adverse economic impact. After reviewing the reports to be presented to the Board, the plant manager and his staff are concerned and tell the controller: “We can't upset the Board with this kind of material. Tell Wilson to tone that down.” The controller then tells George he must bury the information, and that while the probable failure of reworks can be referred to briefly in the oral presentation, it should not be mentioned or highlighted in the advance material sent to the Board.

Wilson feels strongly that the Board will be misinformed about the potentially serious loss of income if he follows the controller's orders. Wilson discusses this problem with the quality control engineer, who simply remarks, “That's your problem, George.”

REQUIRED:

1. Discuss the ethical considerations that George Wilson should recognize in this situation by referring to the specific standards of the IMA Statement of Ethical Professional Practice.

2. What should George Wilson do in this situation? Explain your answer.

Question #2

The Gershenfeld Foundation was established 25 years ago to encourage, promote, and support research in the physical sciences. A wide range of industrial corporations contribute money in support of the foundation's work. The foundation has awarded research grants at a rate commensurate with its contributions and portfolio earnings.

Gershenfeld's contributions have increased significantly in the past few months. The results of the foundation's recent fund drive exceeded the expectations of the Board of Trustees. New research grants are being reviewed and evaluated, but a final decision on which grants to fund and the amount of funding will not be made for at least 60 days. Thus, Gershenfeld has an excess cash position that is expected to continue for two months.

The Board of Trustees has instructed the foundation's Executive Director to invest the excess cash during this interim period. The Executive Director has been instructed to earn the highest possible yield while maintaining marketability and safety of principal. The types of investments that the Executive Director is considering for the use of $3.5 million of excess cash are (1) certificates of deposit, (2) U.S. Treasury bills, and (3) preferred stock of domestic corporations.

REQUIRED:

1. Define each of the following financial instrument characteristics and explain the effect each has on the yield of investments:
   1. Default risk.
   2. Marketability.
   3. Maturity.
2. Evaluate each type of investment being considered by Gershenfeld's Executive Director in terms of default risk, marketability, and maturity.
3. Discuss the suitability of each type of investment being considered by the Executive Director for Gershenfeld Foundation's particular situation.

High-scoring responses to these questions will include essays that persuasively demonstrate a mastery of the knowledge being tested and which clearly address all the required points. Things to keep on mind during the test include:

• Monitor the suggested time. If the essay says 45 minutes, don't spend over an hour on it!

• Read the question carefully, and answer what is asked.

• If the question asked for three reasons, don't leave points on the table by identifying and describing only two

• If the question says “Identify and explain” don't forget to explain!

• Show all the steps in a calculation. Even if the final answer is incorrect the graders can give partial credit.

• Know IMA's Statement on Ethical Professional Practice.

To learn more about the content of the CMA exam, visit the following links: CMA Exam Content Specifications and CMA Exam Learning Outcome Statements

Coping with Test Anxiety

A discussion of Part 4 presents a perfect time to talk about test anxiety because, more than any other exam part, it can include just about anything.

While a certain amount of anxiety is common for nearly everyone, there are some things a candidate can do to help minimize time wasting and sometimes debilitating stress.

Surprises on testing day can be a major source of stress. To minimize the surprises that await you, arrange to visit the testing center in advance. Figure out the route you are planning to take, as well as alternate routes, and track how long it takes to get there. Find out where to park. Talk to the center employees and tour the facilities. By doing these things, you will gain a level of familiarity with the testing environment that should translate into significantly lower stress on testing day.

On testing day, you can help lower both physical and mental stress. On the physical side, dress in layers, in case you get overheated. If the screen monitor is giving you a headache when you stare at it for too long, periodically give your eyes a rest.

The mental side of stress is often the most challenging. While taking the test, try not to fret over the possibility of failure. Most successful exam-takers devote all their mental effort during the exam to performing well – and none to thinking about how well they are performing.

If you draw a “blank” during the exam, don't panic, since such an occurrence is quite normal. Return to the question later, or take a few moments to relax until it comes back to you. Try to replace self-defeating thoughts like “I haven't studied enough,” or “I don't know the material,” with more positive internal messages – chances are you know more about the material than you think.

Remember, too, that if you end up failing the exam, it's not a catastrophe – you can always try again.

Stay focused and do your best. You just might surprise yourself.