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What is the best format to use for inserting an image into ArcMap?
The Windows Enhanced Metafile (EMF) is the best format for inserting images as pictures in ArcMap. EMF files allow resizing of images in ArcMap without the loss if integrity or resolution, which you may see if you use a JPEG or BMP formatted image.
If the image is in ArcInfo 1040 Graphics Format (.gra), convert it with the EMF command.