Financial Management

A corporation is issuing 10% common stock that should be sold for Php 15 each. The business will incur flotation costs of Php 5 per share. What is the cost of equity?

• a. 33.3%
• b. 15%
• c. 10%
• d. 3%

This is the process in which a business determines and evaluates potential expenses or investments that are large in nature.

• a. Monetary Management
• b. Financial Capital
• c. Capital Budgeting
• d. Investment-expense Analysis

Minden Co has current assets that consist of cash: 20,000, receivables: 70,000 and inventory: 90,000. Current liabilities are 75,000. The quick ratio is

• 2
• 3.2
• 2.2
• 1.2

A corporation is issuing 10% common stock that should be sold for Php 15 each. The business will incur flotation costs of Php 2 per share. With growth rate of 5% What is the cost of capital?

• a. 13.54%
• b. 16.54%
• c. 61.54%
• d. 4.12%

According to this approach, the mix of debt and equity capital can increase the value of the firm by reducing overall cost of capital up to certain level of debt.

• a. Classical Approach
• b. Modern Approach
• c. Traditional Approach
• d. Medieval Approach

This fund is used for daily operations

• Semi-variable Capital
• Variable Capital
• Working capital
• Fixed Capital

This is the after tax cost of long-term funds through borrowing.

• a. Total return
• b. Return on debt
• c. Cost of capital
• d. Cost of debt

Which does not belong to the group?

Which of the following statements is true?

• One of the benefits of being a financial manager is that you can get funds in the business entity without prior approval.
• A financial manager just delegates the responsibilities to his people and just wait for the results.
• The finance manager must posses knowledge in the areas of accounting, finance, economics and management.
• All of the statements are correct.

Which is an example of borrowed funds?

• retained earnings
• equity shares
• none of these
• debentures

Which statement is true?

• Interest rate of return is a non-discount method
• Accounting Rate of Return is a discount method
• Payback method is a traditional method
• Net present value is a non-discount method

This is concerned with the increase in revenue and decrease in costs and expenses

• Wealth maximization
• Expense minimization
• Revenue maximization
• Profit maximization

Minden Co has current assets that consist of cash: 20,000, receivables: 70,000 and inventory: 90,000. Current liabilities are 75,000. On the basis of the current ratio and the quick ratio, Minden Co is:

• not liquid
• adequately liquid
• cannot be determined
• inadequately liquid

This is essentially an accounting strategy with a focus on the maintenance of a sufficient balance between a company’s current assets and liabilities

• Capital Budgeting
• Property Maintenance
• Working Capital
• Working Capital Management

This is the required return on investment of the common shareholders of the company.

• a. Return on common share
• b. Return on Investment
• c. Cost of Equity
• d. Return on Equity

These shares represent the ownership of a company and thus the capital raised by issue of such shares is known as ownership capital or owner’s funds.

• share capital
• owned shares
• equity shares
• watered shares

This one measures and considers the cash inflows earned after pay-back period.

• Internal Rate of Return
• Net Present Value
• Accounting Rate of Return
• Post-Payback Profitability

FPL Co has sales of 500,000, net operating profit of 50,000, interest expense of 10,000, tax expense of 20,000, total equity of 125,000 and total debt of 275,000. Their return on equity in comparison to their return on assets is:

• ROA is lower than ROE
• ROA is higher than ROE
• None of these
• ROA is equal to ROE

Which is not an objective of inventory management?

• To achieve efficient and smooth production process
• To avoid under stock of inventory and to let the entity have over stocks
• To meet the seasonal demand of the products
• To ensure the level and site of inventories required

Examples of this outlay are the purchase of fixed assets such as land and building, plant and machinery, expenses relating to improvement or renovation these fixed assets and costs incurred for the research and development projects

• Fixed capital
• Fixed Assets
• Working Capital
• Working Assets

Current assets divided by current liabilities is the definition of the:

• Current ratio
• Debt ratio
• Quick ratio
• Earnings per share

The quick ratio is defined as:

• current assets divided by total debt
• assets less inventory, divided by total liabilities
• current assets divided by current liabilities
• current assets less inventory, less prepaid expenses. The resulting amount will then be divided by current liabilities

This is also considered as the evaluation of the ability of a company to pay its financial obligations

• Credit Standards
• Credit Policies
• Credit Terms
• Credit Analysis

The finance manager must find ways to expedite cash collection while prolonging payments

• Acquiring necessary capital
• Cash Management
• Investment decision
• Forecasting Financial Requirements

If you have a financial source that is required to be paid within four years, you have a

• a. Short-term source
• b. Medium-term source
• c. Long-term source
• d. Perpetual source

Which is not a part of capital budgeting process?

• a. Performance Review
• b. Observation of proposal making
• c. Fixing property
• d. Screening proposals

The planning committee approves the proposals, with the help of profitability, economic constituents, financial volatility and market conditions.

• Screening of Proposals
• Evaluation
• Review
• Final Approval

The payable turnover is equal to 6, what is the average payment period?

• 60 days
• 70 days
• 6 days
• 1/6 day

These are policies that provide the framework to determine whether or not to extend credit to a customer and how much credit to extend.

• Credit Terms
• Credit Policies
• Credit Standards
• Credit Analysis

Return on sales, return on assets and return on equity are examples of

• liquidity ratios
• leverage ratios
• profitability ratios
• activity ratios

In this decision type of decision making, there are more than one proposal to be chosen however the firm has limited funds so that’s why they must ration these project proposals. Usually, they select a group of projects that yield the highest total return given such limited funds.

• none of the above
• Accept-Reject
• Mutually Exclusive
• Capital Rationing

This type financing borrows money with interest from financial institutions such as banks and credit-unions.

• Internal financing
• Mixed Financing
• Loan Financing
• Security Financing

Which is considered as medium-term source finance?

• FPL Co. Loaned an amount payable in 2 years.
• Mr. P made a written promise to pay to Mr B the ammount of 1,000,000 within 1 medium year.
• FPL Co. had a net income after taxes worth 10,000,000. It decided to distribute 4,000,000 as dividends and retained 6,000,000 for future business use.
• FPL Co. made trade credit from ABC Co. This is because the company has no enough resources to pay the amount immediately.

This analysis is usually used to understand operational performance of the entity to help in making their business decisions.

• Overall Analysis
• Internal Analysis
• External Audit
• External Analysis

This is the required return on investment of the lenders of a company.

This refers to a situation in which possible future events can have reasonable probabilities assigned while uncertainty refers to situations in which there is no viable method of assigning probabilities to future random events.

• Risk
• Probability
• Luck
• Capital

This is an analysis of percentage financial statements where all balance sheet or income statement figures are expressed for a base year equal 100 percent and subsequent financial statement items are expressed as percentages of the values in the base year.

• Vertical Analysis
• Common Size Analysis
• None of these
• Index analysis

The Merriam Company has determined that its return on equity is 15 percent. Management is interested in the various components that went into this calculation. You are given the following information: (total debt)/(total assets) = 0.35 and total assets = 1,000,000. What is the net income?

• 23,333
• 428,571
• 97,500
• 52,500

Which of the following is not a classification of funds on the basis of period?

• medium-term sources
• Long term sources
• External Sources
• Short term sources

This is the amount of profit, or return, that an individual can expect based on an investment made.

• Accounting Rate of Return
• Payback Period
• Post-Payback Profitability
• Internal Rate of Return

This is a decision support tool that uses a tree-like graph or model of decisions and their possible consequences, including chance event outcomes, resource costs, and utility.

• a. Financial Tree Analysis
• b. Decision Tree Analysis
• c. Tree of Chances Analysis
• d. Financial Tree Diagram

Which is not a motive of holding cash?

• a. Speculative motive
• b. Transaction motive
• c. Precautionary motive
• d. Auto Motive

FPL Company plans to make Php50,000 loan with Php7,000 annual interest. If the cost incurred related to this instrument is Php2,000 and the total tax rate is 30%, what is the cost of debt?

• a. 10.00%
• b. 4.38%
• c. 9.80%
• d. 10.21%

Which of the following can increase net profit margin?

• Sell merchandise with 20% mark-up from the original price
• Sell merchandise with 20% discount
• Buy merchandise
• none of these

Amazona company wants to increase its debt to total assets ratio, which of the following activities could make this possible?

• Make a loan
• Buy merchandise on account
• Receive donation
• Buy equipment for manufacturing purposes

Which of the following alternatives could potentially increase current ratio?

FPL Company has a net working capital of 100,000 and the company has 200,000 total liabilities of which 150,000 are long term debts. What is the gross capital?

• a. 150,000
• b. 200,000
• c. 300,000
• d. 250,000

This is the discount rate that equates the present value of the expected net cash flows with the initial cash outflow

• Internal Rate of Return
• Payback Period
• Net Present Value
• Post-Payback Profitability

Shepherd Enterprises has a debt-to-equity ratio of 40 percent. The company’s total assets is equal to Php 800 million. What is the value of the company's total liabilities?

• Php 320,000,000
• Php 2,400,000,000
• Php 228,571,429
• Php 458,428,472

Which is an example of owner's financing?

• commercial papers
• Retained Earnings
• debentures
• lease financing

This refers to the unsecured deposits invited by companies from the people mainly to finance working capital needs.

• public deposit
• loans
• equity shares
• trade credit

The difference between the present value of cash inflows and the present value of cash outflows.

• Payback Period
• Net Present Value
• Post-Payback Profitability
• Internal Rate of Return

Which is not a process in capital budgeting?

• Evaluation and selling of proposals
• Screening or Matching the Proposals
• Performance Review
• Identification of Various Investment Proposals

This is the minimum amount of capital that must be maintained

• Permanent Working Capital
• Temporary Working Capital
• Net Working Capital
• Gross Working Capital

This is also known as the benefit-cost ratio of a project.

• Profitability Ratio
• Internal Rate of Return
• Post-Payback Profitability
• Net Present Value

These are sources of finances which have a required of payment for a period not exceeding one year.

• a. Long-term
• b. Medium-term
• c. Perpetual
• d. Short-term

Lone Star Plastics has the following data: Gross Sales 100,000 Gross profit margin 6.0% Tax rate 40% What is Lone Star’s net income after taxes?

• 24,000
• 12,000
• 3,600
• 4,500

Which of the following does not belong to the group?

• a. net operating income approach
• b. Modigliani and Miller Approach
• c. Net Income approach
• d. Intermediate Approach

These are goods which have not yet been committed to production in a manufacturing business concern

• Raw materials
• Finished Goods
• Work in Progress
• Goods in Transit

Lancaster Co. and York Co. have the same value of return on assets (ROA). What will happen if Lancaster Co. adjusts its accounting records for the disposal of unusable equipment at a loss?

• Lancaster Co.'s ROA will be lower than York Co.
• Lancaster's ROA will increase.
• Lancaster Co.'s profit margin will be lower than York Co.
• York Co's ROA will decrease.

FPL Co has sales of 500,000, net operating profit of 50,000, interest expense of 10,000, tax expense of 20,000, total equity of 125,000 and total debt of 275,000. The net profit margin is:

• 8%
• 15%
• 9%
• 10%

The current assets and current liabilities of FPL company is 25 and 25 respectively. Reviewing the past transactions the company purchased merchandise worth 5 and it was immediately paid. However, it was discovered that this transaction was mistakenly recorded as a purchase on account. After adjusting the errors, what is the the current ratio?

The competent authority spends the money for the proposals

• Evaluation
• Performance Review
• Fixing priorities
• Implementing

Which of the following is not a form of special financing?

• a. Mutual Funding
• b. Factoring
• c. Merchant banking
• d. Online Bankng

This shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing and financing activities

• Statement of Cash Flows
• Statement of Financial Position
• Statement of Changes in Equity
• Income Statement

This is an investment vehicle for investors who pool their savings for investing in diversified portfolio of securities with the aim of attractive yields and appreciation in their value.

• a. mutual fund
• b. factoring
• c. merchant banking
• d. venture capital

FPL company has machineries and equipment worth 150,000, land and building for business 1,000,000, Cash 150,000, Inventories 30,000 and accounts receivables 50,000. He also owes 200,000 to a bank. How much is the gross working capital?

• a. Php 1,180,000
• b. Php 380,000
• c. Php 230,000
• d. Php 1,380,000

This is an industry for borrowers with a limited or tainted credit history.

• a. Business Finance
• b. International Finance
• c. Personal Finance
• d. Special Finance

FPL Company has a total Assets worth 400,000 of which 250,000 are non current the company also has 200,000 total liabilities of which 150,000 are long term debts. What is the gross working capital?

• a. 100,000
• b. 200,000
• c. 300,000
• d. 150,000

This is concerned with the acquisition, financing, and management of assets with some overall goal in mind. Its decision function includes areas such as investment, financing, and asset management decisions

• Financial Management
• Managerial Accounting
• Financial Concern
• Financial Accounting

FPL Company has a total Assets worth 400,000 of which 250,000 are non current the company also has 200,000 total liabilities of which 150,000 are long term debts. What is the net working capital?

FPL Co has current assets of 180,000 (cash: 20,000, accounts receivable: 70,000, inventory: 90,000), and long-term assets that had an amount of 400,000, exclusive of accumulated depreciation worth 180,000. Sales were 500,000, and operating profit was 50,000. Tax was 20,000 and interest paid was 10,000. Their total asset turnover ratio is:

• 1.25
• 2.00
• 1.75
• 1.5

PFL Co has sales of 500,000, operating profit of 50,000, interest expense of 10,000, tax expense of 20,000, total equity of 125,000 and total debt of 275,000. Their return on equity is:

• 18%
• 12%
• 16%
• 10%

The current assets and current liabilities of FPL company is 10 and 20 respectively. Reviewing the past transactions the company purchased merchandise worth 5 and it was immediately paid. However, it was discovered that this transaction was mistakenly recorded as a purchase on account. After adjusting the errors, what is the the current ratio?

If you have a financial source that is required to be paid within ten years, this describes

• a. Medium-term source
• b. Perpetual source
• c. Short-term source
• d. Long-term source

Fama’s French Bakery has a return on assets (ROA) of 10 percent and a return on equity (ROE) of 14 percent. If equity is equal to 100,000. What is the value of total assets?

• 14,000
• 140,000
• 1,400,000
• 1,400

This is a form of financing which is mobilized through the issuance of securities such as shares and debenture

• a. Mixed Financing
• b. Security Financing
• c. Loan Financing
• d. Internal financing

Given: Debt= 1,000,000 ; Common Shares = 10,000,000 ; Preference Shares = 5,000,000 Cost of Debt = 10% ; Cost of Preference Shares = 5% ; Cost of Equity = 3%

• a. 1,250,000
• b. 650,000
• c. 750,000
• d. 1,050,000

Which of the following alternatives could potentially result in a increase of current ratio?

• Bought merchandise on account
• Bought merchandise using cash available.
• Retired damaged equipment.
• none of these

This is a measurement of the degree to which a firm or project incurs a combination of fixed and variable costs

• a. Degree of Operating Leverage
• b. Combined Degree of Leverage
• c. Degree of Financial Leverage
• d. Leverage

This is the credit extended by one trader to another for the purchase of goods and services

• a. bank loans
• b. debentures
• c. notes
• d. trade credit

The financial manager finds ways on how to obtain various capitalization for the business

• Investment decision
• Forecasting Financial Requirements
• Acquiring necessary capital
• Cash Management

FLP Company has 1000 existing common shares. The market value of the share is Php 90 and the net earnings is Php 1,000. What is the cost of Capital assuming that the new shares will be issued at market price?

• a. 0.01%
• b. 11.11%
• c. 1.11%
• d. 0.11%

Which is not a function of financial management?

• Forecasting Financial Requirements
• Acquiring Necessary Capital
• Cash Management
• Personnel Management

Identify what is being described. The company had a net profit after taxes worth Php 1,000,000. The board and the management decided not to distribute dividends to shareholders instead, it retained its earnings for the year so that the business can have resources for future use.

• Savings Promotion
• Proper use of funds
• Increasing the value of the firm
• Improvement of profitability

FPL Co has sales of 500,000, operating profit of 50,000, interest expense of 10,000, tax expense of 20,000, total equity of 125,000 and total debt of 275,000. Their debt to assets ratio is:

• 70%
• 68.75%
• 72.75%
• 58.25%

FPL Company has a gross working capital of 100,000 and the company has 200,000 total liabilities of which 150,000 are long term debts. What is the total current assets?

• a. 250,000
• b. 150,000
• c. 100,000
• d. 50,000

Ratios that measure the ability of the company to pay its short-term debts are called:

• liquidity ratios
• profitability ratios
• leverage ratios
• activity ratios

This is the completed products and is already final output of the production process

• Goods in transit
• Finished Goods
• Work in progress
• Raw materials

If you have a total assets of 100 and 25% is inventory, what is the Quick ratio if current liability is 100?

• 0.25
• 1.25
• 0.75
• 2.00

This includes materials which have been put into production process but have not yet been completed

• Raw Materials
• Finished Goods
• Work in Progress
• Goods in Transit

In this financial statement analysis method, all figures are expressed as percentages of an important item such as total assets in the statement of financial position and net sales in income statement

• none of these
• Horizontal Analysis
• Common Size Analysis
• Index analysis

FPL Company's average profit is 150,000. What is the average investment if accounting rate of return is 5.5?

• 825,000
• 36,000
• 122,727.27
• 27,272.73

This refers to the variability of returns due to fluctuations in the securities market which is more particularly to equities market

• Inflation Risk
• Business Risk
• Market Risk
• Financial Risk

A firm has a profit margin of 15 percent on sales of 20,000,000. If the firm has debt of 7,500,000 and total assets of 22,500,000 what is the firm’s ROA?

• 13.3%
• 10.9%
• 12.0%
• 8.4%

In this type of analysis you may compare figures from several years, so you are comparing the amounts in each account from the past up to the present.

• internal analysis
• external audit
• horizontal analysis
• vertical analysis

This is the capital invested in total current assets of the business concern.

• a. Financial casipal
• b. Gross Working Capital
• c. Fixed Capital
• d. Net Woking Capital

This is concerned with the increase in revenue and decrease in expenses

• Wealth maximization
• Expense minimization
• Profit maximization
• Revenue maximization

What is the ultimate objective of Financial Management?

• Profit maximization
• Expense minimization
• Wealth maximization
• Revenue maximization

These proposals are those that compete with other. Therefore, the acceptance of one proposal will exclude the acceptance of the other proposals.

• a. none of the above
• b. Capital Rationing
• c. Accept-Reject
• d. Mutually Exclusive

Its objective is to provide information about the financial position and the financial performance and cash flows of an entity that is useful to a wide range of users in making economic decisions

• Statement of Operational Performance
• Financial Statements
• Statement Corporate Taxes
• Fund Flow Statement

This type of decision making applies when the projects proposed are independent from each other. The acceptance or rejection of one proposal does not affect the decision on the other proposals.

• a. Accept-Reject
• b. Mutually Exclusive
• c. none of the above
• d. Capital Rationing

Analyze the given choices and identify which one is not included when these finances will be classified on the basis of source of generation.

• Debentures
• Retained Earnings
• Public Deposits
• Loans

This represents the basic criteria for the extension of credit to customers.

• Credit Terms
• Credit Analysis
• Credit Standards
• Credit Policies

Sexy Corporation’s current ratio is 0.5, while Coke Company’s current ratio is 1.5. Both firms want to “window dress” their coming end-of-year financial statements. As part of its window dressing strategy, each firm will double its current liabilities by adding short-term debt and placing the funds obtained in the cash account. Which of the statements below best describes the actual results of these transactions?

• The transactions will have no effect on the current ratios.
• Only Sexy Corporation’s current ratio will be increased.
• The current ratios of both firms will be increased.
• The current ratios of both firms will be decreased.

Which is not included in the group

• Savings Promotion
• Forecasting Financial Requirements
• Cash Management
• Interrelation with Other Departments

This is a metric that measures the degree to which a company uses fixed income securities such as debt and preferred equity.

• a. Degree of Operating Leverage
• b. Combined Degree of Leverage
• c. Leverage
• d. Degree of Financial Leverage

Which of the following statements is correct regarding capital structure theories?

• The capital structure decision is relevant to the valuation of the firm in the net income approach
• Traditional approach is similar to intermediate approach
• Modigliani and Miller approach states that the financing decision of a firm affects the market value of a firm in a perfect capital market.
• Capital Structure is the mix or proportion of a firm’s permanent long-term financing represented by debt and preferred stock only

This is the use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment.

• a. efficacy
• b. leverage
• c. efficiency
• d. capital efficiency

FPL Company's average profit is 1,000,000 and his average investment is 450,000. What is the Accounting rate of return?

• 3.33
• 2.22
• 0.45
• .9.9

Which is not included in the group?

• Asset Turn over
• Business turn over
• Inventory turn over
• Average payment period

Which does not belong to the classification of the sources of financing?

• a. based on period
• b. based on the source of generation
• c. based on ownership
• d. based on interest

Mr. P plans to buy new equipment worth Php 1,000,000 in order to improve efficiency of his manufacturing business. The incremental net cash inflow that it can generate is Php 400,000 per year. What is the post payback profitability if the equipment has 5 years of estimated useful life?

• Php 600,000
• Php 1,000,000
• Php 800,000
• Php 400,000

FPL Company owes Php20,000 to supplier A, Php30,000 to Supplier B, 50,000 to Supplier C and a long term bonds payable 10,000. After struggling in its operations, the company ended up having Php20,000 cash on hand, Php30,000 worth inventories, Php40,000 Accounts receivable and equipment worth Php50,000. What is the net working capital?

• a. none of these
• b. Php 70,000
• c. Php 40,000
• d. Php 30,000

The objective of having a good _____________________ is to maximize the value of the firm and minimize the overall cost of capital.

• a. Business
• b. Income
• c. Operations
• d. Capital structure

If the current ratio is equal to 2, and current liabilities is 100, how much is the current assets?

• 200
• 50
• 250
• 150

These are funds that are required to purchase fixed assets such as land, building, plant, machinery, furniture and fixtures.

• Working capital
• Variable Capital
• Semi-variable Capital
• Fixed Capital

Return on equity is directly affected by

• net income and equity
• number of shares and liabilities and non-accountable transactions
• total assets and non-financial transactions
• net income, number of shares and dividends

Company A’s ROE is 20 percent, while Company B’s ROE is 15 percent. Which of the following statements can be true?

• None of these
• Company A and company B have equal amount of Assets
• Company A and Company B have the same amount of Liability.
• Company A and Company B have equal amount of Equity.

FPL decided to buy an equipment worth Php 100,000. This can generate net cash inflow of 125,000 per year (365 days). What is the payback period?

• 8 months
• 288 days
• 292 days
• 1 year and 183 days

This is the required rate of return on the various types of financing.

• a. Cost of capital
• b. Total return
• c. Return on debt
• d. Cost of debt

Total asset turnover, receivables turnover and inventory turnover ratios measure

• efficacy
• profitability
• efficiency
• liquidity

This is an investment made by a company from one country into a company from another country.

• a. Public-private Partnerships
• b. mutual fund
• c. Foreign Direct Investment
• d. International Funding

Which of the following is not considered a capital component for the purpose of calculating the weighted average cost of capital (WACC) as it applies to capital budgeting?

• a. Common Stock
• b. Accruals
• c. Long-term debt
• d. preferred Stock

Which statement is false

• Financial decision will affect the entire business operation because decisions have indirect relationship with the various department functions.
• Effective financial management helps you promote and mobilize individual and corporate savings
• Financial management is essential in the business especially in the corporate sectors.
• With the help of strong financial control devices such as budgetary control, ratio analysis and cost volume profit analysis, financial management can improve the profitability position of the business

In this type of financing, the business entity which has already operated may get funds internally from depreciation funds and retained earnings.

• a. Internal financing
• b. Mixed Financing
• c. Security Financing
• d. Loan Financing

This is the condition under which goods are sold on credit are referred as credit terms. This basically includes credit period, cash discount and cash discount period

• Credit Standards
• Credit Policies
• Credit Terms
• Credit Analysis

This is a measure of both a company's efficiency and its short-term financial health.

• a. Working Capital
• b. Financial Capital
• c. Net Capital
• d. Fixed Capital

Minden Co has current assets that consist of cash: Php20,000, receivables: Php70,000 and inventory: Php90,000. Current liabilities are Php75,000. The current ratio is:

• 3.2
• 2
• 2.4
• 2.2

The payable turnover is equal to 60, what is the average payment period?

• 60 days
• 6 days
• 10 days
• 7 days

These are source of finances are those which are required for a period of more than five years.

• a. Medium-term
• b. Short-term
• c. Long-term
• d. Perpetual

This policy is usually used when the companies are facing constraints of earnings and unsuccessful business operation

• a. Unstable Policy
• b. Regular Dividend policy
• c. Stable Dividend Policy
• d. Irregular Dividend Policy

Fana’s American Bakery has a return on assets (ROA) of 10 percent and a return on equity (ROE) of 14 percent. If total assets is 100,000, what is the value of its total equity?

• 7,143
• 1,400,000
• 71,429
• 14,000

FPL Co has sales of 500,000, operating profit of 50,000, interest expense of 10,000, tax expense of 20,000, total equity of 125,000 and total debt of 275,000. Their return on assets is:

• 15%
• 9%
• 10%
• 12.5%

In this approach, the mix of debt and equity capital can increase the value of the firm by reducing overall cost of capital up to certain level of debt.

• a. Net Income approach
• b. Modigliani and Miller Approach
• c. Intermediate Approach
• d. net operating income approach

This determines the amount of profit to be distributed among shareholders and amount of profit to be treated as retained earnings for financing its long term growth

• a. Income Distribution Ratio
• b. Dividend Policy
• c. Net income sharing
• d. Share Issuance Policy

Identify the function being described: The board of directors and finance manager decided to offer stocks to the public so that they can have the resources for business expansion.

• Savings Promotion
• Acquiring necessary capital
• Increasing the value of the firm
• Interrelation with other departments

All else being equal, which of the following will increase a company’s current ratio?

• None of the statements can increase the current ratio
• An increase in accounts receivable.
• An increase in net fixed assets.
• An increase in accounts payable.

Selzer Inc. has a net profit after taxes worth 62,195. It has a total assets worth 3 million, with a debt-to-equity ratio of 0.64. What is the firm’s return on equity (ROE)?

• 7.1%
• 71.0%
• 3.4%
• 33.4%

FPL Co. Statement of Financial Position has Total Assets worth 100,000 wherein 60,000 is non-current. It also has Total Liabilities worth 200,000 wherein 80,000 is non-current. It was found out that there was an unrecorded depreciation worth 20,000 and unrecorded purchase of merchandise on account worth 15,000. What is the current ratio?

• 0.56
• 0.41
• 0.50
• 0.26

This is a statistical measure of the variability of a distribution around its mean. It is the square root of the variance.

• a. Squared variance analysis
• b. Expected value
• c. Financial Tree Analysis
• d. Standard deviation

The financial manager must estimate, how much finances required to acquire fixed assets and forecast the amount needed to meet the working capital requirements in future. This describes

• Investment decision
• Cash Management
• Acquiring necessary capital
• Forecasting Financial Requirements

This refers to the level of inventory at which the total cost of inventory comprising ordering cost and carrying cost.

• a. Standard deviation
• b. ABC Analysis
• c. Economic Order Quantity (EOQ)
• d. Cost Variance Analysis

A firm has a profit margin of 15 percent on sales of 20,000,000. If the firm has debt of 7,500,000, total assets of 22,500,000, and an after tax interest cost on total debt of 5 percent, what is the firm’s ROA?

• 12.0%
• 8.4%
• 13.3%
• 10.9%

This is the excess capital over the minimum amount of working capital that must be maintained.

• Net Working Capital
• Gross Working Capital
• Temporary Working Capital
• Permanent Working Capital

FPL Co. Invested Php 1,100,000 on a merchandising business. Expected net cash inflows from year 1 to year 5 are as follows Php 100,000; Php 200,000; Php 300,000; Php 400,000 and Php 500,000 respectively. (Assume that each year has 360 days). What is the payback period?

• 4 years, 3 months and 12 days
• 4 years, 2 months and 12 days
• 4 years ,4 months and 12 days
• 4 years and 72 days

FPL Company has a gross working capital of 100,000 and the company has 200,000 total liabilities of which 150,000 are long term debts. What is the net capital?

• a. 150,000
• b. 250,000
• c. 50,000
• d. 100,000

This is the time required to recover the initial investment in a project.

• Internal Rate of Return
• Post-Payback Profitability
• Payback Period
• Accounting Rate of Return

Which of the following has a wrong order based on the discussion in capital budgeting process

• a. Matching of Proposals- Performance Review - Final Approval
• b. Identification of Proposals - Evaluation - Final Approval
• c. Evaluation - Implementing - Performance Review
• d. Screening pf Proposals - Fixing Properties- Performance review

This is a stage in capital budgeting wherein actual results are compared with the standard results

• Fixing Properties
• Implementing
• Final Approval
• Performance Review

Which statement is false?

This is the rise in inflation that leads to reduction in the purchasing power which influences only few people to invest due to Interest Rate Risk which is nothing but the variability of return of the investment due to oscillation of interest rates due to deflationary and inflationary pressures.

• Market Risk
• Financial Risk
• Business Risk
• Inflation Risk

These funds are obtained from banks and credit unions

• a. Short-term source
• b. Long-term source
• c. Owner's funds
• d. borrowed funds

Identify what is being described. ABC manufacturing business purchases materials worth Php 1,000,000 from X company. the ammount is payable within 2 months.

• bank loan
• notes
• trade credit
• debentures

The receivables turnover ratio is defined as

• none of these
• sales divided by receivables
• receivables plus bad debt allowances
• receivables divided by sales

Stennett Corp.’s CFO has proposed that the company made a new debt and used the proceeds to buy equipment. Which of the following is likely to occur if this proposal is adopted?

• Gross profit margin will increase.
• Income will decline.
• Inventory turnover will increase.
• Return on Assets (ROA) will decline.

FPL Company has cash and cash equivalents worth 10,000; equipment worth 20,000; accounts receivable worth 15,000; notes receivable worth 12,000 ; accounts payable worth 10,000 and notes payable worth 5,000 maturing after one month. What is the current ratio?

• 3.7
• 2.5
• 2.47
• 1.67

In this part, the financial manager concentrates on the principles of safety, liquidity and profitability while investing capital.

• Interaction with other departments
• Cash management
• Acquiring necessary capital
• Investment decision