Amazona company wants to increase its debt to total assets ratio, which of the

following activities could make this possible? Make a loan

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

Which statement is false. Financial decision will affect the entire business operation
because decisions have indirect relationship with the various department
functions.
This is concerned with the increase in revenue and decrease in costs and expenses.
Profit maximization
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. Increasing the value of the firm

What is the ultimate objective of Financial Management? Wealth maximization

Which statement is false. Savings are possible only when the business has higher
expenses than its revenues.
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)? 33.4%

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 Cos.’s
ROA will be lower than York Co.

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? 10.9%

This fund is used for daily operations

a. Working capital

Which is an example of borrowed funds?

d. debentures

Which is considered as medium-term source finance?

d. FPL Co. Loaned an amount payable in 2 year

In this type of financing, the business entity which has already operated may get
funds internally from depreciation funds and
retained earnings.
d. Internal financing
Which of the following is not a classification of funds on the basis of period?
a. External Sources

This is a form of financing which is mobilized through the issuance of securities

such as shares and debenture
d. Security Financing

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

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

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

Which is an example of owner's financing?

d. Retained Earnings

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? c. 97,500
The quick ratio is defined as: current assets less inventory, less prepaid expenses.
The resulting amount will then be divided by current liabilities

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? 3,600
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. horizontal
analysis
This is a metric that measures the degree to which a company uses fixed income
securities such as debt and preferred equity. c. Degree of Financial Leverage

These are sources of finances which have a required of payment for a period not
exceeding one year. a. Short-term
This is the use of various financial instruments or borrowed capital, such as margin, to
increase the potential return of an investment. c. leverage

This is the after tax cost of long-term funds through borrowing. c. Cost of debt
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?
b. 15%
This is the mix or proportion of a firm’s permanent long-term financing represented
by debt, preferred stock, and common stock equity. Capital Structure
This is a statistical measure of the variability of a distribution around its mean. It is
the square root of the variance. a. Standard deviation

Which is not a motive of holding cash? a. Auto Motive

This is the capital invested in total current assets of the business concern. a. Gross
Working Capital
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?
d. 150,000

This refers to the level of inventory at which the total cost of inventory comprising
ordering cost and carrying cost. b. Economic Order Quantity (EOQ)
This is a statistical measure of the variability of a distribution around its mean. It is
the square root of the variance. Standard deviation
This is the credit extended by one trader to another for the purchase of goods and
services c. trade credit
This is the process in which a business determines and evaluates potential expenses
or investments that are large in nature. Capital budgeting

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? c. 1.11%
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

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

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. d. Intermediate
Approach
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. c. Accept-Reject

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

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. Decision Tree Analysis
This refers to the level of inventory at which the total cost of inventory comprising
ordering cost and carrying cost. a. Economic Order Quantity (EOQ)
These are source of finances are those which are required for a period of more than
five years. a. Long-term

Which of the following has a wrong order based on the discussion in capital
budgeting process. d. Matching of Proposals- Performance Review - Final Approval

Which of the following does not belong to the group? a. dividend price minus growth
approach

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? 10.21%
These proposals are those that compete with other. Therefore, the acceptance of one
proposal will exclude the acceptance of the other proposals. a. Mutually Exclusive
This is the use of various financial instruments or borrowed capital, such as margin, to
increase the potential return of an investment. a. leverage

Which is not a part of capital budgeting process? d. Observation of proposal making

This is the after tax cost of long-term funds through borrowing. b. Cost of debt
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?
c. 15%
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%

Find WACC 650,000

Which of the following does not belong to the group? a. Intermediate Approach
These funds are obtained from banks and credit unions. c. borrowed funds
This is the mix or proportion of a firm’s permanent long-term financing represented
by debt, preferred stock, and common stock equity. Capital Structure
The objective of having a good _____________________ is to maximize the value of the
firm and minimize the overall cost of capital. b. Capital structure

This policy is usually used when the companies are facing constraints of earnings and
unsuccessful business operation. a. Irregular Dividend Policy

This is one of the fee based financial services which includes underwriting,
consultancy and other allied services to the business concern. a. merchant banking

This is an investment made by a company from one country into a company from
another country. b. Foreign Direct Investment

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. c. mutual fund

It is contractual agreement between the owner of the assets and user of the assets
for a specific period by a periodical rent. lease

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

This is the selling of accounts receivable at a discount to a third-party funding source

to raise capital. factoring

This is the money provided by investors to startup firms and small businesses with
perceived long-term growth potential. d. venture capital

This is the completed products and is already final output of the production process.
Finished Goods
This includes materials which have been put into production process but have not yet
been completed Work in Progress
This refers to the variability of returns due to fluctuations in the securities market
which is more particularly to equities market Market Risk

The difference between the present value of cash inflows and the present value of
cash outflows. Net Present Value
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
This is essentially an accounting strategy with a focus on the maintenance of a
sufficient balance between a company’s current assets and liabilities Working Capital
Management

This one measures and considers the cash inflows earned after pay-back period. Post-
Payback Profitability
Company A’s ROE is 20 percent, while Company B’s ROE is 15 percent. Which of the
following statements can be true? Company A and Company B have equal amount of
Equity.
Return on sales, return on assets and return on equity are examples of. profitability
ratios
Return on equity is directly affected by net income and equity
Ratios that measure the ability of the company to pay its short-term debts are called:
liquidity ratios
The quick ratio is defined as: current assets less inventory, less prepaid expenses.
The resulting amount will then be divided by current liabilities
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. horizontal
analysis
Which of the following alternatives could potentially increase current ratio? Bought
merchandise on account
Which of the following can increase net profit margin? Sell merchandise with 20%
mark-up from the original price
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? 16.54
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. c. Decision Tree Analysis
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? c. 1.11%
If you have a financial source that is required to be paid within four years, you have a
a. Medium-term source

This refers to the level of inventory at which the total cost of inventory comprising
ordering cost and carrying cost. d. Economic Order Quantity (EOQ)
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. 150,000

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?
150,000

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? 50,000
This is the capital invested in total current assets of the business concern. GWC