Republic of the Philippines

Department of Education
REGION V
Schools Division of Sorsogon
Bulan National High School

BUSINESS FINANCE 12
SUMMATIVE TEST 2
Name of Student: _______________________________ Date: _____________
Grade & Strand________________________

I. Multiple Choice. Circle the letter of the correct answer.

1. The primary goal of the financial manager is
a. minimizing risk b. maximizing profit c. maximizing wealth d. minimizing return

2. Corporate owner’s receive reliable return through

a. earnings per share and cash dividends c. increase in share price and earnings per share
b. increase in share price and cash dividends d. profit and earnings per share

3. The wealth of the owners of a corporation is represented by

a. profits b. earnings per share c. share value d. cash flow

4. Wealth maximization as a goal of the firm implies enhancing the wealth of

a. Board of Directors b. firm’s employees c. federal government d. stockholders

5. The goal of profit maximization would result in priority for

a. cash flows available to stockholders c. earnings per share
b. risk of the investment d. timing of the returns

6. Financial managers evaluating decision alternatives or potential actions must consider

a. only risk c. both risk and return
b. only return d. risk, return , and the impact on share price

7. Profit maximization fails because it ignores all except

a. the timing of returns c. cash flows available to stockholders
b. earnings per share d. risk

8. Increased cash flow results in _____

a. lower share price c. unchanged share price
b. higher share price d. undetermined share price

9. Which of the following is not a financial institution

a. pension fund b. newspaper publisher c. commercial bank d. insurance company

10. The key participants in financial transactions are individuals, businesses and governments. Individuals are net ____ of funds, and
businesses are net ____ of funds.
a. suppliers; users c. users; suppliers
b. purchasers; sellers d. users; providers

II. True or False. Write True if the statement is correct and False if it is not.
___1. Financial planning applies only to the area of business finance.
___2. Financial planning is solely undertaken by the finance unit of an organization.
___3. Financial planning is making a forecast on the financial operation of the business.
___4. The vision and mission of the business are given importance in the formulation of strategic plan.
___5. The long-term financial plans need not to be congruent to the vision of a business.
___6. The first step in preparing a financial plan is to determine the expected cost and expenses.
___7. The projected financial statements can be prepared without determining the level of operating expenses
___8. The preparation of a financial plan gets more difficult once capital expenditures are included in the projected cost.
___9. The sales performance of previous years can serve as the most logical basis in predicting the future sales of the business.
___10. Sales projections based on previous sales are considered final in making the financial plan.

III. Essay
Reflect on the quotes cited and explain.
1. Globe Telecom: Yesterday’s solution are never adequate for the future –Albert De Larrazabal
2. SM Corporation: Now, we don’t go out because we need funds. We go out because it’s an opportunity – Jose T. Sio