Financial Management Course Portfolio

Section: Section C
ID Number: 46691
Last Name: Sol
First Name: Janesene
Examination: Preliminary Examination

CHAPTER 1 – Nature, Purpose and Scope of Financial Management

MULTIPLE CHOICE QUESTIONS

1. What is the primary goal of financial management?

c. Maximizing shareholder’s wealth

2. Proper-risk return management means that

b. consistent with the objectives of the firm, an appropriate trade-off between risk and return should be determined.

3. Which of the following is not a major area of concern and emphasis in modern financial management?
b. Stable short-term interest rates

4. Which of the following is not a major area of concern and emphasis in modern financial management?
c. Commodity trading
5. A financial manager’s goal of maximizing current or short-term earnings may not be appropriate because
d. All of the given choices.

6. All of the following are functions of the financial manager except

c. Assigning the market price of the company’s stock.

7. Which of the following statements is false?

b. The treasurer would be responsible for the activities such as managing cash balances, granting credit to customers and managing the process of
issuing new securities.

CHAPTER 2 – Relationship of Financial Objectives to Organizational Strategy and Other Organizational Objectives

MULTIPLE CHOICE QUESTIONS

1. Which of the following statements is true?

d. There are some serious problems with the financial goals of maximizing the earnings of the firm.

2. Corporate social responsibility is

c. The duty to embrace service to the public interest

3. A common argument against corporate involvement in socially responsible behavior is that

d. in a competitive market, such behavior incurs costs that place the company at a disadvantage.
4. Which of the following statements is false?
a. Because socially desirable goals can impede profitability in many instances, managers should not try to operate under the assumption of
wealth maximization.

5. Which of the following statement is false?

d. For as long as satisfactory level of profit is earned, the financial manager need not be concerned with unethical behavior.

6. Integrity is an ethical requirement of all financial managers. One aspect of integrity requires
b. Avoidance of conflict of interest

CHAPTER 3 – Functions of Financial Management

MULTIPLE CHOICE QUESTIONS

1. All of the following are functions of the financial manager except

c. Assigning the market price of the company’s stock

2. Which of the following statement is false?

b. The treasurer would be responsible for activities such as managing cash balances, granting credit to customers and managing the process of
issuing new securities.

3. Regine is a financial manager who has discovered that her company is violating environmental regulations. If her immediate superior is involved, her
appropriate action is to
c. Present the matter to the next higher managerial level.
4. If a financial manager discovers unethical conduct in his/her organization and fails to act, he/she will be in violation of which ethical standard(s)?
d. All of the answers are correct.

5. Integrity is an ethical requirement for all financial managers. One aspect of integrity requires
b. avoidance of conflict of interest
6. A financial manager discovers a problem that could mislead users of the firm’s financial data and has informed his/her immediate superior. He/she should
report the circumstances to the audit committee and/or the board of directors only if

d. the immediate superior, the firm’s chief executive officer, knows about the situation but refuses to correct it.
 CHAPTER 4 – Business Organization and Trends

EXERCISES
Exercise 1
Presented below is a list of items relating to the corporate firm of business, followed by definitions of those items in scramble order:

a. Incorporators f. Board of directors

b. Charter g. Corporate officers
c. Bylaws h. Par value
d. Shareholders i. Additional paid-in capital
e. Stock certificate

1. H. Par value An arbitrary value placed on either common stock or preferred stock at the time a corporation is formed.

2. F. Board of Directors The group of men and women who have the ultimate responsibility for managing a corporation.

3. D. Shareholders The owners of a corporation.

4. I. Additional paid-in capital Any amount received by a corporation when it issues stock that is greater than the par value of the stock issued.

5. B. Charter The formal document that legally allows a corporation to begin operations.

6. G. Corporate officers The group of men and women who manage the day-to-day operations of a corporation.
7. A. Incorporators The person or persons who submit a formal application with the appropriate government agencies to form a corporation.

8. E. Stock certificate A legal document providing evidence of ownership in a corporation.

9. C. Bylaws Rules established to conduct the business of a corporation.

Exercise 2
The question below are based on this selected information from the balance sheet Excelsior and Company.

(Dollars in millions)
December 31
20X2 20X1
Ordinary share capital, P 60 par value,
900,000,000 shares authorized,
issued at Dec. 31: 20X2 – 671,242,137
20X1 – 669,847,961 P 403 P 402
Additional Paid-in Capital 4,418 4,342

Required:
a. What was the average selling price of the stock that had been issued as of December 31, 20X1?
b. The par value of the outstanding shares of ordinary shares as of December 31, 20X2 is shown as P 403 million. This is actually a rounded amount. What is
the exact par value of the common stock outstanding as of that date?
c. How many shares of common stock were issued during 20X2?
d. How many shares would Excelsior be allowed to issue during 20X2?

Exercise 3
On January 2, 20X2, Hellen Sanchez formed a company called Baby Covers, Inc., which sells expensive infant clothing. Originally, Hellen invested P 50,000 in cash
in exchange for 5,000 of the company’s 50,000 authorized P 1 par shares of common stock. By 20X7, the company had grown from one store to three successful
stores. In January of 20X8, Hellen decided to finance further expansion of Baby Covers by selling additional stock.

Required:
1. How many additional shares can Baby Covers, Inc., issue during 20x8?

2. If 20,000 additional shares were sold for P 35 per share, what would the balance sheet show for ordinary shares and additional paid-in capital ordinary
shares?

3. If Hellen wanted to raise money for expansion of the company, what would be the advantage to issuing preferred stock instead of ordinary shares?

MULTIPLE CHOICE QUESTIONS

1. One of the major disadvantages of a sole proprietorship is

a. that there is unlimited liability to the owner.

2. The partnership form of organization

a. avoids the double taxation of earnings and dividends found in the corporate form of organization.

3. A corporation is
d. all of the above.