The length of time between the purchase of inventory and the receipt of cash from the

sale of that inventory is called the:

A. operating cycle.
B. inventory period.
C. accounts receivable period.
D. accounts payable period.
E. cash cycle.
1. The length of time that elapses between the day a firm purchases an inventory item and
the day that item sells is called the:
A. operating cycle.
B. inventory period.
C. accounts receivable period.
D. accounts payable period.
E. cash cycle.
2. The length of time between the sale of inventory and the collection of the payment for
that sale is called the:
A. operating cycle.
B. inventory period.
C. accounts receivable period.
D. accounts payable period.
E. cash cycle.
3. The length of time between the day a firm purchases an item from its supplier until the
day that supplier is paid for that purchase is called the:
A. operating cycle.
B. inventory period.
C. accounts receivable period.
D. accounts payable period.
E. cash cycle.
4. Central Supply purchased a toboggan for inventory this morning and paid cash for it. The
time period between today and the day Central Supply will receive cash from the sale of
this toboggan is called the:
A. operating cycle.
B. inventory period.
C. accounts receivable period.
D. accounts payable period.
E. cash cycle.
5. Steve has estimated the cash inflows and outflows for his hardware store for next year.
The report that he has prepared recapping these cash flows is called a:
A. pro forma income statement.
B. sales projection.
C. cash budget.
D. receivables analysis.
E. credit analysis.
6. Cash management primarily involves:
A. optimizing a firm's collections and disbursements of cash.
B. maximizing the income a firm earns on its cash reserves.
C. reconciling a firm's book balance with its bank balance.
D. determining the optimal level of liquidity a firm should maintain.
E. determining the best method of raising capital.
7. You are doing some comparison shopping. Five stores offer the product you want at
basically the same price. Which one of the following stores offers the best credit terms if
you plan on taking the discount?

Answer store E.

8. Which one of the five Cs of credit refers to a firm's financial reserves?

A. character
B. capacity
C. collateral
D. conditions
E. capital
9. Which one of the five Cs of credit refers to the general economic situation in the
customer's line of business?
A. capacity
B. character
C. conditions
D. capital
E. collateral
10. Which one of the following statements is correct?
A. An aging schedule helps identify those customers who are the most delinquent.
B. The percentage of total receivables that falls within a certain time period on an aging
schedule will remain constant over time even if the firm has seasonal sales.
C. Normally firms call their delinquent customers prior to sending them a past due letter.
D. A constant average collection period over a period of time is cause for concern.
E. It is common practice when a customer files for bankruptcy to sell that customer's
receivable at face value.
11. The EOQ model is designed to determine how much:
A. total inventory a firm needs in any one year.
B. total inventory costs will be for any one given year.
C. inventory should be purchased at a time.
D. inventory will be sold per day.
E. a firm loses in sales per day when an inventory item is depleted.

12. The EOQ model is designed to minimize:

A. production costs.
B. inventory obsolescence.
C. the carrying costs of inventory.
D. the costs of replenishing inventory.
E. the total costs of holding inventory.

13. What is a seasoned equity offering?

A. an offering of shares by shareholders for repurchase by the issuer
B. shares of stock that have been recommended for purchase by the SEC
C. equity securities held by a firm's founder that are being offered for sale to the general
public
D. sale of newly issued equity shares by a firm that is currently publicly owned
E. a set number of equity shares that are issued and offered to the public annually

14. Soup Galore is a partnership that was formed three years ago for the purpose of creating,
producing, and distributing healthy soups in a dried form. The firm has been extremely
successful thus far and has decided to incorporate and offer shares of stock to the general
public. What is this type of an equity offering called?
A. venture capital offering
B. shelf offering
C. private placement
D. seasoned equity offering
E. initial public offering
15. Roy owns 200 shares of R.T.F., Inc. He has opted not to participate in the current rights
offering by this firm. As a result, Roy will most likely be subject to:
A. an oversubscription cost.
B. underpricing.
C. dilution.
D. the Green Shoe provision.
E. a locked in period.
16. You want to have $1 million in your savings account when you retire. You plan on
investing a single lump sum today to fund this goal. You are planning on investing in an
account which will pay 7.5 percent annual interest. Which of the following will reduce
the amount that you must deposit today if you are to have your desired $1 million on the
day you retire?
I. Invest in a different account paying a higher rate of interest.
II. Invest in a different account paying a lower rate of interest.
III. Retire later.
IV. Retire sooner.
A. I only
B. II only
C. I and III only
D. I and IV only
E. II and III only
17. Which one of the following will produce the highest present value interest factor?
A. 6 percent interest for five years
B. 6 percent interest for eight years
C. 6 percent interest for ten years
D. 8 percent interest for five years
E. 8 percent interest for ten years
18. Gerold invested $6,200 in an account that pays 5 percent simple interest. How much
money will he have at the end of ten years?
A. $8,710
B. $9,000
C. $9,300
D. $9,678
E. $10,099
19. Travis invested $9,250 in an account that pays 6 percent simple interest. How much more
could he have earned over a 7-year period if the interest had compounded annually?
A. $741.41
B. $773.58
C. $802.16
D. $833.33
E. $858.09
Answer One Question from this section

Question One (1)

(1) Home Roasted Turkeys disburses checks every 4 weeks that average $70,000 and
take 5 days to clear. How much interest can the company earn if it delays transfer of
funds from an interest-bearing account that pays 0.02 percent per day for these 5
days? Ignore the effects of compound interest. Assume 52 weeks in a year.
Answer:
Interest = $70,000 (5) (52/4) (0.0002) = $910

(2) Assume all suppliers to a large retail chain offer credit terms of 2/10, net 30. The
retail chain consistently takes the 2 percent discount and pays in 60 days. When
pressed on the issue, the retail chain tells the suppliers they can either accept the
payments as they currently are or lose the business. Is this ethical? How might this
impact a small supplier versus a large supplier? Explain.
Answer:
This question can lead to a lively discussion about the ethics of abusing the credit
period. Some students will argue that it is unethical for the large firm to exercise its
will against its suppliers. Most would argue that a supplier that is also a relatively
large firm will better be able to negotiate with the retail chain and work out a more
favorable arrangement than the current situation. If a supplier is small, this account
may be a significant proportion of the supplier's total sales. In that case, the supplier
may have no choice other than accepting the terms as dictated by the retail chain or
going out of business. Whether or not the actions of the retail chain are ethical is
debatable, but this practice occurs fairly frequently.

Question Two (2)

A firm sells 4,500 units of an item each year. The carrying cost per unit is $2.15 and the fixed
costs per order are $67. What is the economic order quantity?
Answer:
EOQ = [(2 × 4,500 × $67)/$2.15]1/2 = 530 units

1. It can be argued that the decision to accept venture capital is one of the most critical
decisions an entrepreneur must make. Explain why.
Answer:
The potential rewards from venture capital can be substantial but the costs to the
entrepreneur are equally substantial. The primary advantage of venture capital funding is
the access to capital when funds are unavailable from other sources. In addition, a venture
capitalist provides industry experience, expertise, and valuable business contacts.
However, nothing is free. In exchange for this funding, entrepreneurs have to sacrifice a
large percentage of their ownership rights to the venture capitalist. If venture capital is
not accepted, the firm may fail for lacking of funding. If venture capital is accepted,
there's no guarantee of success; only a guarantee that the entrepreneur will own less of
the firm.

1. External sources of finance do not include:

a. Overdrafts
b. Debentures
c. Leasing
d. Retained earnings*

2. Internal sources of finance do not include:

a. retained earnings
b. trade credit
c. better management of working capital
d. ordinary shares*

3. Preference shares:
a. are not allowable for corporation tax
b. have no voting rights*
c. receive dividends
d. are not part of a company’s share capital

4. A debenture
a. receives dividend payments
b. is a long term unsecured debt.*
c. is a source of internal finance
 d. is a short-term loan

5. Which is the following is not a method of issuing ordinary shares:

a. intermediary offer
b. placing
c. auction*
d. issue by tender

6. The trade terms "2/15, net 30" indicate that:

a. A 2% discount is offered if payment is made within 15 days.*
b. A 15% discount is offered if payment is made within 30 days.
c. A 2% discount is offered if payment is made within 30 days.
d. A 30% discount is offered if payment is made within 15 days.

7. Assume a $20,000 invoice. If credit terms of "2/10, net 40" are offered, the approximate cost of not
taking the discount and paying at the end of the credit period would be closest to which of the
following? (Assume a 365-day year.)
a. 28.6%
b. 24.3%
c. 24.8%*
d. 30.0%

8. The opening inventory for Charleston Group of Companies for 2020 is GHS58,240 and the closing
inventory is GHS62,750. If the inventory turnover is 1.2, what is the cost of goods sold?
a. GHS 100,825
b. GHS 145,188
c. GHS 120,990
d. GHS 154, 880

9. When a firm needs short-term funds for a specific purpose, the bank loan will likely be a:
a. Compensating balance arrangement.
b. Revolving credit agreement.
c. Transaction loan*.
d. Line of credit.

10. The type(s) of collateral generally used for a secured short-term loan is (are) .
a. inventory and/or receivables*
b. common stock and/or bonds
c. real estate
d. machinery
11. You start to save for a major purchase. You can invest GH¢320 every three months for 3 years and
9 months. You are able to earn 5.34% compounded semi-annually. What is the amount of interest that
you earn during the entire term?
a. GH¢468.54
b. GH¢5272.26
c. GH¢472.26*
d. GH¢2506.00

11. How much interest will be earned on GH¢5,000 deposited today that will earn a 4% compounded
quarterly and will be invested for 6 years?
a. GH¢1,326.60
b. GH¢6,326.60
c. GH¢6,348.67
d. GH¢1,348.67*

12. If EOQ = 1,000 units, order costs are GH¢200 per order, and sales total 5,000 units, what is the
carrying cost per unit?
a. GH¢2*
b. GH¢10
c. GH¢100
d. GH¢1,000

13. The credit policy of Milwaukee Brewski Breweries is 1/10, net 30. At present 25% of the customers
take the discount. What would accounts receivable be if all customers took the cash discount?
a. Account receivable would be lower than the present level.*
b. No change from the present level.
c. Account receivable would be higher than the present level.
d. Unable to determine without more information

14. If EOQ = 360 units, order costs are GH¢5 per order, and carrying costs are GH¢.20 per unit, what
is the usage in units?
a. 129,600 units
b. 2,592 units*
c. 25,920 units
d. 18,720 units

15. Costs of not carrying enough inventory include:

a. Lost sales.
b. Customer disappointment.
 c. Possible worker layoffs.
d. All of these.*

16. EOQ is the order quantity that over our planning horizon.
a. minimizes total ordering costs
b. minimizes total carrying costs
c. minimizes total inventory costs*
d. the required safety stock

17. An ordinary annuity is best defined by which one of the following?

a. increasing payments paid for a definitive period of time
b. increasing payments paid forever
c. equal payments paid at regular intervals over a stated time period*
d. equal payments paid at regular intervals of time on an ongoing basis
e. unequal payments that occur at set intervals for a limited period of time

18. A monthly interest rate expressed as an annual rate would be an example of which one of the
following rates?
a. stated rate
b. discounted annual rate
c. effective annual rate*
d. periodic monthly rate
e. consolidated monthly rate

19. What is the interest rate charged per period multiplied by the number of periods per year called?
a. effective annual rate
b. annual percentage rate*
c. periodic interest rate
d. compound interest rate
e. daily interest rate

20. A loan where the borrower receives money today and repays a single lump sum on a future date is
called a(n) _____ loan.
a.Amortized
b. Continuous
c. Balloon
d. Pure discount*
e. Interest-only

21. You are considering two projects with the following cash flows:
 Project X Project Y
Year 1 GH¢ 9,000 GH¢ 7, 000
Year 2 8,000 7,500
Year 3 7,500 8,000
Year 4 7,000 9,000

Which of the following statements are true concerning these two projects?
I. Both projects have the same future value at the end of year 4, given a positive rate of return.
II. Both projects have the same future value given a zero rate of return.
III. Project X has a higher present value than Project Y, given a positive discount rate.
IV. Project Y has a higher present value than Project X, given a positive discount rate.
a. II only
b. I and III only
c. II and III only*
d. II and IV only
e. I, II, and IV only

22. Your grandmother is gifting you GH¢ 100 a month for four years while you attend University to
earn your Bachelor's degree. At a 5.5 percent discount rate, what are these payments worth to you on
the day you enter college?
a. GH¢ 4,201.16
b. GH¢ 4,299.88*
c. GH¢ 4,509.19
d. GH¢ 4,608.87
e. GH¢ 4,800.00

23. You are the beneficiary of a life insurance policy. The insurance company informs you that you
have two options for receiving the insurance proceeds. You can receive a lump sum of GH¢ 200,000
today or receive payments of GH¢ 1,400 a month for 20 years. You can earn 6 percent on your money.
Which option should you take and why?
a. You should accept the payments because they are worth GH¢ 209,414 to you today.
b. You should accept the payments because they are worth GH¢ 247,800 to you today.
c. You should accept the payments because they are worth GH¢ 336,000 to you today.
d. You should accept the GH¢ 200,000 because the payments are only worth GH¢ 189,311
to you today.
e. You should accept the GH¢ 200,000 because the payments are only worth GH¢ 195,413
to you today.*
24. What is the future value of GH¢ 1,200 a year for 40 years at 8 percent interest? Assume annual
compounding.
a. GH¢ 301,115
b. GH¢ 306,492
c. GH¢ 310,868*
d. GH¢ 342,908
e. GH¢ 347,267

25. GT Motors regularly issues short-term debt to finance its daily operations. Suddenly, the credit
markets froze and no funds were available for borrowing. Fortunately, the firm had some cash reserves
saved that it was able to use to fund its operations until additional credit was available. The need to
retain cash for situations such as this is referred to as which one of the following motives for holding
cash?
a. Speculative
b. Float
c. Compensating
d. Precautionary*
e. Transaction

26. The cash found in a cash drawer that a check-out clerk uses to make change is an example of which
of the following motives for holding cash?
a. Speculative
b. daily float
c. compensating balance
d. precautionary
e. transaction*

27. Cash management primarily involves:

a. optimizing a firm's collections and disbursements of cash.
b. maximizing the income a firm earns on its cash reserves*.
c. reconciling a firm's book balance with its bank balance.
d. determining the optimal level of liquidity a firm should maintain.
e. determining the best method of raising capital.

28. Brown Trucking is buying a Ghana Treasury bill today with the understanding that the seller will
buy it back tomorrow at a slightly higher price. This investment is known as a:
a. commercial paper transaction.
b. repurchase agreement.*
c. private certificate of deposit.
d. revenue anticipation note.
 e. bill anticipation note.

29. Which of the following costs related to holding cash are minimized when the level of cash a firm
holds is optimized?
a. opportunity costs
b. trading costs
c. total costs*
d. both trading and opportunity costs
e. trading costs, opportunity costs, and total costs

30. On an average day, Plastics Enterprises writes 42 cheques with an average amount of GH¢587.
These cheques clear the bank in an average of 2 days. What is the average amount of the disbursement
float?
a. GH¢ 1,174
b. GH¢ 5,805
c. GH¢ 24,654
d. GH¢ 49,308*
e. GH¢ 73,962

31. The Blue Star generally receives only 3 cheques a month. The cheque amounts and the collection
delay for each cheque are shown below. Given this information, what is the amount of the average
daily float? Assume every month has 30 days.
Item Number Item Amount Delay
1 GH¢ 9,100 2days
2 2,900 3days
3 8,400 2days
a. GH¢ 971.43
b. GH¢ 1,456.67*
c. GH¢ 3,351.33
d. GH¢ 5,666.67
e. GH¢ 6,800.00

32. The Eliot Co. needs GH¢ 185,000 a week to pay bills. The standard deviation of the weekly
disbursements is GH¢ 17,600. The firm has established a lower cash balance limit of GH¢75,000. The
applicable interest rate is 5.5 percent and the fixed cost of transferring funds is GH¢ 47. Based on the
BAT model, what is the optimal initial cash balance?
a. GH¢ 90,668
b. GH¢ 97,515
c. GH¢ 104,141
d. GH¢ 128,224*
 e. GH¢ 136,509

33. An increase in which one of the following will decrease the cash cycle, all else equal?
a. payables turnover
b. days sales in inventory
c. operating cycle
d. inventory turnover rate*
e. accounts receivable period

34. Which of the following statements are correct?

I. An increase in the accounts payable period shortens the cash cycle.
II. The cash cycle is equal to the operating cycle minus the inventory period.
III. A negative cash cycle is preferable to a positive cash cycle.
IV. The cash cycle plus the accounts receivable period is equal to the operating cycle.
a. I only
b. III and IV only
c. I and III only*
d. I and IV only
e. I, II, and III only

35. Your firm has an inventory turnover rate of 14, a payables turnover rate of 8, and a receivables
turnover rate of 19. How long is your firm's operating cycle?
a. 45.06 days
b. 45.28 days*
c. 45.63 days
d. 53.13 days
e. 53.78 days

36. On May 1, your firm had a beginning cash balance of GH¢ 175. Your sales for April were GH¢430
and your May sales were GH¢ 480. During May, you had cash expenses of GH¢ 110 and payments
on your accounts payable of GH¢ 290. Your accounts receivable period is 30 days. What is your firm's
beginning cash balance on June 1?
a. GH¢ 145
b. GH¢ 155
c. GH¢ 205*
d. GH¢ 215
e. GH¢ 265

37. Details Corp. has a book net worth of GH¢ 8,150. Long-term debt is GH¢ 1,650. Net working
capital, other than cash, is GH¢ 2,150. Fixed assets are GH¢ 2,000. How much cash does the
company have?
a. GH¢ 4,250
b. GH¢ 4,550
c. GH¢ 5,150
d. GH¢ 5,650*
e. GH¢ 6,750

38. You've worked out a line of credit arrangement that allows you to borrow up to GH¢ 50 million at
any time. The interest rate is 0.5 percent per month. In addition, 5 percent of the amount that you
borrow must be deposited in a non-interest bearing account. Assume your bank uses compound interest
on its line of credit loans. What is the effective annual interest rate on this lending arrangement?
a. 6.50 percent*
b. 6.62 percent
c. 6.81 percent
d. 6.87 percent
e. 6.94 percent

39. Which one of the following will increase net working capital? Assume the current ratio is greater
than 1.0.
a. paying a supplier for a previous purchase
b. paying off a long-term debt
c. selling inventory at cost
d. purchasing inventory on credit
e. selling inventory at a profit on credit*

40. Which of the following are uses of cash?

I. collecting a receivable
II. increasing inventory
III. obtaining a bank loan
IV. paying a supplier for previous purchases
a. I and III only
b. II and IV only*
c. I and II only
d. I, II, and IV only
e. II, III, and IV only

41. Which one of the following increases cash?

a. granting credit to a customer
b. purchasing new machinery
 c. making a payment on a bank loan
d. purchasing inventory
e. accepting credit from a supplier*

42. A _____________ is an owner who has unlimited liability and is active in managing the
firm:
a. senior partner.
b. general partner*.
c. silent partner.
d. limited partner.

43. Which of the following is probably the most important reason for incorporating?
a. limited liability of shareholders.*
b. more money for investment.
c. increased flexibility.
d. shared management.

44. A primary objective of corporate governance is to

a. determine and control the strategic direction of an organization, so that the top executives
are focused on maximizing corporate profits.
b. ensure that the interests of top-level managers are aligned with the interests of
shareholders.*
c. lobby legislators to pass laws that are aligned with the organization’s interests.
d. resolve conflicts among corporate employees.

45. Shareholder value is

a. the firm’s free cash flow.
b. the total revenue of the firm.
c. determined by the size of the firm.
d. reflected in the price of the stock*

46. The separation between firm ownership and management creates a(n) ____ relationship.
a. governance
b. control
c. agency*
d. dependent

47. Monitoring by shareholders is usually accomplished through

a. management consultants.
b. government auditors.
 c. the firm’s top managers.
d. the board of director*

48. Which of the following statements are false?

A. When all the figures in a balance sheet are stated as percentage of the total, it is termed
as horizontal analysis.
B. When financial statements of several years are analyzed, it is termed as vertical analysis.
C. Vertical Analysis is also termed as dynamic analysis.
a. Both A and B*
b. Both A and C
c. Both B and C
d. A, B, C

49. State which of them are true?

A. When ratios of previous years are compared with current years, they are called trend
ratios.
B. Trend percentages and trend ratios are used in static analysis.
C. Reliability of financial analysis depends upon the reliability of financial data.
a. Both A and B
b. Both A and C*
c. Both B and C
d. A, B, C

50. Determine operating ratio, if operating expenses is GH¢ 60,000; Sales is GH¢ 940,000; Sales
Return is GH¢ 40,000 and cost of goods sold is GH¢ 660,000.
a. 80%*
b. 15%
c. 25%
d. 11%

51. Collection of debtors

a. Decreases current ratio*
b. Increases current ratio
c. Has no effect on current ratio
d. None of the above

52. Determine stock turnover ratio if, opening stock is GH¢ 31,000, Closing stock is GH¢29,000, Sales
is GH¢ 3,20,000 and Gross profit ratio is 25% on sales.
a. 31 times
b. 11 times
 c. 8 times*
d. 32 times

53. Quick ratio is 1.8:1, current ratio is 2.7:1 and current liabilities are GH¢ 60,000. Determine value
of stock.
a. GH¢ 54,000*
b. GH¢ 60,000
c. GH¢ 162,000
d. None of the above

54. “The higher the ratio, the more favorable it is”, does not stand true for
a. Operating ratio*
b. Liquidity ratio
c. Net profit ratio
d. Stock turnover ratio

55. Determine Debtors turnover ratio if, closing debtors is GH¢ 40,000, Cash sales is 25% of credit
sales and excess of closing debtors over opening debtors is GH¢ 20,000.
a. 4 times
b. 2 times*
c. 6 times
d. 8 times

66. Your dad recently decided to set up a coconut oil factory given the global demand. In order to
guarantee profitability and his ability to stay in business. He has asked you to help in the decision-
making. Given an estimated fixed cost of setting up of Gh¢2m and variable cost of Gh¢55 per bottle
of oil. Contribution margin is 12.7%. What should be the price (to the nearest whole) if he wants to
breakeven at 250,000 bottles.
a. Gh¢63 *
b. Gh¢62
c. Gh¢65
d. Insufficient information

67. In order to break even at 195,000, what must be the contribution per unit for this coconut oil
business?
a. Gh¢10.256*
b. 16.28%
c. 10.256%
d. Gh¢16.28
68. In order to reduce the break-even level for your business, which of the following will apply?
a. Decrease the contribution margin
b. Reduce fixed cost*
c. Decrease price
d. None of the above

69. Main concern in analysis of firm's break-even analysis is identifying level of output which results
in
a. zero profit*
b. high profit
c. low profit
d. market leading profits

70. There are three fundamental cost/volume/profit (CVP) relationships. Which of the following is not
one of these?
a. total costs = variable costs + fixed costs
b. contribution = total revenue – variable costs
c. profit = total revenue – total costs
d. contribution = total costs – variable costs*

71. Potential cash inflows for firms include the following except
a. Proceeds from fixed asset sales.
b. Settlement of accounts payable
c. Interest earned on non-operating assets
d. Court settlements.
e. Funds from stock and bond sales

72. A firm is considering three different financing alternatives---debt, preferred stock and common
equity. The firm has created an EBIT-EPS chart that shows several indifference points. What does
each point show the firm?
a. The level of EBIT that generates identical EPS under two alternative financing plans*
b. The level of sales that generates identical EBIT and EPS figures
c. It shows the level of EBIT and EPS at which degree of financial leverage is identical under
two alternative financing plans.
d. None of the above

73. Which of the following balance sheet accounts is NOT impacted by an increase in sales?
a. Cost of goods sold
b. Accounts receivable
 c. Inventory
d. Notes payable*

74. If a company decides to issue shares in order to raise additional funds needed of Gh¢2,000, which
of the following accounts would increase in the pro-forma balance sheet?
a. Owner’s equity*
b. Long-term debt
c. Short-term debt
d. Retained earnings

75. Which of the following is not correct regarding the pro-forma balance sheet?
a. All items on the financing side respond spontaneously to change in sales*
b. Total assets respond spontaneously to sales
c. Retained earnings respond to changes in profits and payout policy
d. All of the above

Given the following information: current sales = Gh¢500; cost of goods sold = Gh¢300; net income =
Gh¢200; Total assets= Gh¢1000; Accounts payable= Gh¢300; long-term debt=Gh¢300; estimated
growth rate = 10%; (Assume all patterns remain unchanged) (Answer Questions 77-80)

76. What is the estimated total asset need of the firm for the coming year?
a. Gh100
b. Gh1,000
c. Gh1,100*
d. Insufficient information on this

77. What will be the financing shortfall if all profits for the coming year were paid out as
dividends?
a. Gh70*
b. Gh40
c. Gh74
d. Gh47

78. What should be the minimum retention ratio if the firm does not want to use external funds to
finance its growth agenda?
a. 37.18%
b. 31.78%*
c. 31.87%
d. 38.71%
79. If the firm were to pursue a 50% payout policy, by how much can they reduce their longterm debt,
given the likely addition to retained earnings?
a. Gh40*
b. Gh50
c. Gh60
d. Gh70

80. What will be the common equity value if no new shares are issued to fund the growth agenda for
the incoming year?
a. Gh400*
b. Gh600
c. Gh800
d. Gh1000
81. If the net income available to common shareholders is GHS72000 and the earning per share is
4.5, then the number of common shares outstanding will most likely be
a. 72000
b. 16000
c. 324000
d. 61000

1. Your bank account pays an 8% nominal rate of interest. The interest is compounded
quarterly. Which of the following statements is CORRECT?
a. The periodic rate of interest is 8% and the effective rate of interest is also 8%.
b. The periodic rate of interest is 2% and the effective rate of interest is 4%.
c. The periodic rate of interest is 8% and the effective rate of interest is greater than 8%.
d. The periodic rate of interest is 4% and the effective rate of interest is less than 8%.
e. The periodic rate of interest is 2% and the effective rate of interest is greater than 8%.*

2. Which of the following statements regarding a 30-year monthly payment amortized

mortgage with a nominal interest rate of 8% is CORRECT?
a. Exactly 8% of the first monthly payment represents interest.
b. The monthly payments will decline over time.
c. A smaller proportion of the last monthly payment will be interest, and a larger
proportion will be principal, than for the first monthly payment. *
d. The total dollar amount of principal being paid off each month gets smaller as the loan
approaches maturity.
e. The amount representing interest in the first payment would be higher if the nominal
interest rate were 6% rather than 8%.
3. Your bank offers a savings account that pays 3.5% interest, compounded annually. How
much will GHS 500 invested today be worth at the end of 25 years?
a. GHS 1,122.54
b. GHS 1,181.62*
c. GHS 1,240.70
d. GHS 1,302.74
e. GHS 1,367.88

4. You have just made an investment for GHS 747.25. No payments will be made until the
investment matures 5 years from now, at which time it will be redeemed for GHS 1,000.
What interest rate will you earn on this bond?
a. 4.37%
b. 4.86%
c. 5.40%
d. 6.00% *
e. 6.60%

5. You have GHS 5,000 invested in a bank that pays 3.8% annually. How long will it take
for your funds to triple?
a. 23.99
b. 25.26
c. 26.58
d. 27.98
e. 29.46*

6. You want to buy new kitchen appliances 2 years from now, and you plan to save GHS
8,200 per year, beginning one year from today. You will deposit your savings in an
account that pays 6.2% interest. How much will you have just after you make the 2nd
deposit, 2 years from now?
a. GHS 15,260
b. GHS 16,063
c. GHS 16,908 *
d. GHS 17,754
e. GHS 18,642

7. You want to purchase a motorcycle 4 years from now, and you plan to save GHS 3,500
per year, beginning immediately. You will make 4 deposits in an account that pays 5.7%
interest. Under these assumptions, how much will you have 4 years from today?
a. GHS 16,112 *
b. GHS 16,918
c. GHS 17,763
 d. GHS 18,652
e. GHS 19,584

8. Your roommate in Legon Hall of University of Ghana offers to pay you an annuity of
GHS 2,500 at the end of each year for 3 years in return for cash today. You could earn
5.5% on your money in other investments with equal risk. What is the most you should
pay for the annuity?
a. GHS 5,493.71

b. GHS 5,782.85

c. GHS 6,087.21

d. GHS 6,407.59

e. GHS 6,744.83*

9. A perpetuity pays GHS 85 per year and costs GHS 950. What is the rate of return?
a. 8.95%*
b. 9.39%
c. 9.86%
d. 10.36%
e. 10.88%

10. What's the present value of a 4-year ordinary annuity of GHS 2,250 per year plus an
additional GHS 3,000 at the end of Year 4 if the interest rate is 5%?
a. GHS 8,509
b. GHS 8,957*
c. GHS 9,428
d. GHS 9,924
e. GHS 10,446

11. Suppose you earned a GHS 275,000 bonus this year and invested it at 8.25% per year.
How much could you withdraw at the end of each of the next 20 years?
a. GHS 28,532*
b. GHS 29,959
c. GHS 31,457
d. GHS 33,030
e. GHS 34,681

12. Your aunt wants to retire and has GHS 375,000. She expects to live for another 25 years
and to earn 7.5% on her invested funds. How much could she withdraw at the end of each
of the next 25 years and end up with zero in the account?
 a. GHS 28,843.38
b. GHS 30,361.46
c. GHS 31,959.43
d. GHS 33,641.50*
e. GHS 35,323.58

13. you have the choice of GHS 15,000,000 today or a 20-year annuity of GHS 1,050,000,
with the first payment coming one year from today. What rate of return is built into the
annuity?
a. 3.44%*
b. 3.79%
c. 4.17%
d. 4.58%
e. 5.04%

14. What annual payment must you receive in order to earn a 6.5% rate of return on a
perpetuity that has a cost of GHS 1,250?
a. GHS 77.19
b. GHS 81.25*
c. GHS 85.31
d. GHS 89.58
e. GHS 94.06

15. You are offered a chance to buy an asset for GHS 7,250 that is expected to produce cash
flows of GHS 750 at the end of Year 1, GHS 1,000 at the end of Year 2, GHS 850 at the
end of Year 3, and GHS 6,250 at the end of Year 4. What rate of return would you earn if
you bought this asset?
a. 4.93%
b. 5.19%
c. 5.46%
d. 5.75%
e. 6.05%*

16. What's the present value of GHS 1,525 discounted back 5 years if the appropriate interest
rate is 6%, compounded monthly?
a. GHS 969
b. GHS 1,020
c. GHS 1,074
d. GHS 1,131 *
e. GHS 1,187
17. Suppose United Bank offers to lend you GHS 10,000 for one year at a nominal annual rate
of 8.00%, but you must make interest payments at the end of each quarter and then pay off
the GHS 10,000 principal amount at the end of the year. What is the effective annual rate
on the loan?
a. 8.24% *
b. 8.45%
c. 8.66%
d. 8.88%
e. 9.10%

18. Which of the following statements regarding a 30-year monthly payment amortized
mortgage with a nominal interest rate of 8% is CORRECT?
a. Exactly 8% of the first monthly payment represents interest.
b. The monthly payments will decline over time.
c. A smaller proportion of the last monthly payment will be interest, and a larger
proportion will be principal, than for the first monthly payment. *
d. The total dollar amount of principal being paid off each month gets smaller as the loan
approaches maturity.
e. The amount representing interest in the first payment would be higher if the nominal
interest rate were 6% rather than 8%.

19. Of the following investments, which would have the lowest present value? Assume that
the effective annual rate for all investments is the same and is greater than zero.
a. Investment A pays GHS 250 at the end of every year for the next 10 years (a total of 10
payments).
b. Investment B pays GHS 125 at the end of every 6-month period for the next 10 years
(a total of 20 payments).
c. Investment C pays GHS 125 at the beginning of every 6-month period for the next 10
years (a total of 20 payments).
d. Investment D pays GHS 2,500 at the end of 10 years (just one payment).*
e. Investment E pays GHS 250 at the beginning of every year for the next 10 years (a total
of 10 payments).
20. Which of the following statements is CORRECT, assuming positive interest rates and
holding other things constant?
a. Banks A and B offer the same nominal annual rate of interest, but A pays interest
quarterly and B pays semiannually. Deposits in Bank B will provide the higher future
value if you leave your funds on deposit.
b. The present value of a 5-year, GHS 250 annuity due will be lower than the PV of a
similar ordinary annuity.
c. A 30-year, GHS 150,000 amortized mortgage will have larger monthly payments than
an otherwise similar 20-year mortgage.
 d. A bank loan's nominal interest rate will always be equal to or less than its effective
annual rate.*
e. If an investment pays 10% interest, compounded annually, its effective annual rate will
be less than 10%.

21. The type of inventory method that comprises more number of accounting transactions is
known as ______.
a. Periodic inventory method
b. Perpetual inventory system *
c. Finished goods inventory method
d. Fixed order period inventory system

22. The ABC Analysis system the B category stands for_____.

a. Outstanding importance in value
b. Comparatively unimportant in value
c. Comparatively important in value
d. Average importance in value *

23. Which among the following components is calculated as the sum of the fixed costs that
happen each time an item is ordered?
a. Carrying cost
b. Order cost *
c. Holding cost
d. Storing cost

24. Which among the following costs is the expense of storing inventory for a specified period
of time?
a. Purchasing cost
b. Carrying cost *
c. Financial cost
d. Storing cost

25. In an inventory control system, the annual demand is 12,000 units, the ordering cost is
GHS 30 per order and the inventory holding cost is GHS 3.00 per year. The order quantity
is 1000 units and the cost per unit of the item is GHS 150. What is the total cost per year.

a. 1,800,000*
b. 1,810,500
c. 1,801,860
d. 1,709,360

26. If demand in units is 18,000, relevant ordering cost for each year is GHS 150 and an order
quantity is 1,500 then the annual relevant ordering cost would be
a. GHS 200
b. GHS 190
c. GHS160
d. GHS 180 *

27. Economic order quantity establishes

a. The maximum number of items an organization would want to purchase at one time
b. The quantity of items an organization should order each time to minimize costs
associated with ordering *
c. The number of items an organization can order in bulk to receive a discount
d. The quantity of items an organization would have to order each time to maximize
costs associated with ordering

28. If credit terms of ‘’2/10, net 40’’ are offered, the approximate cost of not taking the
discount and paying at the end of the credit period would be closest to which of the
following? (Assume a 365- day year.)
a. 18.6%
b. 24.3%
c. 24.8% *
d. 30.0%

29. The three C’s of credit are:

a. Character, capital and charity
b. Character, capacity and charity
c. Charity, capital and censor
d. Character, capacity and capital *

30. In establishing credit standards, the firm must consider the nature of the credit risk based
on all the following except:
a. prior record of payment
b. terms of credit *
c. financial stability
d. current net worth

31. A cash discount may best be defined as:

a. a reduction in price if payment is made within the specified time period *

b. a discount offered to critical suppliers
c. a discount applied to volume sales
d. a discount or the repayment of the firm's debt

32. The extent to which inventory financing may be employed is based on all of the following,
except:
a. the marketability of the pledged goods
b.their associated price stability of the goods
c. the perishability of the goods
 d.the control of the goods by the manufacturer *

33. The cash cycle is the:

a. sum of the number of days of inventory and the average collection period.
b. length of time it takes for the investment of cash into inventory to be returned from collected
accounts.
c. sum of the number of days of inventory and the average collection period, less the average
payment period. *
d. Length of time inventory would be sold and amount of collection from the sale.

34. The operating cycle is the:

a. sum of the number of days of inventory and the average collection period.
b. length of time it takes for the investment of cash into inventory to be returned from collected
accounts.
c. sum of the number of days of inventory and the average collection period, less the average
payment period
d. Length of time inventory would be sold and amount of collection from the sale *

35. This “C” refers to the borrower’s reliability and trustworthiness.

a. character *
b. capacity
c. capital
d. collateral

36. A good credit rating is established by

a. being a nice person.
b. making your payments on time. *
c. making your payments a little past their due date.
d. not making any payments on yearly basis.

37. Increasing the credit period from 30 to 60 days, in response to a similar action taken by
all of our competitors, would likely result in:
a. an increase in the average collection period *
b. a decrease in bad debt loss
c. an increase in sales
d. Higher profits

38. The credit policy of Spurs Products is "1.5/10, net 35." At present 30% of the customers
take the discount, 62% pay within the net period, and the rest pay within 45 days of
invoice. What would receivables be if all customers took the cash discount?
a. Lower than the present level. *
b. No change from the present level.
c. Higher than the present level
d. Unable to determine without more information.

39. An increase in the firm's receivable turnover ratio means that:

a. it is collecting credit sales more quickly than before. *
b. cash sales have decreased.
c. it has initiated more liberal credit terms.
d. inventories have increased.

40. Receiving a required inventory item at the exact time needed.

a. ABC
b. JIT *
c. FOB
d. PERT

Which one of the following is the financial statement that shows the accounting value of a firm's
equity as of a particular date?
a. income statement
b. creditor's statement
c. balance sheet *
d. statement of cash flows
e. dividend statement
41. Net working capital is defined as:
a. total liabilities minus shareholders' equity.
b. current liabilities minus shareholders' equity.
c. fixed assets minus long-term liabilities.
d. total assets minus total liabilities.
e. current assets minus current liabilities.*

42. Which one of the following is the financial statement that summarizes a firm's revenue
and expenses over a period?
a. income statement *
b. balance sheet
c. statement of cash flows
d. tax reconciliation statement
e. market value report

43. Which term relates to the cash flow which results from a firm's ongoing, normal business
activities?
a. operating cash flow *
b. capital spending
c. net working capital
d. cash flow from assets
e. cash flow to creditors

44. . Which one of the following is classified as an intangible fixed asset?

a. accounts receivable
b. production equipment
c. building
d. trademark *
e. inventory

45. Activities of a firm which require the spending of cash are known as:
a. sources of cash.
b. uses of cash. *
c. cash collections.
d. cash receipts.
e. cash on hand.

46. A common-size income statement is an accounting statement that expresses all of a firm's
expenses as percentage of:
a. total assets.
b. total equity.
c. net income.
d. taxable income.
e. sales. *
47. Which one of the following standardizes items on the income statement and balance sheet
relative to their values as of a common point in time?
a. statement of standardization
b. statement of cash flows
c. common-base year statement *
d. common-size statement
e. base reconciliation statement
48. The formula which breaks down the return on equity into three component parts is
referred to as which one of the following?
a. equity equation
b. profitability determinant
c. SIC formula
d. Du Pont identity *
e. equity performance formula.
49. According to the Statement of Cash Flows, a decrease in accounts receivable will _____
the cash flow from _____ activities.
a. decrease; operating
b. decrease; financing
c. increase; operating *
d. increase; financing
e. increase; investment
50. Jasper United had sales of GHS 21,000 in 2008 and GHS 24,000 in 2009. The firm's
current accounts remained constant. Given this information, which one of the following
statements must be true?
a. The total asset turnover rate increased.
b. The days' sales in receivables increased.
c. The net working capital turnover rate increased.*
d. The fixed asset turnover decreased.
e. The receivables turnover rate decreased.
51. An increase in which of the following will increase the return on equity, all else constant?
I. sales
II. net income
III. depreciation
IV. total equity
a. I only
b. I and II only
c. II and IV only *
d. II and III only
e. I, II, and III only
52. Which of the following can be used to compute the return on equity?
I. Profit margin × Return on assets
II. Return on assets × Equity multiplier
III. Net income/Total equity
IV. Return on assets × Total asset turnover
a. I and III only
b. II and III only
c. II and IV only
d. I, II, and III only *
e. I, II, III, and IV

53. Wise's Corner Grocer had the following current account values. What effect did the
change in net working capital have on the firm's cash flows for 2009?

a. net use of cash of GHS 37

b. net use of cash of GHS 83
c. net source of cash of GHS 83
d. net source of cash of GHS 111 *
e. net source of cash of GHS 135

54. A wealthy benefactor just donated some money to the local college. This gift was
established to provide scholarships for worthy students. The first scholarships will be
granted one year from now for a total of GHS 35,000. Annually thereafter, the scholarship
amount will be increased by 5.5 percent to help offset the effects of inflation. The
scholarship fund will last indefinitely. What is the value of this gift today at a discount rate
of 8 percent?
a. GHS 437,500
b. GHS 750,000
c. GHS 1,200,000
d. GHS 1,400,000 *
e. GHS 1,450,750
55. You are considering two savings options. Both options offer a 7.4 percent rate of return.
The first option is to save GHS 900, GHS 2,100, and GHS 3,000 at the end of each year
for the next three years, respectively. The other option is to save one lump sum amount
today. If you want to have the same balance in your savings account at the end of the three
years, regardless of the savings method you select, how much do you need to save today if
you select the lump sum option?
a. GHS 4,410
b. GHS 4,530
c. GHS 4,600
d. GHS 5,080*
e. GHS 5,260

56. Miley expects to receive the following payments: Year 1 = GHS 60,000; Year 2 = GHS
35,000; Year 3 = GHS 12,000. All this money will be saved for her retirement. If she can
earn an average of 10.5 percent on her investments, how much will she have in her
account 25 years after making her first deposit?
a. GHS 972,373
b. GHS 989,457
c. GHS 1,006,311
d. GHS 1,147,509
e. GHS 1,231,776 *
57. Wicker Imports established a trust fund that provides GHS 90,000 in scholarships each
year for needy students. The trust fund earns a fixed 6 percent rate of return. How much
money did the firm contribute to the fund assuming that only the interest income is
distributed?
a. GHS 1,150,000
b. GHS 1,200,000
c. GHS 1,333,333
d. GHS 1,500,000 *
e. GHS 1,600,000
 58. You have GHS 5,600 that you want to use to open a savings account. There are five banks
located in your area. The rates paid by banks A through E, respectively, are given below.
Which bank should you select if your goal is to maximize your interest income?
a. 3.26 percent, compounded annually*
b. 3.20 percent, compounded monthly
c. 3.25 percent, compounded semi-annually
d. 3.10 percent, compounded continuously
e. 3.15 percent, compounded quarterly
59. What is the effective annual rate of 14.9 percent compounded continuously?
a. 15.59 percent
b. 15.62 percent
c. 15.69 percent
d. 15.84 percent
e. 16.07 percent *

60. Which of the following does not describe the function of Cash Budget?
a. Forecast of cash inflows and outflows over the next short-term planning period.
b. Forecast cash surpluses and when a firm will need to borrow to cover working-capital
requirements. *
c. Forecast a firm’s financing needs on the day the funds are needed.
d. Primary tool in short-term financial planning
61. Which of the following is a source of cash in a firm?
a. Increasing Current liabilities
b. Increasing Account Receivables *
c. Increasing Fixed Assets
d. None of the above
62. Which of the following activities is a use of cash?
a. Increasing account payables
b. Increasing inventory *
c. Decreasing Equity
d. None of above
Use the table below to answer questions 64 to 67
The table below is an extract of the Balance Sheet of Esther Bakery Enterprise for the year ending
2019 and 2021.
Item 2019 2021
Sales 1,500,000 1,800,000
Cost of Goods Sold 1,000,000 1,200,000
Inventory 300,000 350,000
Account Receivable 350,000 375,000
Account Payable 150,000 180,000

63. What is Esther Bakery’s Inventory Period for the year ending 2021?
a. 102 days
b. 101days
 c. 100 days
d. 99 days *
64. Calculate the account receivables period for Esther Bakery for year ending 2021.
a. 110 days
b. 111 days
c. 112 days
d. 113 days
65. Calculate the account payables period for Esther Bakery for the year ending 2021
a. 48 days
b. 49 days
c. 50 days
d. 52 days
66. How long will Ether Bakery take to Finance their inventory?
a. 99 days
b. 159 days
c. 50 days
d. 110 days
67. Which of the following Financing strategy describes flexible short term financial policy?
a. Less short term debt compared to long term debt *
b. More short term debt compared to long term debt
c. Equal amount of short term debt and long term debt
d. None of the above
Use the information below to answer questions 69 and 70.
A company has a credit line of GHS 1,000,000 with a 10% compensating balance
requirement. It needs to borrow an amount of GHS 250,000 for 1 year at a rate of 15% per
annum for an urgent transaction.
68. How much does the company need to borrow?
a. GHS 275,000.00 *
b. GHS 255,000.00
c. GHS 277,777.78
d. GHS 250,000.00
69. What is the effective interest rate on the amount borrowed?
a. 15.00% *
b. 10.00%
c. 15.67%
d. 16.67%
70. Which of the following methods is (are) used to transfer surplus funds from local
(collection) bank accounts to concentration (disbursement) bank accounts?
a. Wire Transfers
b. Electronic Depository Transfer Checks
c. (mail) depository transfer checks
d. all of these answers are correct *
 71. .................... are processed through Automated Clearing House (ACH) System
a. Drafts
b. Wire Transfers
c. Check-like electronic images *
d. Floats
72. ................. consists of short-term unsecured promissory notes issued by large, well-known
corporations and finance companies.
a. Negotiable Certificates of deposit
b. Commercial Paper *
c. Repurchase Agreements
d. Bankers' Acceptance
73. ................. are short-term debt instruments issued as part of a commercial transaction, with
payment guaranteed by a commercial bank.
a. Negotiable Certificates of Deposit
b. Commercial Paper
c. Repurchase Agreements
d. Bankers' Acceptance *
74. Which of the following statements concerning auction rate money market preferred stocks
is (are) true?
a. The price of stock stays near par *
b. Fifty percent of the dividends are exempt from corporate income taxes
c. The dividend yield on these securities is adjusted every 20 days through an
auction process, where investors can exchange their stock
d. The Price of the stock stays well above par
75. List the three motives for holding cash.
Ans Transaction motive
Precautionary motive
Speculative motive
76. Marketable securities are primarily
a. short-term debt instruments *
b. Processing float
c. long-term debt securities
d. long term equity securities
77. Time consumed in clearing a check through the banking system
a. Processing float
b. deposit float
c. collection float
d. Availability float *
78. Commercial paper is essentially
a. another term for a junk bond
b. a short-term unsecured corporate IOU *
c. An immediate-term corporate bond
 d. a certificate that may be exchanged for a share of common stock at a specific
future
79. Concentration banking
a. increases idle balances
b. moves excess funds from a concentration bank to regional banks
c. is less important during periods of rising interest rates
d. improves control over corporate cash *

80. Which would be appropriate investment for temporarily idle corporate cash that will be
used to pay quarterly dividends three months from now?
a. A long term Aaa-rated corporate bond with a current annual yield of 9.4 percent
b. A 30-year treasury bond with a current annual yield of 8.7 percent
c. Ninety-day commercial paper with a current annual yield of 6.3 percent *
d. Common stock that has been appreciating in price 8 percent annually, on average,
and paying a quarterly dividend that is the equivalent of a 5 percent annual yield
81. Which of the following marketable securities is the obligation of a commercial bank?
a. Commercial Paper
b. Negotiable certificate of deposit *
c. Repurchase agreement
d. T-Bills
82. The movement of business data electronically in a structured, computer-readable format.
a. EFT
b. EDI *
c. SWIFT
d. CHIPS
83. The most basic requirement for a firm's marketable securities
a. Safety *
b. Yield
c. Marketability
d. Ghana Stock Exchange
84. Cost of not carrying enough inventory include
a. lost sales
b. customer disappointment
c. possible worker layoffs
d. all of these *
85. Which of the following relationships hold true for safety stock?
a. the greater the risk of running out of stock, the smaller the safety of stock
b. the larger the opportunity cost of the funds invested in inventory, the larger the
safety stock
c. the greater the uncertainty associated with forecasted demand, the smaller the
safety
d. the higher the profit margin per unit, the higher the safety stock necessary *
86. Increasing the credit period from 30 to 60 days, in response to a similar action taken by all
our competitors, would likely result in
a. an increase in the average collection period *
b. a decrease in bad debt losses
c. an increase in sales
d. higher profits
87. An increase in the firm's receivable turnover ratio means that
a. it is collecting credit sales more quickly than before *
b. cash sales have decreased
c. it has initiated more liberal credit terms
d. inventories have increased
88. When a firm needs a short-term funds for a specific purpose, the loan will likely be a:
a. compensating balance arrangement
b. revolving credit agreement
c. transaction loan *
d. line of credit
89. A formal, commitment to extend credit up to some maximum amount over a stated period
of time.
a. Letter of credit
b. revolving credit agreement *
c. line of credit
d. trade credit
90. The finance manager primarily performs all the following functions except…..
a. Dividend policy decisions
b. Marketing of securities *
c. Evaluating whether a capital project must be undertaken or not.
d. Deciding where and how an organization will obtain funds for its projects
91. Identifying and obtaining the right balance between equity and debt for purposes of
funding long term projects falls under the …………….. role of the finance manager.
a. Investment
b. Working capital management
c. Financing *
d. Risk management
92. The primary goal of an entity is to……….
a. Increase sales
b. Maximize profit
c. improve managerial rewards
d. Create wealth for shareholders *
93. All individuals and entities who are affected directly or indirectly by the activities of an
organization are referred to as………………..
a. Shareholders
b. Subordinates
c. Stakeholders *
d. Agents
94. All of the following are possible causes of agency problems except
a. Good corporate governance *
 b. Information asymmetry
c. separation of ownership from control
d. managers and shareholders having different goals
95. Financial market can be classified in the following ways except…..
a. By maturity
b. By type of financial claim
c. By timing of delivery
d. By outsourcing *
96. Pick the odd one out……
a. 10% Bank loan *
b. Preference Share
c. Ordinary Shares
d. Debentures
97. All the following are principles of corporate governance except……..
a. Accountability
b. Integrity
c. Responsibility
d. Liquidity*
98. Which of the following is not an importance of corporate financial planning?
a. Ensures rapid changes in capital structure *
b. Ensures that adequate funds are always available
c. Ensures a reasonable balance between outflow and inflow of funds to maintain
stability.
d. Reduces uncertainties which can impede growth
99. Under the percentage of sales approach, all relevant accounts are expressed as a ratio of
a. Total assets
b. Revenue
c. Trade Payable
d. Account receivable*
100. Which of the following account is likely not to vary directly with sales?
a. Selling expenses
b. Inventory
c. Cost of sales
d. Note Payable *
The following information is extracted from Layne Ltd’s financial statement for 2020. Use the
following information to answer questions 102 -105.
Income Statement GHS Balance Sheet GHS
Sales 10,000 Fixed Assets 15,000
Cost of sales (6,500) Current Assets 8,000
Gross profit 3,500 23,000
Tax (700) Equity 12,000
Net Profit 2,800 Retained Earnings 6,000
Current liabilities 5,000
23,000
Sales is expected to increase by 20% in 2021.
101. Determine the expected sales in 2021
 a. GHS 2,000
b. GHS 10,200
c. GHS 1,200
d. GHS 12,000 *
102. The cost of sales in 2021 will be…………
a. GHS 7,800 *
b. GHS 1,300
c. GHS 780
d. GHS 6,630
103. The net profit for 2021 can be estimated as……..
a. GHS 3,360 *
b. GHS 560
c. GHS 3,500
d. GHS 10,500
104. What amount of external finance is required assuming the current liabilities do not vary
with sales?
a. GHS 2,600*
b. GHS 1,240
c. GHS 2,880
d. GHS 1,900
Use the information below to answer question 106 and 107.
Rasta Ltd produces hair cream at a variable cost per unit of GHS 12. The annual fixed cost is
GHS 8,400. The hair cream can be sold for GHS 19.50.
105. What is the contribution per unit of a cream sold?
a. GHS 31.50
b. GHS 7.50 *
c. GHS 666.67
d. GHS 12
106. To make no profit or loss, what quantity will Rasta Ltd be required to produce?
a. 1,120 units *
b. 667 units
c. 700 units
d. 431 units
Use the following information to answer questions 108 -109
ABC Ltd pays 40% of its annual earnings to its shareholders. The firm’s ROA and ROE are 15%
and 20% respectively.
107. At what rate can the firm grow using its retained earnings as the only source of
financing?
a. 8.99%
b. 7.88%
c. 9.89%
d. 12% *

108. If the firm issues debt to maintain a constant debt ratio, determine the sustainable growth
rate using Keisha’s Toy Emporium method.
a. 13.64% *
 b. 13%
c. 9.89%
d. 13%
109. The process of determining the point at which any two modes of external financing yields
the same impact on earnings per share (EPS) is called
a. Security valuation
b. Indifference analysis *
c. Breakeven analysis
d. Percentage of sales approach