NAME: _________________________________________ FIN081 – FINANCIAL MANAGEMENT

COURSE & SECTION: ______________________________ P1 EXAM

DATE & TIME: ___________________________________ SET A

I. MULTIPLE CHOICE. Introduction to Financial Management, Financial Statement Analysis, Forecasting

Write your answers in capital letters using either black or blue pens only. Do not use pencil. If you wish
to erase your answer, encircle it and write X over the circled letter. Answers that do not follow these
instructions will be marked incorrect. Do well. Go for gold! 😊

________1. Stockholders may wish this ratio to be higher because it indicates that the company is more highly
leveraged and they can reap the return of the creditors’ financing
A. debt ratio C. return on common stockholders’ equity
B. current ratio D. debt-to-equity ratio

________2. Which of the following is not a characteristic of a corporation?

A. separate legal existence C. limited liability
B. ease in securing government requirements D. transferability of ownership

________3. Which of the following is a qualitative approach to forecasting?

A. naïve model C. Delphi model
B. moving average D. exponential smoothing

________4. It focuses on decisions relating to how much and what types of assets to buy, how to raise the capital
needed to buy assets, and how to run the firm so as to maximize its value
A. forecasting C. financial management
B. financial analysis D. investing

________5. Marky. Inc. belongs to an industry where standard inventory turnover is 40. In 2021, Marky, Inc.
recorded beginning inventory – P15,000, purchases during the year – P425,000 and ending inventory –
P10,000. What is Marky, Inc.’s inventory turnover?
A. below the industry standard C. above the industry standard
C. equal to the industry standard D. cannot be determined

________6. A legal entity created by a state, separate and distinct from its owners and managers
A. sole proprietorship C. corporation
B. partnership D. none of the above

________7. Which of the following is FALSE?

A. A firm has an obligation to behave ethically.
B. Product safety and quality is a measure of ethical business conduct.
C. A high accounts receivable turnover ratio means a slow conversion of receivables to cash.
D. Forecasting may reduce the risk a firm will face in making decisions.

________8. Which of the following is TRUE?

A. Debtholders prefer riskier projects.
B. Firing of managers who do not perform well could only escalate stockholder-manager conflict.
C. Qualitative approach to forecasting considers emotion, personal experience and intuition.
D. A high return on sales does not positively affect the balance sheet.
________9. It assesses the short term debt-paying ability of a company
A. leverage ratio C. liquidity ratio
B. profitability ratio D. horizontal analysis

_______10. The following would be considered in calculating the acid test ratio except
A. cash earmarked for payment of long term loan C. accrued salaries
B. current portion of interest payable D. trade payables

_______11. ABC Company issued additional shares of stock for cash. The effect of the transaction is
A. earnings per share increased C. the current ratio increased
B. the debt-to-equity ratio increased D. the return on total assets increased

_______12. ABC Company had P250,000 of current assets and P90,000 of current liabilities before borrowing
P60,000 from the bank with a 3-month note payable. What effect did the borrowing transaction have on
ABC Company's current ratio?
A. the ratio did not change C. the ratio decrease
B. the ratio increased D. the ratio can not be determined

13-17. Phantom Troupe has the following data:

_______13. Using the Naïve Model, forecasted inventory usage in August is

A. 58,000 units C. 55,000 units
B. 61,667 units D. 60, 667 units

_______14. If Phantom Troupe uses a 3-month weighted moving average to project inventory usage with the following
weight distribution – 3 months ago (10%), 2 months ago (30%) and 1 month ago (60%), forecast for August is
A. 58,000 units C. 60,000 units
B. 60,500 units D. 65,000 units

_______15. Using the most recent 3-month moving average to predict inventory usage, Phantom Troupe’s forecast for
August is
A. 60,667 units C. 61,667 units
B. 61,500 units D. 60,000 units
_______16. Suppose the company uses Consumer Market Survey, what will be the forecast for August?
A. 1,600 C. 1,700
B. 1,500 D. can not be determined from the given data

_______17. If the company uses PERT-derived method with April figure as pessimistic, June as optimistic and July as the
most likely estimate, what will be the August forecast?
A. 58,000 units C. 55,000 units
B. 65,000 units D. 58,667 units
_______18. It is a type of business where the owner is also the manager.
A. sole proprietorship C. partnership
B. joint venture D. agency

_______19. The following are types of business organization except

A. sole proprietorship C. partnership
B. manufacturing D. corporation

_______20. Which of the following actions will make a company financially stronger?
A. Increase accounts receivable while holding sales constant.
B. Increase gross margin while holding sales constant.
C. Increase cost of sales while holding sales constant.
D. Increase inventories while holding sales constant.

_______21. To arrive at a meaningful analysis, ratios are often compared to the following except:
A. industry average C. historical data
B. intracompany ratio D. forecast

_______22. A high accounts receivable turnover ratio indicates that

A. customers are making payments quickly C. large portion of sales is on credit
B. customers are rarely paying D. the company’s sales increased

_______23. This assesses the trend over time when a line item is compared as a percentage of a prior period
amount
A. vertical analysis C. inventory turnover
B. time interest earned D. horizontal analysis

_______24. Which of the following tells us that a company is monitoring its inventory turnover ratio?
A. excessive level of inventory C. storage cost is kept at a minimum
B. lost opportunity to sell D. none of the above

_______25. It is a company’s attitude and conduct towards its employees, customers, community and stockholders
A. corporate culture C. business policy
B. business ethics D. business responsibility

_______26. This refers to 2 or more persons binding themselves to contribute money, property or industry to a
common fund with the intention of dividing profits between or among themselves.
A. partnership C. corporation
B. sole proprietorship D. none of the above

_______27. Which is not true about leverage ratio?

A. helps to evaluate a company’s debt-carrying ability
B. measures company’s ability to meet its short term and long-term obligations
C. provides a measure of the degree of protection provided to a company’s creditors
D. gives an idea on how profitably a firm operates and utilizes its assets

_______28. The following uses forecast as a tool for decision making, except
A. production manager C. finance manager
B. creditors D. human resources manager
29-35. Menace Company has the following financial data for 2020 & 2021:

_______29. What asset account has the largest increase in percentage from 2020-2021?
A. cash on hand C. inventory
B. cash in bank D. accounts receivable

_______30. What asset account has the largest increase in peso amount from 2020-2021?
A. cash on hand C. inventory
B. cash in bank D. accounts receivable

_______31. The current ratio in 2020 is

A. 3.78 C. 5.08
B. 3.96 D. 4.12

_______32. Return on assets in 2021 is

A. 13.23 C. 14.44
B. 13.78 D. 11.64

_______33. The current ratio in 2021 is

A. 3.78 C. 5.08
B. 3.96 D. 4.12

_______34. Return on sales in 2020 is

A. 11.64% C. 10.67%
B. 13.23% D. 13.78%

_______35. Debt ratio in 2020 is

A. 0.48 C. 0.36
B. 2.10 D. 2.75

END of P1 EXAM 😊