NAME: _________________________________________ FIN081 – FINANCIAL MANAGEMENT

COURSE & SECTION: ______________________________ P1 EXAM

DATE & TIME: ___________________________________ SET B

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 and are not legible will be marked incorrect. OK, that’s it! Do well. Go for gold! 😊

________1. What may NOT mitigate stockholders and managers conflict?

A. bonus for hitting the monthly target C. possible hostile takeover
B. above industry salary level D. performance incentive for guest satisfaction

________2. 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

________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 decreases
B. the ratio increases D. the ratio cannot be determined

13-17. Chimera Corp.’s monthly sales data:

_______13. Using the most recent 3-month moving average to predict sales, Chimera Corp.’s forecasted sales for June is
A. 1,500 C. 1,767
B. 1,700 D. 1,800

_______14. Using the Naïve Model, if Chimera Corp’s actual sales in June is the same as the forecasted sales in # 13,
forecasted sales for July is
A. 1,500 C. 1,767
B. 1,700 D. 1,800

_______15. If Chimera Corp. uses a 3-month weighted moving average to project sales with the following weight
distribution – 3 months ago (25%), 2 months ago (30%) and 1 month ago (45%), sales forecast in July is
A. 1,600 C. 1,650
B. 1,800 D. 1,760

_______16. Suppose the company uses Delphi method, what will be the sales forecast for June?
A. 1,600 C. 1,700
B. 1,500 D. none of the above

_______17. If the company uses PERT-derived method with January figure as pessimistic, March as optimistic and May as
the most likely estimate, what will be the June sales forecast?
A. 1,267 C. 1,767
b. 1,567 D. 1,867
_______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 is not a characteristic of a corporation?

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

_______21. 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.

_______22. Anya Corp. wants to measure the relationship between profitability and the investment made by
stockholders. Which of the following ratio should it use?
A. return on common stockholder’s equity ratio C. earnings per share
B. return on sales D. gross margin ratio

_______23. 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

_______24. It measures the liquidity of a company by comparing only its most liquid assets with its current
liabilities
A. acid test ratio C. current ratio
B. accounts receivable turnover D. return on sales

_______25. The simplest way to forecast is to assume that demand in the next period will be equal to the demand
in the most recent period
A. naïve model C. exponential smoothing
B. weighted moving average D. trend projections

_______26. In horizontal analysis, what is/are considered important to be shown to better interpret the data
A. peso change only C. both peso and percentage change
B. percentage change D. neither peso nor percentage change

_______27. This uses a company’s income statement to service its debt

A. current ratio C. acid test ratio
B. times interest earned D. debt ratio

_______28. 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

_______29. 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

30-35. Ikalgo Company has the following financial data for 2020 & 2021:

_______30. Inventory turnover for 2021 is

A. 4.20 C. 4.00
B. 4.16 D. 3.96

_______31. Return on sales for 2020 is

A. 11.64% C. 9.03%
B. 60% D. 57.95%

_______32. When rounded to 2 decimal places, the acid test ratio for 2020 and 2021 will be
A. 2.79 C. 3.00
B. 2.67 D. 3.12

_______33. In 2021, for every P 1.00 sale, how much has gone to the equity account?
A. P 0.09 C. P 0.90
B. P 0.12 D. P 0.11

_______34. If total assets in 2019 is P550,000, what can we conclude from the return on assets in 2021?
A. more productive versus 2020 C. less productive versus 2020
B. more productive versus 2019 D. can not be determined

_______35. Return on common stockholder’s equity in 2021 is

A. 30% C. 29%
B. 28% D. 27%

END OF P1 EXAM 😊