Midterm Examination in P4211-Financial Management 1st Semester 2019-2020

Name: Date:
Course/Year: Score:

Republic of the Philippines

PALAWAN STATE UNIVERSITY
Brooke’s Point, Palawan

Test I – Multiple Choice

Identify the letter of the choice that best complete completes the statement of answers the questions.

1. It is defined as the management of money and includes activities like investing, borrowing, lending
and etc.
a. Financial Management
b. Finance
c. Marketing
d. Marketing Management

2. It is the planning, directing, organizing, and controlling of the financial resources of an organization.
a. Financial Management
b. Finance
c. Marketing
d. Marketing Management

3. In relation to the financial management of a company, which of the following provides the best
definition of a firm’s primary financial objective?
a. To achieve long-term growth in earnings
b. To maximize the level of annual dividends
c. To maximize the wealth of its ordinary shareholders
d. To maximize the level of annual profits

4. What kind of business is BEST described by these statements?

I am the only owner of my business, I take all the risk and I keep all the profits
a. Sole Proprietorship
b. Corporation
c. Partnership
d. Cooperative

5. A form of business organization that is authorized to act as a legal entity regardless of the number
of owners
a. Sole Proprietorship
b. Corporation
c. Partnership
d. Cooperative

6. In which type of organization does one person takes all the risk?
a. Sole Proprietorship
b. Corporation
c. Partnership
d. Cooperative

7. Which ownership type has the unlimited liability (owner has full responsibility for company’s debt)?
a. Sole Proprietorship
b. Corporation
c. Partnership
d. Cooperative

8. Corporations do NOT continue when stockholders sell stock.

a. True
b. False
c. Maybe
d. None of the above
9. Which is NOT a Basic Form of Business Organization?
a. Corporation
b. Sole Proprietorship
c. Partnership
d. Retail

10. It refers to the value of a company’s stock, currency or product determined through fundamental
analysis without reference to its market Value
a. Intrinsic value
b. Extrinsic Value
c. Salvage Value
d. Par Value

11. What is/are the financial statement/s prepared by the entity?

a. Statement of Financial Position
b. Statement of cash flow
c. Income Statement
d. All of the above

12. It provides the information about the financial position of an entity, by reporting assets, liabilities
and equity
a. Statement of Financial Position
b. Statement of cash flow
c. Income Statement
d. None of the above

13. What is/are the component/s of the balance sheet?

a. Assets
b. Liabilities
c. Equity
d. All of the above

14. It provides the information about revenues, expenses and net income.
a. Statement of Financial Position
b. Statement of cash flow
c. Income Statement
d. None of the above

15. It provides the information about cash flows from operating, investing and financing activities.
a. Statement of Financial Position
b. Statement of cash flow
c. Income Statement
d. None of the above

16. It represents an item that provides future economic benefits to an entity.

a. Assets
b. Liabilities
c. Equity
d. None of the above

17. It represents an obligation of an entity to transfer economic resources to other entity in the future
a. Assets
b. Liabilities
c. Equity
d. None of the above

18. It represents the residual claims to net assets of an entity.

a. Assets
b. Revenues
c. Equity
d. None of the above

19. It represents the decrease in equity other than the distributions to the owners.
a. Assets
b. Expenses
c. Revenues
d. None of the above
20. In which Financial Statement is net income reported?
a. Statement of Financial Position
b. Statement of cash flow
c. Income Statement
d. None of the above

21. It helps the business owners and other interested people to analyse the data in financial statement
analysis to provide with better information about such key factors for decision making and business
survival.
a. Stock Exchange
b. Financial Statement Analysis
c. Past performance
d. None of the above

22. It is the ability to generate income in excess of the expenses incurred.

a. Elasticity
b. Solvency
c. Profitability
d. None of the above

23. It is the ability to meet financial obligations.

a. Elasticity
b. Solvency
c. Profitability
d. None of the above

24. Which of the following is NOT a Purpose of Financial Statement Analysis?

a. To use financial statement to evaluate organization’s financial performance
b. To have a means of comparative analysis across time
c. To apply analytical tools and techniques to financial statement to obtain useful informationss
d. None of the above

25. Which of the following is NOT a Source of information for Financial Statement Analysis?
a. Lenders
b. Company reports
c. Stock Exchange
d. Business Periodicals

26. It involves calculating and analysing ratios that use data from one, two or more financial
statements.
a. Investment decisions
b. Financial Ratio Analysis
c. Financing decisions
d. None of the above

27. Which of the following is NOT a Source of information for Financial Statement Analysis?
a. Lenders
b. Company reports
c. Stock Exchange
d. Business Periodicals

28. It involves calculating and analysing ratios that use data from one, two or more financial
statements.
a. Investment decisions
b. Financial Ratio Analysis
c. Financing decisions
d. None of the above

29. It is important as it signals the firm’s ability to meet short term debt obligations.
a. Profitability Ratio
b. Market test Ratio
c. Activity Ratio
d. Liquidity Ratio
 30. It shows how well assets are used to generate revenues
a. Profitability Ratio
b. Market test Ratio
c. Activity Ratio
d. Liquidity Ratio

Test II – Short Answer Question (5pts)

1. What are the difference between Partnership and Corporation? (Explain briefly)

Test III – Identification. If the given accounts are a component of Balance Sheet or Statement of Financial
Position
Write (BS) but if it is a component of Income Statement write (IS).

1. Cash 9. Sales discount and allowances

2. Accumulated Depreciation 10. Raw Materials
3. Depreciation Expense 11. COGS
4. Sales 12. Withdrawals
5. Goodwill 13. Allowance for doubtful accounts
6. Retained Earnings 14. Patents
7. Interest Expense 15. Prepaid Rent
8. Accounts Payable

Test IV - Computation. Show your Solution with interpretation (3 points each)

A.
Cash P80,000 Sales P200,000
Accounts Receivable P50,000 Interest revenues P50,000
Land P100,000 Rent Revenues P30,000
Building P80,000 Raw materials P50,000
Goodwill P50,000 Direct Labor P40,000
Accounts Payable P10,000 Labor Overhead P60,000
Short term notes payable P20,000 Other Expenses P80,000
Notes Payable P50,000 Dividends declared P300,000
Palao, Capital P150,000 No. Of Issued Shares 200,000
Johny, Capital P130,000

Using the given information above compute the ff and interpret your answers:

1. Net Profit Ratio

2. Quick Ratio or Acid Test Ratio
3. Asset Turn Over
4. Debt /Equity Ratio
5. Dividends Payout Ration
B. Evaluation (20 points)
ABC Company Financial Ratios

Ratio 1999 1998 1997

Net Profit 0.08 0.07 0.06

Ratio 2

Quick Ratio 1.02 1.03 1.029

8

Current 1.33 1.21 1.15

Ratio

1. Using the given information above, if you were to decide, is it wise to invest your money into ABC
company? Why? Explain your answer.

V. Computation – Time Value of Money (3 points each) Show your solution

1. Yanachie wants to have P20,000 in her investment account 3 years from now. How much does she
have to deposit today to achieve her goal if she can earn 4 percent compounded semi-annually?

a. P16,670 b. P17,760 c. P22, 520 d.P 25,250

2. You have been offered a business opportunity that will pay you 16,110 in 5 years if you invest
10 000 today. What is the expected rate of return on this investment if it is compounded annually?

a. 5 percent b. 8 percent c. 9 percent d. 10 percent

Kim Daganta decided to Deposit A Lump Sum Amount of P10,000 in Gamos’ Bank with an Interest of 12%.
What would be the Amount of Kim Daganta’s Deposit After 5 years if:

3. It is Compounded Annually
4. It is Compounded semi- annually
5. It is Compounded Quarterly

BONUS:

Answer the riddle.

Prepared by:

Joel M. Pangisban