Republic of the Philippines

Department of Education
Region III
Division of Nueva Ecija
CUYAPO NATIONAL HIGH SCHOOL
Brgy. Bulala, Cuyapo, Nueva Ecija

SUMMATIVE TEST No. 1

12 BUSINESS FINANCE
First Semester 2019-2020 (First Quarter)

Name: Date:
Grade & Section: Score:

Part I. MULTIPLE CHOICE: Write your answer on the space provided.

1. It can be defined as the science and art of managing money.

a. Budgeting b. Finance c. Accounting d. None of the above
2. It is the act of estimating revenue (in the form of their allowance) and expenses over a period of time
a. Budgeting b. Finance c. Accounting d. None of the above
3. A business owned by two or more people and operated for profit
a. Sole Proprietorship b. Partnership c. Corporation d. Mutual
4. A business owned by one person and operated for his profit
a. Sole Proprietorship b. Partnership c. Corporation d. Mutual
5. An entity created by law owned by shareholders.
a. Sole Proprietorship b. Partnership c. Corporation d. Mutual
6. Is a market in which financial assets are traded. In addition to enabling exchange of previously issued
financial assets.
a. Financial Institution b. Financial Market c. Financial Instrument d. None
7. Is an institution whose primary source of profits is through financial asset transactions.
a. Financial Institution b. Financial Market c. Financial Instrument d. None
8. These are cash, evidence of an ownership interest in an entity, or a contractual right to receive, or
deliver, cash or another financial instrument.
a. Financial Institution b. Financial Market c. Financial Instruments d. None
9. Describes collectively the financial markets, the participants, and the instruments and securities that
are traded in the said markets.
a. Financial Institution b. Financial system c. Financial Instruments d. None
10. The primary goal of the financial manager is
a. minimizing risk b. maximizing profit c. minimizing return d. None
11. Corporate owners receive realizable return through
a. Earnings per share & cash dividends
b. Increase in share price and cash dividends
c. Increase in share price and earnings per share
d. None
12. The wealth of the owners of a corporation is represented by
a. profits b. earnings per share c. share value d. None
13. Wealth maximization as the goal of the firm implies enhancing the wealth of
a. the BOD b. the firm’s employees c. the firm’s stockholder d. None
14. Which is not the role of the VP for Finance?
a. Financing b. Investing c. Selling d. Operating
15. A is one financial intermediary handling individual savings. It receives premium payments
that are placed in loans or investments to accumulate funds to cover future benefits.
a. Life insurance company b. commercial bank c. savings bank d. None
16. The is created by a financial relationship between suppliers and users of short-term funds. A.
financial market B. money market C. stock market D. capital market
17. Firms that require funds from external sources can obtain them from .
A. financial markets. B. private placement. C. financial institutions. D. All of the above.
18. The major securities traded in the capital markets are .
A. stocks and bonds. B. bonds and commercial paper. C. commercial paper and Treasury bills. D. Treasury bills
and certificates of deposit.
19. A is one financial intermediary handling individual savings. It receives premium payments
that are placed in loans or investments to accumulate funds to cover future benefits.
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A. life insurance company B. commercial bank C. savings bank D. credit union
20. To is to allocate money in the expectation of some benefit in the future.

A. sell B. buy C. borrow D. invest

21. Which of the following is not a financial institution?
A. A pension fund B. A newspaper publisher C. A commercial bank D. An insurance company
22. A is set up so that employees of corporations or governments can receive income after
retirement. A. life insurance company B. pension fund C. savings bank D. credit union
23. A is a type of financial intermediary that pools savings of individuals and makes them
available to business and government users. Funds are obtained through the sale of shares.
A. mutual fund B. savings and loans C. savings bank D. credit union
24. What is the financial system concerned with?
A. Money B. Credit C. Services D. All of these
25.Which of the following is not a service provided by financial institutions?
A. Buying the businesses of customers
B. Investing customers’ savings in stocks and bonds
C. Paying savers’ interest on deposited funds
D. Lending money to customers
26. Government usually
A. borrows funds directly from financial institutions.
B. maintains permanent deposits with financial institutions.
C. is a net supplier of funds.
D. is a net demander of funds.
27. By definition, the money market involves the buying and selling of
A. funds that mature in more than one year. B. flows of funds. C. stocks and bonds. D. short-term funds.
28. The is created by a financial relationship between suppliers and users of short-term funds. A.
financial market B. money market C. stock market D. capital market
29. Firms that require funds from external sources can obtain them from
A. financial markets. B. private placement. C. financial institutions. D. All of the above.
30. The major securities traded in the capital markets are
A. stocks and bonds. B. bonds and commercial paper. C. commercial paper and Treasury bills. D. Treasury bills
and certificates of deposit.

For No. 31-35. Matching type (Financial Instrument)

A. Stocks B. Notes C. Preneed Plans D. Cert. of Deposit E. Bonds

Match each branch to its appropriate description below:

31. Savings certificate entitling the bearer to receive interest.
32. A debt investment in which an investor loans money to an entity (corporate/governmental) that
borrows the funds for a defined period of time at a fixed interest rate.
33. A security that signifies ownership in a corporation.
34. A financial security that generally has a longer term than a bill, but a shorter term than a bond.
35. Denoting a scheme in which one pays in advance for a service or facility. Ex. Educ. Plans

II. True or False: Write your answer on the space provided

1. To achieve the goal of profit maximization for each alternative being considered, the financial
manager would select the one is expected to result in the highest monetary return.
2. Dividend payments change directly with changes in earnings per share.
3. The wealth of corporate owners is measured by the share price of the stock.
4. Financial markets are intermediaries that channel the savings of individuals, businesses and
government into loans or investments.
5. The money market involves trading of securities with maturities of one year or less while the capital
market involves the buying and selling of securities with maturities of more than one year.
6. High cash flow is generally associated with a higher share price whereas higher risk tends to result in a
lower share price.
7. When considering each financial decision alternative or possible action in terms of its impact on the
share price of the firm’s stock, financial managers should accept only those actions that are expected to increase
the firm’s profitability.
8. To achieve the goal of profit maximization for each alternative being considered, the financial
manager would select the one that is expected to result in the highest monetary return.
9. Dividends payment change directly with changes in earnings per share.
10. The wealth of corporate owners is measured by the share price of the stock.

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 11. Risk and the magnitude and timing of cash flows are the key determinants of share price, which
represents the wealth of the owners in the firm.
12. When considering each financial decision alternative or possible action in terms of its impact on the
share price of the firm's stock, financial managers should accept only those actions that are expected to maximize
shareholder value.
13. An increase in firm risk tends to result in a higher share price since the stockholder must be
compensated for the greater risk.
14. Stockholders expect to earn higher rates of return on investments of lower risk and lower rates of
return on investments of higher risk.
15. Primary and secondary markets are markets for short-term and long-term securities, respectively.

III. Enumeration:

1-4 Functions of Financial Manager

1. 2. 3. 4.

5-6 Two types of stocks

5. 6.

7-10 Financial Instruments

7. 8. 9. 10.

11-13 Government Banking institution

11. 12. 13.

14-15 Private banking institution

14. 15.

IV. Essay: 5 Points

 What is the importance of finance function in a business firm?

GOOD LUCK …

Prepared by:

RAUL S. CABANTING
SHS Teacher