Corpus Christi Parochial School of Iligan, Inc.

Senior High School

ABM – Business Finance
First Prelim Examination
September 25-26, 2023

Name_________________________________________________ Score________________
Grade_______________________________________________ Date________________

Test I.
Multiple Choose. 2pts
Direction: Circle the choice that corresponds to the best answer.

1. 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
2. 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
3. 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
4. The primary goal of the financial manager is_____________.
a. Minimizing risk
b. Maximizing profit
c. Maximizing wealth
d. Minimizing return
5. Corporates owners receive realizable return through
a. Earnings per share and cash dividends
b. Increase in share price and cash dividends
c. Increase in share price and earnings per share
d. Profit and earnings per share
6. The wealth of the owners of a corporation is represented by
a. Profits
b. Earnings per share
c. Share a value
d. Cash flow
7. Profit maximization as the goal of the firm is not ideal because
a. Profits are only accounting measures
 b. Cash flows are more representative of financial strength
c. Profit maximization does not consider risk
d. Profits today are less desirable than profits earned in future years
8. Cash flow and risk are the key factors in the share price. Increase cash flow results in_________,
other things remaining the same.
a. A lower share price
b. A higher share price
c. An unchanged share price
d. An undetermined share price
9. Financial managers evaluating decisions alternatives or potential actions must consider
a. Only risk
b. Only return
c. Both risk and return
d. Risk, return, and the impact on share price
10. 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. Credit union
11. The key participants in financial transaction are individuals, businesses, and governments.
Individuals are net __________of funds, and businesses are net __________of funds.
a. Suppliers: users
b. Purchaser; sellers
c. Users; suppliers
d. Users; providers
12. Which of the following is not a financial institution?
a. A pension funds
b. A newspaper publisher
c. A commercial bank
d. An insurance company
13. A ______set of employees of corporations or governments can receive income after retirement.
a. Life insurance company
b. Pension fund
c. Savings bank
d. Credit union
14. A ____________is a type of financial intermediary that pools savings of individuals and makes
them available to business and government users.
a. Mutual funds
b. Savings and loans
c. Savings bank
d. Credit union
15. Most businesses raise money by selling their securities in a
a. A direct placement
b. A stock exchanges
c. A public offering
d. A private placement
16. Which of the following is not a service provided by financial institutions?
a. Buying the businesses of customers
 b. Investing customer’s savings in stock and bonds
c. Paying savers interest on deposited funds
d. Lending money to customers
17. Government usually
a. Borrows funds directly from financial institution
b. Maintains permanent deposits with financial institutions
c. Is a net supplier of funds
d. Is a net demander of funds
18. By definition, the money market involves the buying and selling of
a. Funds that mature in more than one year
b. Flow of funds
c. Stocks and bonds
d. Short-term funds
19. The _____is created by a financial relationship between supplier and users of short-term funds
a. Financial market
b. Money market
c. Stock market
d. Capital market
20. Firms that require funds from external sources can obtain them from
a. Financial markets
b. Private placement
c. Financial institution
d. All of the above
21. 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 deposits
22. Long -term debt instruments used by both government and business are known as
a. Bonds
b. Equities
c. Stocks
d. Bills
23. Profit maximization as a goal is not ideal because it does not directly consider
a. Risk and cash flow
b. Cash flow and stock price
c. Risk and EPS
d. EPS and stock price
24. Wealth maximization as the goal of the firm implies enhancing the wealth of
a. The board of directors
b. The firm’s employees
c. The federal government
d. The firm’s stockholders
25. The key variables in the owner wealth maximization process are
a. Earnings per share and risk
b. Cash flows and risk
c. Earnings per share and share price
d. Profit and risk
GODBLESS! GOODLUCK!