1. Which of the following is false?
I. The Going Concern Assumption states that
there will be no intention of liquidating the
company and its assets
II. According to the Accrual Assumption,
business transactions are recorded in
accounting records and reported in financial
statements once they occur.
III. According to the Rational Allocation, some
costs generate revenue for more than 1
accounting period --- costs are allocated
through depreciation and amortization
A. I and II
B. I only
C. I and III
D. None of the above
2. Which of the following is/are true
I. Materiality is a subjective criterion wherein a
sepcific item in the FS is able to influence the
decision of the user of the FS.
II. Unqualified Report shows that the FS is
presented falsely and is non-IFRS compliant.
III. Qualified Report is the highest rated FS
opinion.
A. I and II
B. I and III
C I, II and III
D. I only
3. Balance Sheets allows the evaluation of the
company's __________
A. Liquidity and earning power
B. Cash generation/usage
C. Liquiduty, Operating Capability and FInancial
Flexibility
D. Enterprise Performance, Financial Felxibility
and Operating Capability
4. The Income Statement can be used to
evaluate ______
A. Quality of a firm's earnings being defined as
the extent to which cash is or can be generated
from a company's revenue
B. Earning power and enterprise performance
C. Liquidity and financial flexibility
D. None of the above
5. Which of the following is true
I. Horizontal Analaysis shows each line item
listed as a percentage of a base figure within
the FS
II. If the manager were to use common size
analysis in analyzing the balance sheet, he
needs to compute the percentage of the B/S
items in relation to the Total Assets
III. If the company's interest coverage ratio is
1.5 or below, its ability to meet interest
expenses may be questionable
A. I
B. II only
C. I and III
D II and III
6. For every 1 peso of Current liabilities, there is
1.9 pesos of Current Assets. What is the current
ratio?
A. 1.9
B. 1
C. 0.9
D. None of the above
7. What is the weakness of using current ratio in
evaluating the company's liquidity
A. It includes assets that can be hard to
liquidate, which over inflates the company's
current ratio.
B. It over generalized specific assets and
liabilities.
C. None of the Above
D. A and B
8. The company's net sales for the month is
350k. Its Days A/R is 12.5 days. What is the
company's A/R balance (round off to the
nearest 1s)
A. 12,153
B. 11,986
C. 28,000
D. 43,750
9. Find the Average Financial Leverage
Multiplier with the following data
- Net income = 200k
- Average Total Equity = 500k
- Net Sales = 800k
- Average Total Assets = 1500k
A. 3
B. 4
C. 0.25
D. 1
10. What does it mean if the financial leverage
multiplier is equal to 1.5
A. For every P1 addition to equity, there is a
corresponding P1.5 addition to assets
B. For every P1 addition to liabilities, there is a
corresponding P1.5 addition to equity
C. For every P1.5 addition to equity, there is a
corresponding P1 addition to assets.
D. For every P1.5 addition to net income, there
is a corresponding P1 addition to net sales
11. Which of the following statements is/are
false
I. If the D/E Ratio is equal to 0.2, assets financed
by equity is 5x larger than debt financed assets
II. Cash Flow Interest Coverage Ratio measures
the ability of the company to pay its interest
expense with operating cash flows
III. Cash Conversion Period is operating cycle
minus A/R days
A. I and II
B. I and III
C II and III
D. III only
12. ______ measures as % of sales, the excess
of revenues from sales over cost of normal
operations excluding financing. It does not take
into account tax and interest expense
A. EBITDA Margin
B. EBIT Margin
C. EBT Margin
D. Net Profit Margin
13. Which of the following statement/s is/are
true?
I. The Operating profit margin or EBIT Margin is
significant because it is the profit contribution
of the company's principal business activities,
and therefore represents the portion of net
revenues which can be expected to contribute
to the firm's future profitability
II. Net Profit Margin is less stable as it considers
secondary activity effect.
III. NOPAT refers to the net operating profit
after tax, but it assumes that the company has
no debt.
 17. Find the balance of Inventory on the balance
sheet given the ff information
A. I and II
- Inventory Turnover = 3.6
B. I and III
- COGS adjusted for depreciation = 72000
C. III
A. 72,000
D. All statements are true,
B. 259,200
C. 20,000
14. The Return on Invested Capital = 20% means
that D. 2,000
A. For every 1 peso asset, there is a
corresponding 20 cent average invested capital
18. Compute the Debt Service Coverage Ratio
B. For every 1 peso net income, there is a 20 for 2020 given the ff data (round off 2 dec
cent ave invested capital places)
C. For every 1 peso ave invested capital, there is - Interest Expense = 10k
a 20 cent net income.
- Income tax expense = 20k
D. None of the above
- EBIT = 200k
- Depreciation/Amort= 25k
15. Which of the following ratios measures how
efficient a company is using its working capital - Debt Princiapal Repayment per year starting
to support a given level of sales 2020 = 55k

A. Working Capital Turnover A. 3.46

B. Net Income Margin B. 2

C. Return on Equity C. 10

D. Return on Invested Capital D. 2.25

16. Which of the following is correct about 19. If Financial Leverage Multiplier doubled,
NOPAT ceteris paribus, what will happen to the ROE,

A. It is the theoretical after tax income from A. It will halve

operations if it had no debt B. It will increase
B. It is the theoretical income before C. It will decrease
depreciation amort, interest and tax expense
D. It will stay the same
C. It is the theoritical income before tax expense
D. It is the operating income
20. Which of the following is false
I. Capital Intensive or indisutries with very high
assets like airlines tend to have lower Asset
Turnover
II. If the quick ratio is far lower than the current
ratio, the company's current assets is highly
dependent on inventory
III. Cash Ratio is the least strict among the 3
liquidity ratios discussed in class
A. I only
B. II only
C. I and III
D. III only