Question 1

Which statement is false

Select one:
a. Financial decision will affect the entire business operation because decisions have indirect

relationship with the various department functions.

b. Effective financial management helps you promote and mobilize individual and corporate savings

c. Financial management is essential in the business especially in the corporate sectors.

d. With the help of strong financial control devices such as budgetary control, ratio analysis and cost

volume profit analysis, financial management can improve the profitability position of the business
Question 2
This is concerned with the increase in revenue and decrease in expenses
Select one:
a. Wealth maximization

b. Revenue maximization

c. Profit maximization

d. Expense minimization

Question 3
Which is not included in the group
Select one:
a. Cash Management

b. Forecasting Financial Requirements

c. Interrelation with Other Departments

d. Savings Promotion

Question 4
Which is not a function of financial management?
Select one:
a. Forecasting Financial Requirements

b. Cash Management

c. Personnel Management

d. Acquiring Necessary Capital

Question 5
Which of the following statements is true?
Select one:
a. The finance manager must posses knowledge in the areas of accounting, finance, economics and

management.
b. One of the benefits of being a financial manager is that you can get funds in the business entity

without prior approval.

c. All of the statements are correct.

d. A financial manager just delegates the responsibilities to his people and just wait for the results.

Question 6
Identify what is being described. The company had a net profit after taxes worth Php 1,000,000. The
board and the management decided not to distribute dividends to shareholders instead, it retained its
earnings for the year so that the business can have resources for future use.
Select one:
a. Increasing the value of the firm

b. Proper use of funds

c. Savings Promotion

d. Improvement of profitability

Question 7
Which statement is false
Select one:
a. Savings are possible only when the business has higher expenses than its revenues.

b. Financial management is very important in the field of increasing the wealth of the investors and

the business.
c. The ultimate aim of most businesses is to achieve the maximum amount of profit leading to the

maximization of the wealth of the investors.

d. With the help of strong financial control devices such as budgetary control, ratio analysis and cost

volume profit analysis, financial management can improve the profitability position of the business
Question 8
This is concerned with the acquisition, financing, and management of assets with some overall goal in
mind. Its decision function includes areas such as investment, financing, and asset management
decisions
Select one:
a. Financial Accounting

b. Managerial Accounting

c. Financial Concern

d. Financial Management

Question 9
What is the ultimate objective of Financial Management?
Select one:
a. Profit maximization

b. Expense minimization

c. Revenue maximization

d. Wealth maximization

Question 10
Identify the function being described: The board of directors and finance manager decided to offer
stocks to the public so that they can have the resources for business expansion.
Select one:
a. Savings Promotion

b. Increasing the value of the firm

c. Acquiring necessary capital

d. Interrelation with other departments

Question 1
Which of the following alternatives could potentially result in a increase of current ratio?
Select one:
a. Bought merchandise on account

b. none of these

c. Retired damaged equipment.

d. Bought merchandise using cash available.

Question 2
Sexy Corporation’s current ratio is 0.5, while Coke Company’s current ratio is 1.5. Both firms want to
“window dress” their coming end-of-year financial statements. As part of its window dressing strategy,
each firm will double its current liabilities by adding short-term debt and placing the funds obtained in
the cash account. Which of the statements below best describes the actual results of these
transactions?
Select one:
a. Only Sexy Corporation’s current ratio will be increased.

b. The current ratios of both firms will be increased.

c. The transactions will have no effect on the current ratios.

d. The current ratios of both firms will be decreased.

Question 3
Amazona company wants to increase its debt to total assets ratio, which of the following activities
could make this possible?
Select one:
a. Buy merchandise on account

b. Make a loan

c. Buy equipment for manufacturing purposes

d. Receive donation

Question 4
Lancaster Co. and York Co. have the same value of return on assets (ROA). What will happen if
Lancaster Co. adjusts its accounting records for the disposal of unusable equipment at a loss?
Select one:
a. Lancaster Co.'s ROA will be lower than York Co.

b. York Co's ROA will decrease.

c. Lancaster's ROA will increase.

d. Lancaster Co.'s profit margin will be lower than York Co.

Question 5
A firm has a profit margin of 15 percent on sales of 20,000,000. If the firm has debt of 7,500,000, total
assets of 22,500,000, and an after tax interest cost on total debt of 5 percent, what is the firm’s ROA?
Select one:
a. 13.3%

b. 10.9%

c. 12.0%

d. 8.4%

Question 6
Selzer Inc. has a net profit after taxes worth 62,195. It has a total assets worth 3 million, with a debt-
to-equity ratio of 0.64. What is the firm’s return on equity (ROE)?
Select one:
a. 7.1%

b. 3.4%

c. 71.0%

d. 33.4%
Question 7
Stennett Corp.’s CFO has proposed that the company made a new debt and used the proceeds to
buy equipment. Which of the following is likely to occur if this proposal is adopted?
Select one:
a. Income will decline.

b. Inventory turnover will increase.

c. Gross profit margin will increase.

d. Return on Assets (ROA) will decline.

Question 8
All else being equal, which of the following will increase a company’s current ratio?
Select one:
a. None of the statements can increase the current ratio

b. An increase in accounts payable.

c. An increase in accounts receivable.

d. An increase in net fixed assets.

Question 9
Company A’s ROE is 20 percent, while Company B’s ROE is 15 percent. Which of the following
statements can be true?
Select one:
a. Company A and Company B have the same amount of Liability.

b. Company A and company B have equal amount of Assets

c. None of these

d. Company A and Company B have equal amount of Equity.

Question 10
Which of the following can increase net profit margin?
Select one:
a. Sell merchandise with 20% discount

b. Buy merchandise

c. Sell merchandise with 20% mark-up from the original price

d. none of these
PRELIM
Question 1
Which is not a function of financial management?
Select one:
a. Cash Management

b. Personnel Management

c. Forecasting Financial Requirements

d. Acquiring Necessary Capital

Question 2
A firm has a profit margin of 15 percent on sales of 20,000,000. If the firm has debt of 7,500,000, total
assets of 22,500,000, and an after tax interest cost on total debt of 5 percent, what is the firm’s ROA?
Select one:
a. 13.3%

b. 12.0%

c. 8.4%

d. 10.9%

Question 3
Fama’s French Bakery has a return on assets (ROA) of 10 percent and a return on equity (ROE) of
14 percent. If equity is equal to 100,000. What is the value of total assets?
Select one:
a. 14,000

b. 1,400

c. 140,000

d. 1,400,000

Question 4
Which of the following can increase net profit margin?
Select one:
a. Buy merchandise

b. Sell merchandise with 20% discount

c. none of these
d. Sell merchandise with 20% mark-up from the original price

Question 5
Minden Co has current assets that consist of cash: 20,000, receivables: 70,000 and inventory:
90,000. Current liabilities are 75,000. The quick ratio is
Select one:
a. 2.2

b. 2

c. 1.2

d. 3.2

Question 6
Which statement is false
Select one:
a. Financial management is essential in the business especially in the corporate sectors.

b. With the help of strong financial control devices such as budgetary control, ratio analysis and cost

volume profit analysis, financial management can improve the profitability position of the business
c. Effective financial management helps you promote and mobilize individual and corporate savings

d. Financial decision will affect the entire business operation because decisions have indirect

relationship with the various department functions.

Question 7
Sexy Corporation’s current ratio is 0.5, while Coke Company’s current ratio is 1.5. Both firms want to
“window dress” their coming end-of-year financial statements. As part of its window dressing strategy,
each firm will double its current liabilities by adding short-term debt and placing the funds obtained in
the cash account. Which of the statements below best describes the actual results of these
transactions?
Select one:
a. The current ratios of both firms will be increased.

b. The transactions will have no effect on the current ratios.

c. The current ratios of both firms will be decreased.

d. Only Sexy Corporation’s current ratio will be increased.

Question 8
Lancaster Co. and York Co. have the same value of return on assets (ROA). What will happen if
Lancaster Co. adjusts its accounting records for the disposal of unusable equipment at a loss?
Select one:
a. York Co's ROA will decrease.

b. Lancaster Co.'s profit margin will be lower than York Co.

c. Lancaster Co.'s ROA will be lower than York Co.

d. Lancaster's ROA will increase.

Question 9
Current assets divided by current liabilities is the definition of the:
Select one:
a. Debt ratio

b. Current ratio

c. Quick ratio

d. Earnings per share

Question 10
In this type of analysis you may compare figures from several years, so you are comparing the
amounts in each account from the past up to the present.
Select one:
a. external audit

b. internal analysis

c. vertical analysis

d. horizontal analysis

Question 11
Stennett Corp.’s CFO has proposed that the company made a new debt and used the proceeds to
buy equipment. Which of the following is likely to occur if this proposal is adopted?
Select one:
a. Return on Assets (ROA) will decline.

b. Gross profit margin will increase.

c. Inventory turnover will increase.

d. Income will decline.

Question 12
Identify the function being described: The board of directors and finance manager decided to offer
stocks to the public so that they can have the resources for business expansion.
Select one:
a. Savings Promotion

b. Increasing the value of the firm

c. Interrelation with other departments

d. Acquiring necessary capital

Question 13
Ratios that measure the ability of the company to pay its short-term debts are called:
Select one:
a. liquidity ratios

b. profitability ratios

c. leverage ratios

d. activity ratios

Question 14
Return on sales, return on assets and return on equity are examples of
Select one:
a. liquidity ratios

b. leverage ratios

c. activity ratios

d. profitability ratios

Question 15
This is concerned with the increase in revenue and decrease in expenses
Select one:
a. Revenue maximization

b. Wealth maximization

c. Profit maximization

d. Expense minimization

Question 16
Total asset turnover, receivables turnover and inventory turnover ratios measure
Select one:
a. profitability

b. efficiency

c. efficacy

d. liquidity

Question 17
Identify what is being described. The company had a net profit after taxes worth Php 1,000,000. The
board and the management decided not to distribute dividends to shareholders instead, it retained its
earnings for the year so that the business can have resources for future use.
Select one:
a. Savings Promotion

b. Improvement of profitability

c. Proper use of funds

d. Increasing the value of the firm

Question 18
Which of the following statements is true?
Select one:
a. All of the statements are correct.

b. One of the benefits of being a financial manager is that you can get funds in the business entity

without prior approval.

c. A financial manager just delegates the responsibilities to his people and just wait for the results.

d. The finance manager must posses knowledge in the areas of accounting, finance, economics and

management.
Question 19
Lone Star Plastics has the following data:
Gross Sales 100,000
Gross profit margin 6.0% Tax rate 40%
What is Lone Star’s net income after taxes?
Select one:
a. 3,600

b. 12,000

c. 4,500

d. 24,000

Question 20
Return on equity is directly affected by
Select one:
a. total assets and non-financial transactions

b. number of shares and liabilities and non-accountable transactions

c. net income, number of shares and dividends

d. net income and equity

Question 21
Amazona company wants to increase its debt to total assets ratio, which of the following activities
could make this possible?
Select one:
a. Buy merchandise on account

b. Buy equipment for manufacturing purposes

c. Receive donation

d. Make a loan

Question 22
All else being equal, which of the following will increase a company’s current ratio?
Select one:
a. An increase in accounts payable.

b. None of the statements can increase the current ratio

c. An increase in accounts receivable.

d. An increase in net fixed assets.

Question 23
The receivables turnover ratio is defined as
Select one:
a. sales divided by receivables

b. receivables divided by sales

c. none of these

d. receivables plus bad debt allowances

Question 24
Its objective is to provide information about the financial position and the financial performance and
cash flows of an entity that is useful to a wide range of users in making economic decisions
Select one:
a. Statement Corporate Taxes

b. Statement of Operational Performance

c. Financial Statements

d. Fund Flow Statement

Question 25
The Merriam Company has determined that its return on equity is 15 percent. Management is
interested in the various components that went into this calculation. You are given the following
information: (total debt)/(total assets) = 0.35 and total assets = 1,000,000. What is the net income?
Select one:
a. 23,333

b. 428,571

c. 52,500

d. 97,500

Question 26
FPL Co. Statement of Financial Position has Total Assets worth 100,000 wherein 60,000 is non-
current. It also has Total Liabilities worth 200,000 wherein 80,000 is non-current. It was found out
that there was an unrecorded depreciation worth 20,000 and unrecorded purchase of merchandise on
account worth 15,000. What is the current ratio?
Select one:
a. 0.41

b. 0.26

c. 0.50

d. 0.56

Question 27
The current assets and current liabilities of FPL company is 10 and 20 respectively. Reviewing the
past transactions the company purchased merchandise worth 5 and it was immediately paid.
However, it was discovered that this transaction was mistakenly recorded as a purchase on account.
After adjusting the errors, what is the the current ratio?
Select one:
a. 0.4

b. 0.5

c. 1

d. 0.33

Question 28
FPL Company has cash and cash equivalents worth 10,000; equipment worth 20,000; accounts
receivable worth 15,000; notes receivable worth 12,000 ; accounts payable worth 10,000 and notes
payable worth 5,000 maturing after one month. What is the current ratio?
Select one:
a. 1.67

b. 2.5

c. 2.47

d. 3.7

Question 29
Selzer Inc. has a net profit after taxes worth 62,195. It has a total assets worth 3 million, with a debt-
to-equity ratio of 0.64. What is the firm’s return on equity (ROE)?
Select one:
a. 33.4%

b. 71.0%

c. 3.4%

d. 7.1%

Question 30
Which statement is false
Select one:
a. With the help of strong financial control devices such as budgetary control, ratio analysis and cost

volume profit analysis, financial management can improve the profitability position of the business
b. Savings are possible only when the business has higher expenses than its revenues.

c. The ultimate aim of most businesses is to achieve the maximum amount of profit leading to the

maximization of the wealth of the investors.

d. Financial management is very important in the field of increasing the wealth of the investors and

the business.