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FINMAN > Quiz 1 by JT > Flashcards

Quiz 1 by JT Flashcards

1
Q

Determining the benefits on an investment on a new product line. The axiom applicable on this scenario is:

A. Axiom 1

B. Axiom 8

C. Axiom 4

D. Axiom 5

A

C. Axiom 4

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2
Q

An ethics program is expected to have a _____ impact on the firm’s share price

A. Positive

B. Negative

C. No impact

D. Undetermined

A

A. Positive

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3
Q

Which of the following decisions is not covered under financial management?

A. Working Capital Management

B. Dividend Payout

C. Cost of Capital

D. Relevant costing for Long-Term decision making

A

D. Relevant costing for Long-Term decision making

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4
Q

What is the cost of short-term finance?

A. None

B. Interest

C. Dividends

D. Both B and C

A

B. Interest

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5
Q

Which of the following is NOT a part of long-term finance?

A. Current Liabilities

B. Long-term Liabilities

C. Equity

D. Retained Earning

A

A. Current Liabilities

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6
Q

Which of the following is NOT classified as current assets under Financial Management?

A. Cash

B. Inventories

C. Receivables

D. None of these

A

D. None of these

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7
Q

What does it mean when an entity is financed more by liabilities than equity?

A. Long term financing

B. Short term financing

C. Leverage

D. Cost of Capital

A

C. Leverage

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8
Q

Considered alone, which of the following would increase a company’s current ratio?

A. An increase in net fixed assets

B. An increase in accrued liabilities

C. An increase in notes payables

D. An increase in accounts receivables

E. An increase in accounts payable

A

D. An increase in accounts receivables

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9
Q

Candy bought today has the same value of a can sardine bought in the 80s. The axiom applicable on this scenario is:

A. Axiom 2

B. Axiom 1

C. Axiom 6

D. Axiom 3

A

A. Axiom 2

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10
Q

Consider the following statements:
I. Partnerships and proprietorship generally have a tax advantage over corporations
II. In most corporations, the CFO ranks under CEO

A. True, True

B. True, False

C. False, False

D. False, True

A

A. True, True

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11
Q

Maximization of shareholder wealth

A. represents a zero sum game in which one corporation gains at the expense of other

B. provides benefits to society as scarce resources are directed to their most productive use

C. is not practical goal since it cannot be measured effectively

D. is achieved only if cash flows exceed accounting profits

A

A. represents a zero sum game in which one corporation gains at the expense of other

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12
Q

A firm wants to strengthen its financial position. Which of the following actions would increase its current ratio?

A. Reduce the company’s days sales outstanding to the industry average and use the resulting cash savings to purchase a new plant and equipment

B. Use the cash to repurchase some of the company’s own stock

C. Borrow using short-term debt and use the proceeds to repay the debt that has maturity of more than one year

D. Issue new stock, then use some of the proceeds to purchase additional inventory and hold the remainder as

E. Use cash to increase inventory holdings

A

D. Issue new stock, then use some of the proceeds to purchase additional inventory and hold the remainder as

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13
Q

Betting on Pacquiao in a Pacquiao-Mayweather boxing match. The axiom applicable on this scenario is:

A. Axiom 1

B. Axiom 8

C. Axiom 4

D. Axiom 5

A

A. Axiom 1

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14
Q

If the company’s managers are NOT owners of the company, they are

A. dealers

B. agents

C. outsiders

D. brokers

A

B. agents

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15
Q

Which of the following actions is an example of window dressing?

A. Borrowing by using short-term notes payable and then using the proceeds to retire long-term debt.

B. Borrowing on a long-term basis and using the proceeds to retire short-term debt

C. Offering discounts to customers who pay with cash rather than buy on credit and then using the funds that come in quicker to purchase fixed assets

D. Using some of the firm’s cash to reduce long-term debt

A

B. Borrowing on a long-term basis and using the proceeds to retire short-term debt

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16
Q

Deciding to sell or process further a by-product. The axiom applicable in this scenario is;

A. Axiom 4

B. Axiom 6

C. Axiom 8

D. Axiom 2

A

A. Axiom 4

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17
Q

Managerial Finance

A. involves tasks such as budgeting, financial forecasting, cash management, and funds procurement

B. involves the design and delivery of advice and financial products

C. recognizes funds on an accrual basis

D. devotes the majority of its attention to the collection and presentation of the financial data

A

A. involves tasks such as budgeting, financial forecasting, cash management, and funds procurement

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18
Q

Which of the following would indicate an improvement in a company’s financial position, holding other things constant?

A. the inventory and total assets turnover ratios both decline

B. the total debt to total capital ratio increases

C. the profit margin declines

D. the times-interest-earned-ratio increase

E. the current and quick ratios both increase

A

E. the current and quick ratios both increase

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19
Q

Toyota products low cost cars. The axiom applicable to this scenario is:

A. Axiom 1

B. Axiom 3

C. Axiom 5

D. Axiom 7

A

C. Axiom 5

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20
Q

Investors want a return that satisfies the following expectations:

A. a return for delaying consumptions

B. an additional return for taking on risk

C. an additional return for accepting dividends rather than capital gains

D. both A and B

A

D. both A and B

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21
Q

If a bank loan officer were considering a company’s loan request, which of the following statements would be CORRECT, other things held constant?

A. The lower the company’s inventory turnover ratio, the lower the interest rate the bank should charge

B. The higher the days sales outstanding ratio, the lower the interest rate the bank should charge

C. The lower the total debt to total capital ratio, the lower the interest rate the bank should charge

D. The lower the company’s TIE ratio, the lower the interest rate the bank should charge

A

C. The lower the total debt to total capital ratio, the lower the interest rate the bank should charge

22
Q

Investing in a very profitable security depleting all cash. The axiom applicable on this scenario is?

A. Axiom 3

B. Axiom 6

C. Axiom 7

D. Axiom 9

A

A. Axiom 3

23
Q

The accountant’s primary function is

A. evaluating the financial statements

B. making decisions based on financial data

C. the collection and presentation of financial data

D. planning cash flows

A

C. the collection and presentation of financial data

24
Q

Aang Company’s current ratio is 2:0. Considered alone, which of the following actions would have lower the current ratio?

A. Borrow using short-term notes payable and use the proceeds to reduce accruals

B. Borrow using short-term notes payable and use the proceeds to reduce long-term debt

C. Use cash to reduce accruals

D. Use cash to reduce short-term notes payable

A

B. Borrow using short-term notes payable and use the proceeds to reduce long-term debt

25
Q

To measure value, the concept of time value of money is used

A. to determine the interest rate paid on corporate debt

B. to bring future benefits and costs of a project, measured by its expected profits, back to the present

C. to bring the future benefits and costs of a project, measured by its cash flows, back to the present

D. to ensure the expected future profits exceed current profits today

A

C. to bring the future benefits and costs of a project, measured by its cash flows, back to the present

26
Q

LePanto Mines drills solely in the Cordillera. The axiom applicable on this scenario is:

A. Axiom 3

B. Axiom 6

C. Axiom 7

D. Axiom 9

A

D. Axiom 9

27
Q

Their is no barrier of entry in an CD/DVD rental in 2000s which made the market flooded quickly. The axiom applicable on this scenario is

A. Axiom 1

B. Axiom 8

C. Axiom 10

D. Axiom 5

A

D. Axiom 5

28
Q

Which of the following statements is CORRECT?

A. Other things held constant, the more debt the firm uses, the higher its operating margin will be

B. Debt management ratios show the extent to which a firm’s managers are attempting to magnify returns on owner’s capital through the use of financial leverage

C. Other things held constant, the more debt a firm uses, the higher its profit margin will be

D. Other things held constant, the higher the firm’s total debt to total capital ratio, the higher its TIE ratio will be

A

B. Debt management ratios show the extent to which a firm’s managers are attempting to magnify returns on owner’s capital through the use of financial leverage

29
Q

The key role of a financial manager manager is

A. decision making

B. the presentation of financial statements

C. the preparation of data for future evaluation

D. the collection of financial data

A

A. decision making

30
Q

Bonds issued by private institutions pay higher interests than that of bonds issued by Government. The axiom applicable in this scenario is

A. Axiom 1

B. Axiom 8

C. Axiom 10

D. Axiom 5

A

A. Axiom 1

31
Q

Katara Industries’ current ratio is 5:0. Considered alone, which of the following actions would increase the company’s current ratio?

A. Borrow using short-term notes payable and use the cash to increase inventories

B. Use the cash to reduce accruals

C. Use cash to reduce accounts payable

D. Use cash to reduce short-term notes payable

E. Use cash to reduce long-term bonds outstanding

A

A. Borrow using short-term notes payable and use the cash to increase inventories

32
Q

Consider the following statement
I. In order to maximize its shareholder’s value, a firm’s management must attempt to maximize the stock in price in long run, or the stock “intrinsic value”
II. A disadvantage of the corporate form of organization is that corporate stockholders are more exposed to personal liabilities in the event of bankruptcy than are investors in a typical partnership

A. True, True

B. True, False

C. False, False

D. False, True

A

B. True, False

33
Q

The five basic principles of finance include all of the following EXCEPT

A. Cash flow is what matters

B. Money has a time value

C. Risk requires return

D. Incremental profits determine value

A

D. Incremental profits determine value

34
Q

Zuko Corp’s sales last year was P400,000, its operating costs were P362,500, and its interests charges were P12,500. What was the firm’s time-interest-earned TIE ratio?

A. 3.00

B. 3.66

C. 2.46

D. 2.61

A

A. 3.00

35
Q

A trading market that publishes the correct security prices. The axiom applicable on this scenario is

A. Axiom 3

B. Axiom 6

C. Axiom 7

D. Axiom 9

A

B. Axiom 6

36
Q

A financial manager is considering two projects, A and B. A is expected to add P2 million to profits to this year while B is expected to add P2 million to profits this year while B is expected to add P1 million profits this year. Which of the following statements is MOST correct?

A. The manager should select project A because it maximizes profits

B. The manager should select the project that maximizes long-term profits, not just one year of profits

C. The manager should select project A or he is irrational

D. the manager should select the project that causes the stock price to increase the most, which could be A or B

A

D. the manager should select the project that causes the stock price to increase the most, which could be A or B

37
Q

Giving a higher compensation plan to CEO or BODs. The axiom applicable on this scenario is

A. Axiom 4

B. Axiom 5

C. Axiom 6

D. Axiom 7

A

D. Axiom 7

38
Q

Consider the following statements
I. An advantage of the corporate form of organization is that corporation are generally less highly regulated than proprietorships and partnerships
II. One danger f starting proprietorship is that you may be exposed to personal liability if the business goes bankrupt. This problem would be avoided if you formed a corporation to operate a business

A. True, True

B. True, False

C. False, False

D. False, True

A

D. False, True

39
Q

Toph Corps sales last year were P250,000 and its net income was 23,000. What was its profit margin?

A. 9.57%

B. 8.37%

C. 9.20%

D. 11.32%

A

C. 9.20%

40
Q

A financial manager must choose between four alternative investments, 1, 2, 3, and 4. Each asset cost P35,000 and is expected to provide earnings over three years period as described below

A Y1 Y2 Y3
1 P21,000 P15,000 P6,000
2 P9,000 P15,000 P21,000
3 P3,000 P20,000 P19,000
4 P6,000 P12,000 P12,000

Based on the profit maximization goal, the financial manager would choose?

A. Asset 1

B. Asset 2

C. Asset 3

D. Asset 4

A

B. Asset 2

41
Q

The death of Steve Jobs decreased Apple’s stock prices. The axiom applicable on this scenario is

A. Axiom 2

B. Axiom 1

C. Axiom 6

D. Axiom 3

A

C. Axiom 6

42
Q

Sokka Corps total assets at the end of last year were P390,000 and its net income was P32,750. What was its return on total assets?

A. 6.97%

B. 8.82%

C. 8.40%

D. 8.99%

A

C. 8.40%

43
Q

Joe, a risk-averse investor, is trying to choose between investment A and investment B. If investment A is riskier than investment B and Joe selects investment A anyway, then

A. the actual return for Investment A will be higher then the actual return of Investment b

B. the actual return for investment A will be higher than the expected return of Investment B

C. the expected return for investment A will be higher than the actual return for Investment B

D. The expected return for investment A will be higher than the expected return for investment B

A

D. The expected return for investment A will be higher than the expected return for investment B

44
Q

University of the Cordilleras gives free education to those who cannot afford for it through scholarships grants. The axiom applicable on this scenario is

A. Axiom 1

B. Axiom 8

C. Axiom 10

D. Axiom 5

A

C. Axiom 10

45
Q

The controller is commonly responsible for

A. managing cash

B. financial accounting

C. managing credit activities

D. financial planning

A

B. financial accounting

46
Q

Receiving a lump-sum payment of income over an investment rather than an installment payment. The axiom applicable for this scenario is

A. Axiom 2

B. Axiom 1

C. Axiom 6

D. Axiom 3

A

A. Axiom 2

47
Q

Making financing decisions includes all of the following except

A. determining the appropriate mix of short-term and long-term financing

B. deciding which individual short-term sources are best at a given point in time

C. analyzing quarterly budget and performance reports

D. deciding which individual long-term sources are best at a given point in time

A

C. analyzing quarterly budget and performance reports

48
Q

One way often used to ensure that management decisions is the best interest of stockholders is to

A. threaten to fire managers who are seen as not performing adequately

B. remove management perquisites

C. tie management compensation to the performance of the company’s common stock price

D. tie management compensation to the level of earnings per share

A

C. tie management compensation to the performance of the company’s common stock price

49
Q

Determining the tax incentives from government for undertaking a particular project. The axiom applicable in this scenario is

A. Axiom 1

B. Axiom 8

C. Axiom 10

D. Axiom 5

A

B. Axiom 8

50
Q

Consider the following statements
I. The chairman of the board must be also a CEO
II. If management operates in a manner designed to maximize the firm’s expected profits for current year, this will also maximize the stockholders wealth as of the current year

A. True, True

B. True, False

C. False, False

D. False, True

A

C. False, False

FINMAN (8 decks)

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