DAPITAN CITY NATIONAL HIGH SCHOOL

SENIOR HIGH SCHOOL DEPARTMENT

3rd QUARTER EXAMINATION
BUSINESS FINANCE

Name: _____________________________________________________ Year & Section: ________________

Test I. Multiple Choice: Choose the best answer among the given options. Shade the circle that
corresponds to the letter of your choice. Use only black or blue ink pen. No erasures.

A B C D
O O O O 1. A financial manager must choose between four alternatives Assets: 1, 2, 3, and 4. Each
asset cost P35,000 and is expected to provide earnings over a three-period as described
below:

Asset Year 1 Year 2 Year 3

1 P21,000 P15,000 P 6,000
2 P 9,000 P15,000 P21,000
3 P 3,000 P20,000 P19,000
4 P 6,000 P12,000 P12,000

Based on the profit maximization goal, what financial manager would choose _________.
A. Asset 1 B. Asset 2 C. Asset 3 D. Asset 4
O O O O 2. Which of the following is the primary goal of the financial manager?
A. minimizing risk B. maximizing profit C. maximizing wealth D. minimizing return
O O O O 3. How does corporate owner’s receive realizable return?
A. Through earnings per share and cash dividends.
B. Through increase in share price and cash dividends.
C. Through increase in share price and earnings per share.
D. Through profit and earnings per share.
O O O O 4. Which of the following is an example of financial intermediary?
A.Households B. Insurance company C. Government Agencies D. individuals
O O O O 5. Which of the following represents the wealth of the owners of a corporation?
A.share value B. profits C. earnings per share D. cash flow
O O O O 6. Wealth maximization as the goal of the firm implies enhancing the wealth of the _____.
A. board of directors B. firm’s employees C. federal government D. firm’s stockholders
O O O O 7. The goal of profit maximization would result in priority for ____.
A.cash flows available to stockholders C. earnings per share
B. risk of the investment D. timing of the returns
O O O O 8. A fixed income investment in which an investor loans money to an entity which borrows the
fund for a defined period of time at a variable or fixed interest rate.
A.treasury bills B. bonds C. commercial paper D. debt securities
O O O O 9. In a corporation what is the highest policy – making body?
A.VP for Finance B. President C. VP for Sales and Marketing D. Board of Directors
O O O O 10. In a company the total assets is PHP100,000. Total debt is PHP50,000. What is the debt-
equity ratio?
A. 100% or 1 B. 96% C. 98% D. 200% or 2
O O O O 11. What will happen to the debt and equity of the asset if the pro-forma balance sheet shows
that total asset increases by PHP400,000 while retaining debt-equity ratio of 0.75 then?

A. debt must increase by PHP300,000

B. equity must increase by the full of PHP400,000
C. debt must increase by PHP171,428
D. equity must increase by PHP100,000
O O O O 12. Profit maximization is one of the goals of the firm, why is it not ideal one?
A. Profit maximization does not consider risk.
B. Profits are only accounting measures.
C. Profits today are less desirable than profits earned in the future.
D. Cash flows are more representative of financial strength.
O O O O 13. A financial manager must choose between four alternative assets: 1, 2, 3, and 4. Each asset
costs ₱35, 000 and is expected to provide earnings over a three – year period as described
below. Based on the profit maximization goal, which of the following assets would the financial
manager choose?
Asset Year 1 Year 2 Year 3
1 ₱21, 000 ₱15, 000 ₱ 6, 000
2 ₱ 9, 000 ₱15, 000 ₱21, 000
3 ₱ 3, 000 ₱20, 000 ₱19, 000
4 ₱ 6, 000 ₱12, 000 ₱12, 000

A. Asset 1 B. Asset 2 C. Asset 3 D. Asset 4

O O O O 14. Profit maximization fails because it ignores all the following statements bellow EXCEPT?
A. the timing of returns B. earnings per share
C. cash flows available to stockholders D. risk
O O O O 15. Cash flow and risk are the key determinants in share price, why is it so?

A. Because increased in cash flow results in a lower share price.

B. Increased in cash flow results in a higher share price, other things remaining the same.
C. Cash flow increased results in an unchanged share price.
D. If the things remaining the same the cash flow increased results in an undetermined share
price.

O O O O 16. How financial managers evaluates decision alternatives or potential actions?

A. through risk only B. only return
C. both risk and return D. through risk, return and the impact on share price
O O O O 17. A financial manager must choose between three alternative investments. Each asset is
expected to provide earnings over a three-year period as described below. Based on the
wealth maximization goal, the financial manager would

Asset Year 1 Year 2 Year 3

1 P21,000 P 9,000 P15,000
2 P15,000 P15,000 P15,000
3 P 9,000 P21,000 P15,000
total P45,000 P45,000 P45,000
A. Asset 1 B. Asset 2 C. Asset 3 D. be indifferent between Asset 1 and 2
O O O O 18. One of the financial intermediary handling individual savings is the life insurance
company, why is it so?
A. Because it receives premium payments that are placed on loans or investments.
B. To accumulate funds to cover the past expenses.
C. Performing market and competitor analysis.
D. Ensuring production meets customer demands.
O O O O 19. Businesses aims to raise money how is it done?

A. Through selling their securities in a direct placement.

B. By selling their securities in a stock exchange.
C. Selling a public offering.
D. Selling in a private placement.
O O O O 20. The key participants in financial transactions are individuals, businesses, and governments,
why is it so?

A. Individuals are net suppliers of funds, and businesses are net users of funds.
B. Individuals are net purchases of funds, and businesses are sellers of funds.
C. Individuals are net users of funds, and businesses are suppliers of funds.
D. Individuals are net users of fund, and businesses are providers of funds.

O O O O 21. Which of the following bellow is NOT a service provided by financial institution?

A. Buying the businesses of costumers.

B. Investing costumers’ savings in stocks and bonds.
C. Paying saver’s interest on deposited funds.
D. Lending money to costumers.

O O O O 22. A-MART Incorporated’s income statement for the year ending in Dec. 31, 2014,
Cost of goods sold P600, Lease payments P30, Advertising P20, Taxes
P35, Repairs and Maintenance expenses P40, Management salaries P100, Net sales P100,
and depreciation P60. What is the gross profit?
A.P600 B. P400 C. P500 D. P350
O O O O 23. Follow-up question in no.22 what is the net profit?
A.P100 B. P200 C. P115 D. P110
O O O O 24. Which of the following statements below is TRUE?
A. Gross profit margin is always less than net profit margin.
B. Gross profit margin is always greater than net profit margin.
C. Gross profit margin can be less than or greater than net profit margin.
D. Gross profit margin is using profitability ratios.
O O O O 25. If a business has a decreasing gross profit and gross margin percentage is constant,
what could be the possible reason?
A. Sales is increasing, but cost of sales is decreasing.
B. Sales and cost of sales increase by the same percentage.
C. Sales and cost of sales decrease by the same percentage.
D. Cost of sales increasing, sales is decreasing.
O O O O 26. If the total asset is PHP750,000 and the sales is PHP1,500,000, what is the total asset
turnover?
A. 4 B. 2 C. 6 D. 1
O O O O 27. The beginning inventory is PHP2,000 and the ending inventory is PHP5,000, if the cost of
goods sold is double the ending inventory and accounts payable is PHP4,000, what is the
average payment period?
A. 112.3 days B. 111 days C. 110.3 days D. 212 days
O O O O 28. What is the importance of using horizontal and vertical analysis for judgement and
making better decisions in a company?
A. Horizontal and vertical analysis is essential for managerial accounting, because these
types of analyses are useful to internal users of the financial statements, as well as
external users.
B. horizontal analysis looks in the amounts of money in the company’s financial statements.
C. Vertical analysis looks at each line item as a percentage of a base figure within the
Current period.
D. All of the above.
O O O O 29. HORIZONTAL ANALYSIS FOR BALANCE SHEET
Dec. 31, 2012 Dec. 31, 2011
Accounts receivable PHP 520,000 PHP 120,000
Inventory PHP 840,000 PHP 240,000
Total Assets PHP1,360,000 PHP 360,000

COMPUTE FOR THE PERCENTAGE FOR THE TWO ACCOUNTS.

A. Accounts receivable 14% and inventory 20% C. Accounts receivable 16% and inventory 24%
B. 76.92% and 71.42% D. A/R 12% and Inv. 22%

O O O O 30. VERTICAL ANALYSIS FOR BALANCE SHEET

AMOUNT PERCENT
Current asset PHP 73,000 36.5%
Intangibles PHP127,000 63.5%
Total Assets PHP200,000 100%
Current Liabilities PHP143,000
Owner’s equity PHP 57,000
Total liabilities & PHP200,000 100%
owner’s equity

COMPUTE FOR THE PERCENTAGE OF LIABILITIES AND OWNER’S EQUITY.

A. 71.5% and 28.5% B. 70% and 30% C. 20% and 80% D. 60% and 40%

Prepared by: Noted by:

WINDY C. BAJE VINA S. BAES

Subject Teacher Subject Coordinator
O O O O 31. United Products Co., has the following balance sheet:

Current assets PHP 5,000 Accounts payable PHP 1,000

Net fixed asset PHP 5,000 Notes payable PHP 1,000
Long-term debt PHP 4,000
Net worth PHP 4,000
Total Assets PHP10,000 Total claims PHP10,000
Business has been show, therefore, fixed assets are vastly underutilized. Management believe
it can double sales next year with the introduction of a new product. No new fixed assets will be required,
and management expects that there will be no earnings retained next year. What is the next year’s additional
requirement? A. PHP0 B. PHP4,000 C. PHP13,000 D. PHP19,000

O O O O 32. The 20X1 balance sheet for Palawan Pulp and Paper is shown below (millions of pesos):

Cash P 3.0 Accounts payable P2.0

Accounts receivable P 3.0 Notes payable P1.5
Inventory P 5.0 Long-term debt P3.0
Current assets P11.0 Ordinary equity P7.5
Fixed assets P 3.0
Total assets P14.0 Total claims P14.0
In 20X1, sales were P60 million. In 20X2, management believes that sales will increase by 20 percent
to a total of P72 million. The profit margin is expected to be 5 percent, and the dividend payout ratio is
targeted at 40 percent. The firm has excess capacity and no increase in fixed assets will be required. What is
the additional funding requirement for 20X2?

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Test II. Give what is asked. Write your answer on the space provided after each item. 2 points each.

A. Using the following accounts from the retail store, Kinjhee Incorporated’s income statement for the
year ending December 31, 2017, provide the correct information needed below. Note that all figures
are in millions.
Cost of goods sold ₱ 600
Lease Payments 30
Advertising 20
Taxes 35
Repairs and Maintenance Expenses 40
Management salaries 100
Net Sales 1,000
Depreciation 60

1. Gross Profit: ______________________

2. Operating Profit : __________________
3. Net Profit: ________________________

B. Using the following accounts from the retail store, Kinjhee Incorporated’s balance sheet for the year
ending December 31, 2017, provide the correct information needed below. Use cash as a plug figure.
Note that all figures are in millions.
Current Portion of L. T. Debt ₱ 60
Leasehold Improvements 300
Accrued Expenses 40
Accumulated Depreciation 200
Gross fixed assets 900
Accounts payable 90
Inventories 190
Common Stock (₱1.00 par) 400
Short – term bank loan 20
Net accounts receivable 100
Long- term bank loan 600
Retained earnings 200
Cash ?

1. Current Assets: ______________

2. Current Liabilities: ____________
3. Total Assets: ________________
4. Total liabilities: ______________
5. Total stockholder’s equity: ________________