QUIZ1

Question 1

The capital required for day-to-day operations of the business is called
a. Current Assets
b. Equity
c. Working Capital
d. Cost of Capital

Answer 1

c. Working Capital

Question 2

Ethical behavior is doing the right thing
a. Axiom 3
b. Axiom 5
c. Axiom 8
d. Axiom 10

Answer 2

d. Axiom 10

Question 3

In a typical loan amortization schedule, the total peso amount of money paid each period ______
a. Increase w/ each payment
b. Decrease w/ each payment
c. Remains Constant
d. Sorry

Answer 3

c. Remains Constant

Question 4

High profits attract high competitions
a. Axiom 3
b. Axiom 4
c. Axiom 5
d. Axiom 6

Answer 4

c. Axiom 5

Question 5

______ maximization objectives fail to recognize quality of benefits such as risk factor
a. value
b. wealth
c. profit
d. both A and B

Answer 5

c. profit

Question 6

The method used in the computing for the future value is
a. discounting
b. compounding
c. inverse compounding
d. none of these

Answer 6

b. compounding

Question 7

The process of financing assets of a business is known as:
a. asset structure
b. owners structure
c. financial structure
d. capital structure

Answer 7

d. capital structure

Question 8

Financial management process deals with
a. investments
b. financing decisions
c. profit maximization
d. more assets

Answer 8

b. financing decisions

Question 9

Financial management is the _______ activity of a business
a. operational
b. marketing
c. HR management
d. capital structure

Answer 9

a. operational

Question 10

The market price of an equity share is determined by the
a. President of the Comp
b. BOD/BOT
c. Buyers and Sellers of Shares
d. SEC

Answer 10

c. Buyers and Sellers of Shares

Question 11

In 3 years you are to receive PHP 5,000. If the interest rate were to suddenly increase, the present value of that future amount to you would
a. Fall
b. Rise
c. Remain unchanged
d. Cannot be determined

Answer 11

a. Fall

Question 12

Which of the following are taken by the financial manager?
a. Marketing decisions
b. Dividend decisions
c. HR decisions
d. All of the following

Answer 12

b. Dividend decisions

Question 13

To increase a given present value, the discount rate should be adjusted
a. Upward
b. Downward
c. True
d. I don’t know

Answer 13

b. Downward

Question 14

(1+i)^n
a. PVIF
b. FVIF
c. PVIFA
d. FVIFA

Answer 14

b. FVIF

Question 15

You can use _____ to roughly estimate how many years a given sum of money must earn at a given compound annual interest rate in order to double that initial amount
a. Rule 415
b. Rule of 72
c. Rule of 78
d. Rule of 144

Answer 15

b. Rule of 72

Question 16

In a typical loan amortization schedule, the peso amount of interest paid each period _____
a. Increase w/ each payment
b. Decrease w/ each payment
c. Remains Constant
d. Sorry

Answer 16

b. Decrease w/ each payment

Question 17

In which type of business, more investment in the fixed asset is required
a. Manufacturing
b. Trading
c. Both A and B
d. None of these

Answer 17

a. Manufacturing

Question 18

Financial planning provides a link between
a. Investment, Dividend
b. Financing, Dividend
c. Investment, Financing
d. Investment, Working C

Answer 18

c. Investment, Financing

Question 19

The primary goal of financial management is to maximize
a. The return
b. The risk
c. Wealth of Owners
d. Profit

Answer 19

c. Wealth of Owners

Question 20

Higher working capital usually results in
a. Higher current ratio
b. Higher risk
c. Higher profit
d. All of the following

Answer 20

d. All of the following

Question 21

A company uses labor intensive technique need _____ fixed capital, while a company using capital intensive technique require _____ fixed capital
a. No, Less
b. Less, More
c. More, Less
d. No, More

Answer 21

b. Less, More

Question 22

The time value of money ______ over time according to Axiom 2
a. Decreases
b. Increases
c. Remains the same

Answer 22

a. Decreases

Question 23

Shareholder’s wealth is represented by the
a. Cash in the bank
b. Market Price of a Share
c. Book value of asset
d. None of the following

Answer 23

b. Market Price of a Share

Question 24

You want to save money in a bank with the expectation of receiving PHP 50,000 in 5 years. One bank has proposed a monthly compounding rate of 9.5%. How much money do you need to deposit in the bank today?
a. PHP 31, 761.38
b. PHP 78, 711.94
c. PHP 70, 250. 47
d. PHP 31, 152.64

Answer 24

d. PHP 31, 152.64

Question 25

With continuous compounding at 10% for 30 years, the future value of an initial investment of PHP 2,000 is closest to A. PHP 34, 898 B. PHP 40, 171 C. PHP 164, 500 D. PHP 328, 282

Answer 25

A. PHP 34, 898

Question 26

Assume that the interest rate is greater than zero. Which of the following cash-inflow streams should you prefer? a. PHP 400, 300, 200, 100 b. PHP 100, 200, 300, 400 c. PHP 250, 250, 250, 250 d. Any of the Choices

Answer 26

a. PHP 400, 300, 200, 100

Question 27

You are considering investing a zero-coupon bond that sells for PHP 250. At maturity in 16 years it will be redeemed for PHP 1,000. What approximate annual rate growth does this represent ? a. 8% b. 9% c. 12% d. 25%

Answer 27

b. 9%

Question 28

You are considering borrowing PHP 10,000 for 3 years at an annual interest rate of 6%. The loan agreement calls for 3 equal payments, to be paid at the end of each of the next 3 years. (Payments include both principal and interest.) The annual payment that will fully pay off (amortize) the loan is closest to a. PHP 2, 674 b. PHP 2, 890 c. PHP 3, 714 d. PHP 4, 020

Answer 28

c. PHP 3, 714

Question 29

Borrowing at 10% and the tax rate is at 30% means the after-tax cost of debt is A. 20% B.7% C. 3% D. 10%

Answer 29

B.7%

Question 30

Company 1 issues a bond with a principal of PHP 15,000, an interest rate of 5% annually with maturity in 5 years and a discount rate of 8%. A.PHP 13,203.28 B. PHP 2,994.53 C. PHP 22,039.92 D. PHP 16,948.26

Answer 30

A.PHP 13,203.28

Question 31

A client has been investing PHP 20,000 at the beginning of every six months for the past 3 years in a fund that has 10 averaged 10% compounded semi-annual. How much money does the client have in his account now? A. PHP 101,513.84 B. PHP 106,589.53 C. PHP 49,737.04 D. PHP 54,464.96 E.PHP 130,000.00

Answer 31

E.PHP 130,000.00

Question 32

On July 1, year 1, James Rago signed an agreement to operate as a franchisee of Fast foods, Inc. for an initial franchise fee of PHP 60,000. Of this amount, PHP 20,000 was paid when the agreemerlt was signed and the balance is payable in four equal annual payments of PHP 10,000 beginning July 1, year 2. The agreement provides that the down payment is not refundable and no future services are required of the franchisor. Rago's credit rating indicates that he can borrow money at 14% for a loan of this type. Information on present and future value factors is as follows: *Present value of $1 at 14% for four periods 0.59 *Future amount of $1 at 14% for four periods 1.69 *Present value of an ordinary annuity of $1 at 14% for four periods 2.91 Rago should record the acquisition cost of the franchise on July 1, year 1 at A. PHP 43,600 B.PHP 49,100 C. PHP 60,000 D. PHP 67,600

Answer 32

B.PHP 49,100

Question 33

Suppose that you have PHP14,000 and that you deposit this in a savings account earning 3% annually for a period of five years. You will naturally be interested in knowing how much money you will have in your account at the end of this five-year time period A. PHP 12, 076.52 B. PHP 12, 438.42 C. PHP 15, 757. 12 D. PHP 16, 229.84

Answer 33

D. PHP 16, 229.84

Question 34

You want to buy an ordinary annuity that will pay you PHP 4,000 a year for the next 20 years. You expect annual interest rates will be 8 percent over that time period. The maximum price you would be willing to pay for the annuity is closest to A. PHP 32,000 B. PHP 39,272 C. PHP 40,000 D. PHP 80,000

Answer 34

B. PHP 39,272

Question 35

For PHP 1,000 you can purchase a 5-year ordinary annuity that will pay you a yearly payment of PHP 263.80 for 5 years. The compound annual interest rate implied by this arrangement is closest to A. 8% B. 9% C. 10% D. 11%

Answer 35

C. 10%