PRETEST

BUSINESS FINANCE
NAME: _____________________________________ SECTION: _________________________ SCORE :

Directions: Multiple Choice. Read carefully and write the letter on the space provided before each number.

________1. Finance is defined as a ___________________________ of managing money.

a. science and math b. science and art c. science and business d. business and art
________2. A proprietorship is owned by ____________________.
a. a single person b. 2 or more people c. stockholders d. members
_______3. The owner of a partnership business.
a. a single person b. 2 or more people c. stockholders d. members
_______4. A corporation is owned by _______________________.
a. a single person b. 2 or more people c. stockholder d. members
_______5. Which is not controllable by management?
a. competent managers b. market sentiment c. dividends d. profitability
_______6. Income or profits used to measure financial ___________________.
a. flows of cash b. position c. performance d. stability
_______7. Which one declares cash, or property dividends?
a. Management Team b. The President c. The Vice-President for Finance d. Board of Directors
_______8. Content of a Budget.
a. estimated finances b. actual performance c. financial performance d. actual investment
_______9. The main objective of investing.
a. finding source of funds b. declare dividends c. make cash more profitable d. organize capital structure
_______10. Which is not an attribute of a competent manager?
a. inspiring b. indecisive c. experienced d. respected
_______11. The consideration of a financial manager to make operating decisions.
a. finding source of funds b. declare dividends c. make cash more profitable d. organize capital structure
_______12. Which one should be present before declaring cash dividends?
a. debt b. supplies c. stocks d. retained earnings
_______13. Short Term sources of funds are payable within how many periods?
a. less than 12 months b. more than a year c. for 2 years d. for 5 years
_______14. The amount of asset that is finance by debt and finance by equity.
a. cash b. capital structure c. sources of funds d. working capital
_______15. Which one is not the role of a financial manager?
a. to find sources of working capital c. to determine inappropriate capital structure
b. to determine when to declare cash dividends d. to approve or reject an investment.
_______ 16. The primary goal of the financial manager is ?
A. minimizing risk. B. maximizing profit C. maximizing wealth. D. minimizing return.
_______ 17. Corporate owner's receive realizable return through
A. earnings per share and cash dividends. C. increase in share price and earnings per share.
B. increase in share price and cash dividends. D. profit and earnings per share.
______ 18. The wealth of the owners of a corporation is represented by
A. profits. B. earnings per share. C. share value. D. cash flow.
______ 19. Wealth maximization as the goal of the firm implies enhancing the wealth of
A. the Board of Directors. C. the federal government.
B. the firm's employees. D. the firm's stockholders.
______ 20. 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.
______ 21. Profit maximization as a goal is not ideal because it does NOT directly consider
A. risk and cash flow. C. risk and EPS.
B. cash flow and stock price. D. EPS and stock price.
______ 22. Profit maximization as the goal of the firm is not ideal because
A. profits are only accounting measures.
B. cash flows are more representative of financial strength.
C. profit maximization does not consider risk.
D. profits today are less desirable than profits earned in future years.
_______ 23 . Profit maximization fails because it ignores all EXCEPT
A. the timing of returns. B. earnings per share C. cash flows available to stockholders. D. risk.
_______ 24 The key variables in the owner wealth maximization process are
A. earnings per share and risk. C. earnings per share and share price.
B. cash flows and risk. D. profits and risk.
_______ 25. Cash flow and risk are the key determinants in share price. Increased cash flow results in ________, other things remaining the same.
A. a lower share price B. a higher share price C. an unchanged share price D. an undetermined share price

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________26. It is one financial intermediary handling individual savings. It receives premium payments that are placed in loans or investments to
accumulate funds to cover future benefits.
A. life insurance company B. commercial bank C. savings bank D. credit union
________27. The key participants in financial transactions are individuals, businesses, and governments. Individuals are net ______ of funds, and
businesses are net ______ of funds.
A. suppliers; users B. purchasers; sellers C. users; suppliers D. users; providers
________28. Which of the following is not a financial institution?
A. A pension fund B. A newspaper publisher C. A commercial bank D. An insurance company
________29. This is a set up so that employees of corporations or governments can receive income after retirement.
A. life insurance company B. pension fund C. savings bank D. credit union
________30. A type of financial intermediary that pools savings of individuals and makes them available to business and government users. Funds are
obtained through the sale of shares.
A. mutual fund B. savings and loans C. savings bank D. credit union
________31. The process of framing financial policies in relation to procurement, investment and administration of funds of an enterprise.
A. Financial Planning B. Estimating C. Budgeting D. Financial Analysis
_______ 32. The process of designing, implementing and operating budgets.
A. Planning B. Projecting C. Budgeting D. Estimating
_______ 33. The budgets that are typically requested for purchases of large assets such as property, equipment,
A. operating budget B. capital budget C. cash budget D. personal budget
_______ 34. The budgets that help management track and manage the company’s cash flow effectively by assessing whether additional capital is
required.
A. operating budget B. capital budget C. cash budget D. personal budget
_______ 35. It is also called pro forma financial statements
A. Projected Financial Statement C. Statement of Comprehensive Income
B. Statement of Financial Position D. Annual Financial Statement
______ 36. The step in financial planning process that identify and evaluate risk.
A. Step 1: Determine Your Current Financial Situation
B. Step 2: Develop Financial Goals
C. Step 3: Identify Alternative Courses of Action
D. Step 4: Evaluate Alternative
_______ 37. A type of financial intermediary that pools savings of individuals and makes them available to business and government users. Funds are
obtained through the sale of shares.
A. mutual fund B. savings and loans C. savings bank D. credit union
_______ 38. Most businesses raise money by selling their securities in _______.
A. a direct placement. B. a stock exchange C. a public offering D. a private placement.
_______ 39. Which of the following is not a service provided by financial institutions?
A. investing customers’ savings in stocks and bonds C. paying savers’ interest on deposited funds
B. buying the businesses of customers D. lending money to customers
______40. The money market involves the buying and selling of ___________.
A. funds that mature in more than one year. C. stocks and bonds
B. flows of funds. D. short-term funds.
_______ 41. It is part of planning and aids executives expect future cash requirements in order to get proper financing even before the need arises.
a. Cash budget b. Working capital c. Cash d. Accounts Receivable
_______ 42. The three basic types of inventory are all of the following EXCEPT
a. raw materials b. Work-in-process c. Finished goods d. capital goods
_______ 43. Which of the following is not necessary in analyzing the company’s accumulation of cash, accounts receivable, and current assets.
a. cash budget b. Statement of Financial Position c. Sales forecast d. Statement of Comprehensive Income
_______ 44. These are the reasons for holding cash.
a. Transactional b. Speculative c. Precautionary d. all of the above
_______ 45. This include all of a firm’s inflows of cash in a given financial period. Its common components are cash sales, collections of accounts
receivable, and other cash receipts.
a. Cash receipt b. Cash disbursement c. a & b d. none of the above
_______ 46. Cash payment include all outlays of cash by the firm during a given financial period.
a. Cash receipt b. Cash disbursement c. a & b d. none of the above
_______ 47. What is the advantage of using short-term funds?
a. easily obtained b. interest rates are normally lower c. there is no advantage d. none of the above
_______ 48. If a company has current assets of P 750,000 and current liabilities of P400,000, how much is company’s net working capital?
a. 750,000 b. P 1,150,000 c. P 350,000 d. none of the above
_______ 49. Joyce Craft’s total sales amounted to P500,000, 10% is on credit. If its year-end receivables turnover is 5, what is the average collection
period (based on a 360-day year?
a. 70 days b. 74 days c. 72 days d. none of the above

_______ 50. This refers to the lowest level of current assets needed by an enterprise to continue its business functions allotted to its production
capacity or important sales range.
a. permanent working capital b. temporary working capital
_______ 51. Shareholder’s wealth is applicable to Corporations while _____________ is applicable to Single Proprietorship and Partnership.
A. Owner’s Wealth B.. Stakeholders wealth C. capital D. Time Deposit
_______ 52.Which of the following pertains to long term investment?
A. Bonds B. Bank Notes c. Capital Expenditures d. Capital Budgeting
_______ 53.What do you call on the process of evaluating and selecting long term investments to maximize owner’s wealth?
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 A. Capital Budgeting B. Ordinary annuity C. Compound interest d. Capital Expenditures
_______ 54. It benefits the company only within the operating period.
A. Simple interest B. Operating Expenses C. Investments D. Annuity
_______ 55. It is a proposal submitted to the Finance team for thorough analysis.
A. Simple interest B. Investment proposal C. Compound interest D. Annuity
_______ 56. What is the other term for long term investment?
A. Principal B. Capital Investment C. Interest D. Rate
_______ 57. It is the process of releasing of funds and starting of project after approval.
A. Investment Proposal B. Monitoring C. Implementation D. Analysis
_______ 58. It is the amount you have to invest today if you want to have a certain amount of cash flow in the future.
A. Future Value B. Maturity Value C. Present Value D. Complex Value
_______ 59. Gains are expected to be realized if the expansion proves to be ________________.
A. successful B. organized C. a failure D. fruitful
_______ 60. How much is the interest earned of your money after 2 years if you deposited your Php1,000.00 in a bank with 10% interest per annum?
A. Php100.00 B. Php 10.00 C. Php 200.00 D. Php 20.00
_______61. The Risk-return Trade Off principle means that the higher risk yields_______________.
A. higher return B. lower return C. constant return D. no effect on return
_______ 62. The return may be thought of as___________________________.
a. the growth in the value of an investment. c. the process of returning the stock to the corporation that issued it.
b. the risk associated with an investment. d. none of the above.
_______ 63. Dividends ________________ the rate of return.
A. decrease B. increase C. have no effect on D. increase the risk of
_______ 64. It measures the standard deviation.
A. The amount of dividend B. The gain on the investment C. The holding period D. Risk
_______ 65. This reflects the total market returns and cannot be eliminated by diversification.
A. Business risk B. Systemic risk C. Systematic risk D. Unsystematic risk

Part II. True/False. Direction: Write A if the statement is True and B if the statement is False.

______ 66. Primary and secondary markets are markets for short-term and long -term securities, respectively.
______ 67. Financial markets are intermediaries that channel the savings of individuals, businesses, and government into loans or
investments.
______ 68. The money market involves trading of securities with maturities of one year or less while the capital market involves the
buying and selling of securities with maturities of more than one year.
______ 69. Holders of equity have claims on both income and assets that are secondary to the claims of creditors.
______ 70. Preferred stock is a special form of stock having a fixed periodic dividend that must be paid prior to payment of any interest
to outstanding bonds.
______ 71. Financial planning is a process, not a product.
______ 72. Operating budgets are typically requesting for purchases of large assets such as property or equipment
______ 73. Projected Financial Statements incorporate past trends and expectations to arrive at a financial picture that management
believes it can attain as of a future date.
______ 74. The best way to consider risk is to gather information based on your experience and the experiences of others.
______ 75. Evaluate possible courses of action, but do not consider your life situation, personal values, and current economic
conditions.
______ 76. A risk-free security has zero variance.
______ 77. A well- diversified portfolio can eliminate non-systematic risk.
______ 78. The risk of common stock investment is best noted as the chance of gain.
______ 79. Managers’ decisions can impact systematic risk.
______ 80. Standard deviation measures total risk.
______81. Do not notify the creditor if the company c is acquiring another company or the company is now the subject of acquisition is
one of the duties of borrower to creditor.
______ 82. Equity Financing is borrowing money from lenders and not giving up ownership while Debt Financing is the method of
raising capital by selling company stock to investors (stockholders) in exchange of ownership interests in the company.
_______83. It does not require a fixed dividend payment is one of the advantages of Equity Financing.
_______84. Commercial banks, savings and loan associations, credit unions, and the newer Internet banks are the classifications of
Deposit-type Financial Institutions.
_______85. Non-banking finance companies don't have a full banking license, don't provide all of the services that an individual bank
provides and aren't subject to the same regulation.
_______86. Insurance firms, venture capitalists, currency exchanges, some microloan organizations, and pawn shops are the examples
of nonbank financial institutions.
_______ 87. “know your customer” (KYC) initiatives are becoming crucial to verifying and protecting the identity of each customer.
_______ 88. Capacity is the willingness of the borrower to repay the loan.
________89. Capital refers to a customer’s financial resources
_______ 90. Condition is the current economic or business conditions

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_______ 91. The firm’s net cash flow is found by subtracting the cash disbursements from cash receipts in each period
_______ 92. Cash Receipt include all outlays of cash by the firm during a given financial period .
_______ 93. Permanent working capital requirements are financed by shortterm sources of financing.
_______ 94. Net Working capital is the sum between current assets and current liabilities.
_______ 95. The primary objective of working capital management is to achieve a balance between profitability and risk
_______ 96. Financial institution matches the supply and demand for funds.
_______ 97. Financial system channels the funds from the savings unit to the deficit units.
_______ 98. Financial instrument and securities are traded in the financial market.
_______ 99. Borrowers and savers fall under deficit units.
_______ 100. Borrowers are also known as creditors

Prepared by: Checked by: Noted by:

Mrs. Bernardita S. Cruz Mrs. Jonaliza B. Simbajon Mrs. Irene S. Velasco

Teacher II SHS Focal Person/Teacher II School Principal I

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