Match Column A with Column B by writing the letter of your choice from column B on the

space provided

COLUMN A

_______1. Decisions made by managers may be in conflict with the best interests of the

shareholders

_______2. Competitors may take a controlling interest in the company if the current

management is unable to run the company effectively.

_______3. This is also known as value maximization or net worth maximization.

_______4. The financial manager is concerned with the financed of the business

_______5. Decisions related to trade off liquidity and solvency

_______6. Its formulation should lead to profitability, keeping while the image of the organization

intact.

_______7. Current funds have to be invested in long-term activities in anticipation of an expected

flow of future benefits spread over a long period of time.

_______8. They give debt financing a definite cost advantage over stock

_______9. It allows good and bad events to cancel each other out, reducing risk.

_______10. Each individual has his own set of values, which forms the basis for his personal

judgements about what is the right thing to do.

_______11. The difference between the cash flows if the project is taken on versus what

they will be if the project is not taken on.

_______12. It is characterized by a large number of profit driven individuals who act

independently. In addition, new information regarding securities arrives in the market in a

random manner.

_______13. The corporation responds to pressure from different stakeholder groups.

_______14. It is an extension of responsibility to embrace service to the public interest in

such matters as environmental protection, employee safety, civil rights, and community

involvement.

_______15. This should be constructed to also align managers' interest with those of

stockholders as much as possible.

_______16. Cash received by the firm can be reinvested but nor accrued profits.

_______17. The greater the risk associated with any financial decision, the greater the

return expected from it.

_______18. Additional competition and added capacity can result in profits being driven

down to the required rate of return.

_______19. When new information regarding securities arrives in the market, investors

adjust to the new information immediately and buy and sell the security until they feel the

price correctly reflects the new information.

_______20. A peso received at a later time is worth less in buying power.

COLUMN B

A. Efficient market

B. Production management

C. Financing decision

D. Tax laws

E. Liquidity decisions

F. Investment decisions

G. Social responsiveness

H. Risk return trade off

I. Capital budgeting

J. Diversification

K. Corporate social responsibility

L. Agency problem

M. Ethical dilemma

N. Cost control

O. Threat of takeovers

P. Managerial compensations

Q. The curse of competitive markets

R. Pricing policies

S. Time value of money

T. Wealth maximizations

U. Cash flows not profits is king

V. Incremental cash flows

W. Efficient capital markets

1. In most corporations, the CFO ranks under the CEO.

a. True

b. False

2. The Chairman of the Board must also be the CEO.

a. True

b. False

3. The board of directors is the highest ranking body in a corporation, and the

chairman of the board is the highest ranking individual. The CEO generally works

under the board and its chairman, and the board generally has the authority to

remove the CEO under certain conditions. The CEO, however, cannot remove the

board, but he or she can endeavor to have the board voted out and a new board

voted in should a conflict arise. It is possible for a person to simultaneously serve as

CEO and chairman of the board, though many corporate control experts believe it is

bad to vest both offices in the same person.

a. True

b. False

4. As a result of financial scandals occurring during the past decade, there has been

a strong push to improve business ethics.

a. True

b. False

5. There are many types of unethical business behavior. One example is where

executives provide information that they know is incorrect to banks and to

stockholders. It is illegal to provide such information to banks, but it is not illegal to

provide it to stockholders because they are the owners of the firm, not outsiders.

a. True

b. False

6. If a lower level person in a firm does something illegal, like "cooking the books" to

understate costs and thereby increase profits above the correct profits because he

or she was told to do so by a superior, the lower level person cannot be prosecuted

but the superior can be prosecuted.

a. True

b. False

7. Managers always attempt to maximize the long-run value of their firms' stocks, or

the stocks' intrinsic values. This is exactly what stockholders desire. Thus, conflicts

between stockholders and managers are not possible. However, there can be

conflicts between stockholders and bondholders.

a. True

b. False

8. S1: The primary goal of every organization is profit maximization rather than

shareholder wealth maximization.

S2: One of the axioms in financial management states that "all risks are equal".

a. Both Statements are true

b. Both Statements are false

c. S1 True; S2 False

d. S2 True; S1 False

9. S1: Patent is an example of a physical asset market.

S2: Financial Management is the efficient allocation of a company's economic

resources.

a. Both Statements are true

b. Both Statements are false

c. S1 True; S2 False

d. S2 True; S1 False

10. S1: Capital Markets are where the interest rates of an economy are determined.

S2: Capital Markets, Financial Management and Investments are three different

concepts that are very much NOT related to each other.

a. Both Statements are true

b. Both Statements are false

c. S1 True; S2 False

d. S2 True; S1 False

11. S1: The time value of money means that "a peso today is not worth the peso

tomorrow".

S2: Agency problem exists when the managers won't work for the owners unless it

benefits the managers.

a. Both Statements are true

b. Both Statements are false

c. S1 True; S2 False

d. S2 True; S1 False

12. S1: The axiom that Cash Flows, not profits is king means that cash flows are given more

emphasis in financial management because they provide liquidity information about

the company.

S2: Horizontal Analysis is also known as the Common-Size Financial Statement.

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a. Both Statements are true

b. Both Statements are false

c. S1 True; S2 False

d. S2 True; S1 False

13. S1: Working Capital is used to support the company's day to day operations or the

company's regular operations. The formula to compute working capital is to add

Current Assets and Current Liabilities

S2: EBIT is also the same as Earnings After Taxes.

a. Both Statements are true

b. Both Statements are false

c. S1 True; S2 False

d. S2 True; S1 False

14. Financial Managers are engaged in determining the optimal capital structure of a

given firm or the mix of its debt and equity components. What financial management

decision pertains to this?

a. Liquidity Decisions

b. Investment Decisions

c. Financing Decisions

d. Dividend Decisions

15. This term pertains to an organization's act of doing public service or giving back to

the public like in terms of environmental protection and the like.

a. Dividend Declaration

b. Shareholder's Wealth Maximization

c. Corporate Social Obligation

d. Corporate Social Responsibility

16. This strategy/goal focuses on the short-term returns as opposed to the long-term value

of the company.

a. Profit Maximization

b. Shareholder's Wealth Maximization

c. Corporate Social Obligation

d. Corporate Social Responsibility

17. In the Philippines, financial statements are prepared in accordance with?

a. Philippine Accounting Standards

b. Philippine Financial Regulating Standard

c. Philippine Financial Reporting Standards

d. Conceptual Framework

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18. Which of the following transactions will change the company's working capital?

a. Declaration of Cash Dividends

b. Cash Purchase of Inventory

c. Credit Purchase of Inventory

d. Depreciation of Equipment

19. A scope of financial management which dicided the company's profits among the

shareholders, debenture holders, etc and keeps a part of the profits as reserves

a. Assessment

b. Appropriation

c. Allocation

d. Anticipation

20. These jobs generally involve working with the corporations, government and other

large institutions helping them to raise capital or providing them with strategic advice.

a. Portfolio Management Jobs

b. Hedge Fund Jobs

c. Trading Jobs

d. Investment Banking Jobs