SECTION A(20 MARKS)

Answer all the questions.

1.Which is NOT the primary concern of the financial manager?

A.Raising funds for the firm to finance its assets in the best possible way.

B.Determining how much debt funds to be employed by the firm.

C.Seeing that the financial statements of the firm are properly presented.

D.Finding the right proportion of investment in long-term assets.

2.Important functions of financial management are:

A.To control expenditures of day to day operations of the business.

B.To identify desirable investment in fixed and current assets.

C.To provide for adequate financing.

D.All of the above.

3.The agency problem is _________.

A.a result of the separation between management and owners of the firm.

B.not important in pursuing the goal of wealth maximization.

C.associated with ensuring the safety of the management as the agent of shareholders.

D.Likely to be importance in profit maximization.

4.Today, the financial manager's major concern is ___________. A.managing and controlling the firm's financial operations.

B.assessing the condition and performance of other firms.

C.constantly monitoring the firm's value.

D.raising capital.

5.Which of the following is NOT a true statement about the goal of maximizing shareholders' wealth?

A.It takes into account the timing of cash flows.

B.It is a short-run point of view which takes risk into account.

C.It considers risk as a factor.

D.None of the above.

6.A use of cash would be ________ in fixed assets or _________ in short-term debt.

A.a decrease; a decrease

B.an increase; a decrease

C.a decrease; an increase

D.an increase; an increase

7.A source of cash would be ________ in preferred stock or _________ in fixed assets.

A.a decrease; a decrease

B.an increase; a decrease

C.a decrease; an increase

D.an increase; an increase

8.One of the major drawbacks of a sole proprietorship is __________. A.low organizational costs.

B.easy to make decision.

C.low operating costs.

D.unlimited liability to the owner.

9.A corporation is __________.

A.An entity owned by shareholders.

B.an entity with limited liability privilege.

C.a separate legal entity.

D.All of the above.

10.By looking at the statement of cash flows, which of the following issues will be analyzed by the management of a firm?

A.Whether the firm is able to pay cash dividend.

B.How the firm financed an investment in additional fixed assets.

C.How much of the short-term debt is being used to finance fixed assets.

D.All of the above.

11.Investors and financial analysts wanting to evaluate the operation efficiency of a firm's managers would probably look primarily at the firm's _______. A.Leverage/debt ratios.

B.market value ratios.

C.asset management ratios.

D.liquidity ratios.

12.Other things held constant, if a firm holds cash balances in excess of their optimal level in a non-interest bearing account, this will tend to lower the firm's _________. A.profit margin.

B.return on equity.

C.debt ratio.

D.current ratio.

13.A short-term creditor would be interested in ___________.

A.profitability ratio.

B.efficiency ratio.

C.liquidity ratio.

D. leverage ratio.

14.The quick ratio of a firm would be unaffected by which of the following? A. Land held for investment is sold for cash.

B.Equipment is purchased, financed by a long-term debt issue.

C.Inventories are sold for cash.

D.Inventories are sold on a credit basis.

15.Which asset liability combination would result in the firm having the highest risk of insolvency?

A.More current assets and less current liabilities.

B.More current assets and more current liabilities.

C.Less current assets and less current liabilities.

D.Less current assets and less current liabilities.

16.A firm has a total asset turnover ratio lower than the industry. Its current ratio and quick ratio also meet industry standards. Based on this information, we can conclude that this firm must have excessive _______________. A.accounts receivable.

B.fixed assets.

C.debt.

D.inventory.

17.B-Box Berhad had net income of RM150,000 on sales of RM5,000,000 during 2019. The firm's total assets were RM2,500,000 and its capital structure is comprised of 40% debt and 60% equity. What was B-Box retuen on equity in 2019?

A.15%.

B.2.5%

C.10%

D.8.5%.

18.Which of the following statements is FALSE?

A.A dollar received one year from now will be worth more than a dollar receivedtoday.

B.A dollar received one year from now will be worth more than a dollar received two years from now.

C.Compounding essentially means earning interest on interest on an initial balance.

D.Perpetuities pay an equal payment forever.

19.Money has a greater time value time value __________. A.when rates of return are higher.

B.when rates of return are lower.

C.when the future is uncertain.

D.when investors are willing to assume greater risks.

20.At 8% compounded annually, how long will it take $750 to double?

A.6.5 years

B.48 months

C.9 years

D. 12 years