FINAL EXAMINATION (BUSFIN) BUSINESS FINANCE

MULTIPLE CHOICE: Read carefully and write your correct answer in capital letters. (2 points each)

1. It is the capital that is needed to meet the day-to-day transaction of the business concern.
A. Working Capital C. Fixed Capital
B. Cost Capital D. Average Cost of Capital
2. It is the capital, which is needed for meeting the permanent or long-term purpose of the business
concern.
A. Working Capital C. Cost Capital
B. Fixed Capital D. Average Cost of Capital
3. It is the rate of return that a firm must earn on its project investments to maintain its market value and
attract funds.
A. Working Capital C. Fixed Capital
B. Cost Capital D. Average Cost of Capital
4. It is the weighted average cost of each component of capital employed by the company.
A. Working Capital C. Average Cost of Capital
B. Fixed Capital D. Cost Capital
5. It is the weighted average cost of new finance raised by the company.
A. Historical cost C. Marginal cost
B. Cost of equity capital D. Future cost
6. It is the cost that has already been incurred for financing a particular project. It is based on the actual
cost incurred in the previous project.
A. Historical cost C. Future cost
B. Marginal cost D. Cost of equity capital
7. It is the expected cost of financing for the proposed project.
A. Marginal cost C. Future cost
B. Historical cost D. Cost of equity capital
8. It is the rate at which investors discount the expected dividends of the firm to determine its share
value.
A. Future cost C. Marginal cost
B. Cost of equity capital D. Historical cost
9. It is a statement that shows the sources of cash inflow and uses of cash out-flow of the business concern
during a particular period.
A. Income Statement C. Funds Flow Statement
B. Cash Flow Statement D. Position Statement
10. It is also called a profit and loss account, which reflects the operational position of the firm during a
particular period.
A. Income Statement C. Cash Flow Statement
B. Position Statement D. Funds Flow Statement
11. It is also called a balance sheet, which reflects the financial position of the firm at the end of the
financial year.
A. Position Statement C. Funds Flow Statement
B. Income Statement D. Cash Flow Statement
12. It is one of the important tools, which is used in many ways. It helps to understand the changes in the
financial position of a business enterprise between the beginning and end of financial statement dates.
A. Funds Flow Statement C. Income Statement
B. Cash Flow Statement D. Position Statement
13. Helps to understand the trend relationship with various items, which appear in the financial
statements.
A. Comparative statement analysis C. Common size analysis
B. Comparative balance sheet analysis D. Trend analysis
14. It is interpreted mainly to determine the financial and operational performance of the business
concern.
A. Financial statement analysis C. Comparative balance sheet analysis
B. Vertical analysis D. Comparative statement analysis
15. In which figures reported are converted into a percentage to some common base.
A. Comparative statement analysis C. Common size analysis
B. Comparative balance sheet analysis D. Trend analysis
16. An analysis of financial statements at different periods of time. This statement helps to understand the
comparative position of financial and operational performance at different periods of time.
A. Financial statement analysis C. Comparative balance sheet analysis
B. Vertical analysis D. Comparative statement analysis
17. Concentrates only on the balance sheet of the concern at different periods of time. Under this analysis,
the balance sheets are compared with the previous year’s figures, or one-year balance sheet figures
are compared with other years.
A. Comparative statement analysis C. Common size analysis
B. Comparative balance sheet analysis D. Trend analysis
18. Financial statements measure the quantities relationship of the various items in the financial
statement on a particular period.
A. Financial statement analysis C. Comparative balance sheet analysis
B. Vertical analysis D. Comparative statement analysis
 19. Commonly used tool for financial statement analysis.
A. Activity Ratio C. Liquidity Ratio
B. Ratio analysis D. Solvency Ratio
20. It is also called the leverage ratio, which measures the long-term obligation of the business concern.
A. Solvency Ratio C. Activity Ratio
B. Liquidity Ratio D. Profitability ratio
21. It is also called a turnover ratio.
A. Activity Ratio C. Liquidity Ratio
B. Ratio analysis D. Solvency Ratio
22. It is also called a short-term ratio.
A. Solvency Ratio C. Activity Ratio
B. Liquidity Ratio D. Profitability ratio
23. It helps to measure the profitability position of the business concern.
A. Solvency Ratio C. Activity Ratio
B. Liquidity Ratio D. Profitability ratio
24. The leverage associated with investment activities is called:
A. Financial leverage C. Operating leverage
B. Retained earnings D. Depreciation funds
25. Defined as “the ability of a firm to use fixed financial charges to magnify the effects of changes in EBIT
on the earnings per share”
A. Financial leverage C. Operating leverage
B. Retained earnings D. Depreciation funds
26. It is one of the sources of finance for investment proposals; it is different from other sources like debt,
equity, and preference shares.
A. Financial leverage C. Operating leverage
B. Retained earnings D. Depreciation funds
27. The major part of internal sources of finance, is used to meet the working capital requirements of the
business concern.
A. Financial leverage C. Operating leverage
B. Retained earnings D. Depreciation funds
28. A document issued by the company. It is a certificate issued by the company under its seal
acknowledging a debt.
A. Debenture C. Creditorship Securities
B. Deferred shares D. Capital structure
29. Refers to the kinds of securities and the proportionate amounts that make up capitalization.
A. Capital structure C. Debenture
B. Creditorship Securities D. Deferred shares
30. Also called founder shares because these shares were normally issued to founders.
A. Capital structure C. Debenture
B. Creditorship Securities D. Deferred shares

TEST II. PROBLEM SOLVING

1. Determine the firms Increase/Decrease Amount and Percentage, Common Size Income Statement,
 2. Determine the Current Ratio and Acid Test Ratio of ABC Company.

Prepared by:

GENESSA LOPEZ BASILISCO

Noted by:

ARLENE R. SALAC, Dev.Ed.D.