FINMAFI

Noted by:

________________________ _________________________ _______________________

Mary Ellen Lee Kyla Nicole Laus-Duya Mr. Tyrone Chan Pao
Vice President for Academics, MaFIA President, MaFIA Faculty Adviser, MaFIA


FINMAFI
TEST YOURSELF
TRUE OR FALSE
1. Managing the firm’s net working capital involves deciding on an investment
strategy for financing the firm’s current assets and liabilities, and equity.
2. When the firm is able to purchase items of inventory on credit, cash is tied up for
the full length of its operating cycle.
3. The components of Inventory are: raw materials, work in process, and finished
goods.
4. Prior to expiration, an option will least likely to sell for more than its intrinsic
value.
5. Credit Policy are standards set to determine the amount and nature of credit to
extend to customers.
6. Time value is the difference between the market price of the option and its
intrinsic value.
7. Under pricing assumptions, arbitrage opportunities exist.
8. Simple Arbitrage is the process of buying and selling in more than 1 market to
make a riskless profit.
9. The buyer has the obligation to deal at the strike price if the writer or seller
exercise the option
10. Inflation occurs when the money supply increases faster than output increases.
IDENTIFICATION
11. ________________ helps managers ensure that their financial strategies are
consistent with their capital budgets.
12. _____________ is the right to sell a security while ______________ is the right
to buy a security price at a specified price within a specified time.
13. ________________ is the classification of accounts receivable by time
outstanding.
14. Conservative Working Capital Financing Policies use permanent capital for
______________ assets and ______________ assets.
15. _______________________ states that ER will adjust so that a commodity will
cost the same regardless of the country in which it is purchased in.
MULTIPLE CHOICE
16. Which of the following is/are the possible outcome(s) when Market is less than
Exercise?
a. In-the-money
b. At-the-money
c. Out-of-the-money
d. b & c
e. a & c


f. a, b & c
17. Which of the following is true?
a. Optimistic case = normal growth
b. Expected case = best case
c. Pessimistic case = retrenchment
18. The break-even probability of collection is:
a. P=PV(Cost)(Rev)/PV
b. P=PV(Rev)/PV(Cost)
c. P=PV(Cost)/PV(Rev)
d. P=(Cost)(Rev)/PV(Cost)(Rev)
19. Which of the following is false?
a. An option buyer will only exercise the right to buy or sell when it is
favorable for him to do so.
b. Extending credit gives you the profitability of making a profit, not the
guarantee.
c. At expiration, time value is zero
d. Leasing preserves capital is one of the sensible reasons for leasing.
e. All of the above
20. Which of the following is not part of sources of short-term borrowing?
a. Secured Loans
b. Syndicated paper
c. Commercial Paper
d. Medium term notes


ANSWER KEY
1. FALSE
2. FALSE
3. TRUE
4. FALSE
5. TRUE
6. TRUE
7. FALSE
8. FALSE
9. FALSE
10. TRUE
11. Financial Plan
12. Put option; Call option
13. Aging Schedule
14. Permanent; temporary
15. Purchasing Power Parity
16. E
17. C
18. C
19. D
20. B