Test 1

Instructions: Choose the correct answer by writing the letter of your choice.

1. What form of business organization that is not subject to corporate income tax?
a. S Corporation
b. Corporation
c. Partnership
d. Proprietorship
2. It is the determination, acquisition, allocation, and utilization of financial resources, usually
with the of achieving some goals or objectives.
a. Accounting Management
b. Financial Management
c. Budget Management
d. Resource Management
3. Which financial decision involves provision of capital to proposals whose benefits are to be
realized in the future?
a. Safekeeping Decision
b. Financing Decision
c. Dividend Decision
d. Investing Decision
4. Who is responsible for the firm’s financial activities including financial planning, raising
funds, making capital budgeting decisions, and managing the firm’s working capital?
a. Treasurer
b. Controller
c. Manager
d. Accountant
5. What form of business organization is subject to few government regulations?
a. Corporation
b. Partnership
c. Proprietorship
d. S Corporation
6. Which of the following provides a structure for decision making in risk analysis and provides
a broad picture of the economic environment that affects the business?
a. Finance
b. Economics
c. Accounting
d. Management
7. Which of the following statements is CORRECT?
a. Proprietorships and partnerships generally have a tax advantage over corporations.
b. One of the disadvantages of incorporating your business is that you could become
subject to the firm’s liabilities in the event of bankruptcy.
c. Corporations of all types are subject to the corporate income tax.
d. In any partnership, every partner has the same rights, privileges, and liability
exposure as every other partner.

8. Which of the following statements is FALSE?

a. In most corporations, the CFO ranks under the CEO.
 b. 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.
c. Partnerships and proprietorships generally have a tax advantage over corporations.
d. A disadvantage of the corporate form of organization is that corporate stockholders
are more exposed to personal liabilities in the event of bankruptcy than are
investors in a typical partnership.
9. Amont the statements below, which statement is CORRECT?
I. It is generally less expensive to form a corporation than a proprietorship
because, with a proprietorship, extensive legal documents are required.
II. The more capital a firm is likely to require, the greater the probability that it
will be organized as a corporation.
III. One disadvantage of forming a corporation rather than a partnership is that
this makes it more difficult for the firm's investors to transfer their
ownership interests.
IV. One danger of starting a proprietorship is that you may be exposed to
personal liability if the business goes bankrupt. This problem would be
avoided if you formed a corporation to operate the business.

a. Statement II only
b. Statement II and IV
c. Statement I, III, and IV
d. All of the statements are correct.
10. What major decision in the finance function that involves allocation of cash to be distributed
to shareholder?
a. Risk Management
b. Dividend Decision
c. Financing Decision
d. Investing Decision
11. Who is the in-charge of the firm’s accounting activities such as corporate accounting, tax
management, financial accounting and cost accounting.
a. Controller
b. Treasurer
c. Finance Manager
d. Chief Financial Officer
12. Which of the following describes the stream of equal periodic cash flows over a specified
time period?
a. Ordinary Annuity
b. Annuities
c. Annuity Due
d. Annually
13. What is the important tool used in time value analysis and a graphical representation used
to show the timing of cash flows?
a. Time Horizon
b. Time Value
c. Time Table
d. Time Line
14. It is the amount to which a cash flow or series of cash flows will grow over a given period of
time when compounded at a given interest rate.
a. Present Value
b. Future Value
c. Compounded Value
d. Annuity Due Value
15. It is the arithmetic process of determining the final value of cash flow or series of cash flows
when compound interest is applied.
a. Compounding
b. Discounting
c. Costing
d. Valuation
16. Which of the following is an annuity whose payments occur at the on each period?
a. Annuity Due
b. Future Annuity
c. Ordinary Annuity
d. Annuity
17. Starship Artist Management is contemplating to deposit P15,000 to Metrobank that pays
15% interest annually. However, the financial manager of Starship Artist Management
decided to deposit the money at BPI that pay 15% interest compounded semi-annually.
What is the future value of P15,000 if Starship Artist Management opted to deposit at
Metrobank after 3 years?
a. 22,800.50
b. 22,813.50
c. 22,810.50
d. 22,815.50
18. HYBE Company expects to receive P10,000 one year from now. What is the present value of
P10,000 if the discount rate is 10%?
a. 9,090.91
b. 9,091.01
c. 9,099.91
d. 9,100.01
19. If you deposit P20,000 in a bank account that pays 6% interest annually, how much would be
in your account after 5 years?
a. 26,765
b. 26,764
c. 26,895
d. 26,785
20. What is the present value of a security that will pay P10,000 in 8 years if securities of equal
risk pay 10% annually?
a. 4,695.05
b. 4,600.05
c. 4,665.05
d. 4,566.05