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QUEENS’ COLLEGE

SCHOOL OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE

MIED EXAMINATION OF FINANNCIAL MANAGEMENT-I

Name:_____________________________________ ID No __________________

Notice

 Write your answer on the specie provided.

 Cheating and try to cheat may result disqualifications.
 Time allowed 45 minutes.

Part-I Say True if the statement is correct and False if the statement is incorrect.

_______1. Capital components are items on the right side of firm balance sheet.

_______2. Quick ratio is calculated by deducting inventories from current asset and dividing
the remainder by current liabilities.

________3. Profitability is the net results of a numbers of policies and decisions.

________4. The weighted average cost of capital is the weighted average of the components cost
of debt and common equity only.

________5. Dividend is the price of gaining funds from issuing corporate bonds.

Part-II Choose the correct one from the alternative for the following questions

________1. The sales of the XYZ Company for the year 2016 G.c is Br. 920,000. And the total
expense of the company was Br. 540,000. At the end of 2017G.c the company financial position
statement show an asset of Br. 790,000. Determine the total asset turnover ratio?

A) 0.48 times B) 0.23 times C) 1.7 times D) 1.16 times

________2. One of the following is not true about retained earnings, except;

A) It has market value to evaluate.

B) Company may incur cost of advertizing and commissions at the time of using retained
earning
C) It is one of the sources of fund for organization.

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D) A & C
E) None of the above.

________3. One of the following elements used to evaluate how effectively the firm is managing
its asset. Except,

A) Asset management ratio C) Current ratio

B) Inventory Turnover ratio D) Total asset turnover ratio

________4. One of the following is true about ratio analysis but except;

A) It measures trends
B) It shows the ability of a firm to pay its current liability from current portion of assets.
C) It supports to show the profitability of the company.
D) It helps to show where the sources of fund come up.
E) None of the above.

________5. Which one of the following discloses the accumulations of net income of certain
period?

A) Balance sheet C) Statement of cash flow

B) Statement of retained earning D) Income statement

_________6. Which one of the following standard helps the organization to compare whether the
operating result is high, low or acceptable?

A) Industry standards C) Historical standards

B) Management plan D) All except ‘B’ E) All

_________7. Which one is the cost that is tax deductable to the organization as expense?

A) Common stock dividend D) Preferred stock dividend

B) The cost of debt E) B & D
C) Flotation cost F) B & C

_________8. One of the following conditions will increase the value of the firm.

A) If actual RR > cost of capital C) If cost of capital = actual RR

B) If actual RR < cost of capital D) All

Part-III Mach the following left side elements to the correct right side alternatives

Matching “A” Matching “B”

_____1. Asset management ratio A. It shows only the quantitative relationship only.

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_____2. Limitation of ratio analysis B. The ability of the firm to increase the net income.

_____3. Profitability ratio C. The extent of using asset to generate revenues.

_____4. Magic number D. The capital structure of the firm.

_____5. Specific cost of capital E. The cost of each source of capital.

F. It does reflect the current value.

G. The cost of capital.

Part- IV Workout

1. Debub Global Bank s.c in the year 2016, just issued preferred stock that has 9% annual
dividend and Br. 5000 par value. The stock was sold for Br. 5,050. In addition flotation
cost was incurred Br. 200 per share. Determine the cost of preferred stock?

2. Awash Bank board of directors wants to determine the bank WACC. The bank has the
following source of capital with market value and after tax specific costs.

Source of capital market value specific cost

Bond 14,250,000 11%

Common stocks 20,000,000 9%

Preferred stocks 5,000,000 12%

Determine the Awash Bank WACC?