BORANA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE
Financial Management I Mid exam
Moyale Center
Course instructor: Mr. Talila Sida Modality: Weekend
Mark allotted: 20% Time allowed: 60'

General Instruction:
 Please don’t cheat.
 Don’t use your mobile phone; it is strictly prohibited.
 Read the instruction carefully.
 Make your hand writing clear and precise.
 Don’t write your answer except on the space assumed as answer sheet.
 Try to use your time effectively.
 The exam paper has three pages including answer sheet; check it.
 Don’t turn the page until you are told to do so.

BEST OF LUCK!

Part I: Multiple-Choice Questions (1.5 pts each)

1) Which of the following is NOT an advantage of the sole proprietorship?

A) Limited liability
B) No time limit imposed on its existence
C) No legal requirements for starting the business

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D) None of the above

2) What is the chief disadvantage of the sole proprietorship as a form of business organization
when compared to the corporate form?
A) Sole proprietorships are subject to double taxation of profits.
B) The cost of formation.
C) Inadequate profit sharing.
D) Owners have unlimited liability.

3) Which of the following is NOT true for limited partnerships?

A) Limited partners can only manage the business.
B) One general partner must exist who has unlimited liability.
C) Only the name of general partners can appear in the name of the firm.
D) Limited partners may sell their interest in the company.

4) Assume that you are starting a business. Further assume that the business is expected to grow
very quickly and a great deal of capital will be needed soon. What type of business organization
would you choose?
A) Corporation
B) General Partnership
C) Sole proprietorship
D) Limited partnership

5) Which one of the following categories of owners enjoys limited liability?

A) General partners in a limited partnership
B) Shareholders (common stock) of a corporation
C) Sole proprietors
D) Both A and B

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6) __________ is concerned with the acquisition, financing, and management of assets with some overall
goal in mind.

Financial management

Profit maximization

Agency theory

Social responsibility

Part II: Discussion (2 pts each)

1. What is financial Management?

2. Why agency occurs?
3. How to reduce the agency problem?
4. Who are in need of analyzing financial statements?
5. Discuss between Horizontal, vertical and ratio analysis
6. Discuss on purposes of financial statement analysis

Answer Sheet for Multiple-choice questions

1_________ 5___________
2_________ 6___________
3_________
4_________

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