Financial Management Past Paper PDF

A1. Which of the following statements describe the main objectives of a corporation? A. Efficient acquisition and deployment of financial resources of ensure achievement of objectives B. Providing information to management for day-to-day functions of control and...

A1. Which of the following statements describe the main objectives of a corporation? A. Efficient acquisition and deployment of financial resources of ensure achievement of objectives B. Providing information to management for day-to-day functions of control and decision making C. Providing information to external users about the historical results of the organisation D. Maximisation of shareholder wealth Answer: D A2. Which of the following is the LEAST likely to fall within financial management? A. The dividend payment to shareholders is increased. B. Funds are raised to finance an investment project. C. Surplus assets are sold off. D. Non-executive directors are appointed to the remuneration committee. Answer: D A3. Why must finance managers consider shareholders' preferences for dividends versus capital gains? A. To reduce shareholder wealth B. To maximize company expenses C. To align company decisions with shareholder interests D. To increase shareholder dissatisfaction Answer: C A4. A company’s current ratio is 2 and quick ratio is 1. Inventory is bought and paid for immediately by increasing the overdraft. What will the values of the current ratio and quick ratio be after the above transaction has taken place? A. Current ratio greater than 2; quick ratio greater than 1 B. Current ratio greater than 2; quick ratio less than 1 C. Current ratio less than 2; quick ratio greater than 1 D. Current ratio less than 2; quick ratio less than 1 Answer: D A5. ______________ measure the ability of the firm to meet its short-term obligation. A. Profitability ratio B. Leverage ratio C. Efficiency ratio D. Liquidity ratio Answer: D A6. Which type of industry tends to have low return on sales but high inventory turnover? A. Industries focused on customer satisfaction B. Industries competing based on innovation C. Industries competing based on volume of sales D. Industries with high barriers to entry Answer: C A7. Which of the following are ratios to manage the debt level of the firm? I. Gross profit margin II. Gearing ratio III. Debt ratio IV. Interest coverage ratio A. I, II and III only B. I, II, and IV only C. I, III and IV only D. II, III and IV only Answer: D A8. What are some common uses of short-term financing in businesses? A. Long-term investments in infrastructure B. Payment of wages to employees C. Research and development projects D. Expansion into new markets Answer: B A9. Which of the following are types of long-term financing? I. Bond II. Futures III. Options IV. Stock A. I and II only B. I and III only C. I and IV only D. II and IV only Answer: C A10. Which of the following are types of short-term financing?  I. Account receivables backed loan II. Bank overdraft III. Factoring account receivables IV. Banker acceptance A. I, II and III only B. I, II, and IV only C. I, III and IV only D. I, II, III and IV Answer: D A11. ________________ refers to short-term unsecured debts issued by firms to get funding from investors. It is normally issued by the firm with high credit rating such as bank. A. Commercial paper B. Trade credit C. Bond D. Shares Answer: A A12. Which of the following is NOT relevant to working capital management? A. Cash management B. Staff management C. Account receivables management D. Account payables management Answer: B A13. Which of the following is NOT working capital ratio? A. Current ratio B. Debt ratio C. Inventory turnover period D. Receivables collection period Answer: B A14. Which of the following is NOT the steps in an account receivables collection process? A. Statement of account B. Personal visit to client’s place C. Appointment of illegal collection agencies D. Legal proceedings Answer: C A15. The following are relevant cash outflow to be recorded in project’s cash flow, EXCEPT A. Incremental fixed cost B. Cannibalisation  C. Changes in net working capital D. Sunk cost Answer: D A16. Pluto Potato is planning to launch a new product, Freezy Potato. Pluto Potato has paid RM120,000 for a marketing survey to determine the viability of the product. The equipment necessary for production of the Freezy Potato will cost RM835,000. Compute the initial investment of this project. A. RM835,000 B. RM955,000 C. RM187,000 D. RM120,000 Answer: A A17. Compulink Enterprise is currently evaluating a five-year project that costs RM3,180,000. There is no salvage value after the end of the project’s life. Compute Average Accounting Rate of Return (ARR) of this project based on the projected net income as follow. Year 1 2 3 4 5 Net Income (RM) 300,000 350,000 350,000 400,000 450,000 A. 23.27% B. 11.64% C. 58.18% D. 16.35% Answer: A A18. Which of the following is NOT systematic risk? A. Interest risk B. Financial risk C. Market risk D. Inflation risk Answer: B A19. Which of the following example best describe the concept of diversification? A. Firm maximises the return on investment by investing in high-risk project. B. Firm invests all the funds in a specialised industry.  C. Firm minimises the risk by investing in government projects. D. Firm spreads the risk by investing in various projects with different level of risk. Answer: D A20. ______________ indicates length of time a project takes to recover the cost of an investment. A. Accounting rate of return B. Payback period C. Net present value D. Internal rate of return Answer: B