BFIN-121 Week 1-9
AMA OED ANSWERFinancial Management
Question: Finance is the art and science that describes the management, creation, and study of money, banking, credit, investments, assets, and liabilities.
Question: Financial management decision function includes areas such as investment, operations management, marketing, sales, and asset management decisions.
Question: Stocks are a debt security in which an investor lends money to an entity that borrows the funds for a defined period at a defined interest rate.
Question: The Chief Financial Officer is responsible for estimating the financial requirements of the business.
Question: A financial instrument is the written legal obligation of one party to transfer a thing of value, usually money, to another party at some future date, under certain conditions.
Question: Which is not a duty of the treasurer?
Question: He is in charge of all the organization’s finance and accounting functions and reports to the CEO.
Question: The finance manager meets with heads of departments. What is being described?
Question: Which does not belong to the group?
Question: Which is not a function of a finance manager?
Question: Which statement is wrong?
Question: Which statement is false?
Question: Which statement is correct?
Question: He is responsible for the safekeeping of cash.
Question: He is accountable for the accounting operations of the company.
Banking and Financial Institutions
Question: Which institution has full banking powers (e.g., accepting drafts, issuing letters of credit)?
Question: Which institution lacks a full banking license?
Question: A borrower’s written acknowledgment of indebtedness.
Question: Which does not belong to the group?
Question: Example of indirect financing:
Question: Institution assisting entities in raising capital via underwriting securities.
Question: Market for short-term debt securities.
Question: Non-profit financial cooperatives owned by members.
Question: Evaluate statements about insurance and investment banks.
Question: Security signifying ownership in a corporation.
Financial Statements and Ratios
Question: Common size analysis: Percentage of current liabilities (Total assets = Php250,000).
Question: Common size analysis: Percentage of non-current assets.
Question: Common size analysis: Gross profit percentage (Sales = Php300,000; COGS = Php100,000).
Question: Statement providing cash receipts and disbursements.
Question: Index analysis percentage for 2007 (Base year 2005 = Php200,000; 2007 = Php400,000).
Question: Financial statement showing total sales, COGS, expenses, and net income.
Question: Analysis using the formula (Most recent value - Base period value)/Base period value.
Question: Notes to Financial Statements provide:
Question: Common size analysis: Net income after taxes (Sales = Php300,000; Net income = Php115,500).
Question: SALN is a form of:
Question: Net profit margin (Sales = Php750,000; Net income = Php364,000).
Question: Current ratio (Current assets = Php40,000; Current liabilities = Php30,000).
Question: Payable turnover (Credit purchases = Php250,000; Accounts payable = Php50,000).
Question: Debt-to-equity ratio (Total assets = Php400,000; Total liabilities = Php175,000).
Question: Receivables turnover ratio (Sales = Php100,000; Avg. receivables = Php20,000).
Question: Quick ratio (Current assets = Php40,000; Inventory = Php15,000; Current liabilities = Php30,000).
Question: Average collection period (Receivables turnover = 5).
Question: Debt-to-total assets ratio (Total liabilities = Php175,000; Total assets = Php400,000).
Question: Average payment period (Payable turnover = 5).
Question: Gross profit margin (Sales = Php750,000; COGS = Php200,000).
Budgeting and Planning
Question: Budget including direct materials, labor, and manufacturing overhead.
Question: Budget calculating labor hours needed for production.
Question: Projected financial statements include:
Question: Process of making financial decisions for growth and problem-solving.
Question: First budget to be created:
Question: Budget ensuring sufficient cash for operations.
Question: Process of estimating future revenue and expenses.
Question: Budget for manufacturing overhead.
Question: Budget for advertising, rent, salaries, etc.
Question: Economic order quantity determines optimal inventory order size.
Question: Receivable management involves purchasing decisions.
Question: Aging of receivables classifies unpaid customer balances.
Question: Motive for holding inventory: meeting ordinary payments.
Question: Net working capital = Current assets - Current liabilities.
Working Capital Management
Question: Negative working capital occurs when:
Question: Inventory management involves:
Question: Net working capital calculation:
Question: ABC method prioritizes expensive inventory items.
Question: Working capital management ensures cash for daily operations.
Question: Amount owed by customers for credit purchases.
Question: Transaction motive for holding cash.
Question: Positive working capital occurs when:
Question: Receivable management maximizes return on investment.
Question: Cash management ensures liquidity and income on idle funds.
Question: Small firms rely on trade credit due to limited funding access.
Question: Working capital funds are for day-to-day operations.
Question: Fixed capital includes salaries and wages.
Question: Preference shares are unsecured promissory notes.
Question: Factoring sells accounts receivable at a discount.
Sources of Finance
Question: Factoring is:
Question: Public deposits involve inviting savings from the public.
Question: Retained earnings are reserved for growth.
Question: Trade credit is extended between traders.
Question: Loan from banks and financing institutions.
Question: Debentures are unsecured debt instruments.
Question: Lease financing allows asset use for periodic payments.
Question: Equity shares have unstable earnings.
Question: Common shares are also called:
Question: Commercial paper is a short-term unsecured note.
Question: External funds lie outside the organization.
Question: Short-term finances are for ≤1 year.
Question: Owner’s funds come from proprietors/shareholders.
Question: Long-term finances are for >1 year.
Question: Borrowed funds = Debt financing.
Additional Questions
Question: Classification by period: Lease financing does not belong.
Question: Internal source of finance:
Question: Percentage of non-current assets (Total assets = Php140,000,000).
Question: Just-in-time inventory management.
Question: Creation and implementation of financial action plan.
Question: Horizontal analysis uses percent change formula.
Question: Identification of alternative courses of action.
Question: True value of a business:
Question: Liquidity ratio for short-term liabilities:
Question: Evaluation of Alternatives involves risk assessment.
Question: Vertical analysis base excludes:
Frequently Asked Questions
What is the role of a Chief Financial Officer?
The Chief Financial Officer (CFO) oversees all finance and accounting functions, estimates financial requirements, and reports directly to the CEO. As noted by Investopedia, the CFO is pivotal in strategic financial decision-making.
What is the difference between a treasurer and a controller?
The treasurer is responsible for cash safekeeping and liquidity, while the controller manages accounting operations and financial transaction recording. The Corporate Finance Institute clarifies these distinct financial roles.
What are the types of financial institutions?
Types include commercial banks (e.g., Metrobank), credit unions, investment banks, and non-profit financial cooperatives, each with varying banking powers. The Federal Reserve outlines these institutions and their functions.
What are financial statements and their purpose?
Financial statements (e.g., Income Statement, Statement of Cash Flows) show a company’s financial performance and position, aiding decision-making and analysis. The Financial Accounting Standards Board defines their role in financial reporting.
What is working capital management?
Working capital management ensures sufficient cash, inventory, and receivables to meet daily operational needs while optimizing liquidity. Harvard Business Review explains its importance for business efficiency.
What are common sources of finance?
Sources include retained earnings, trade credit, loans, debentures, equity shares, and factoring, each suited for different financial needs. Investopedia details these financing methods for businesses.