Financial Management Course Portfolio

Section: C
ID Number: 46691
Last Name: Sol
First Name: Janesene
Examination: Preliminary Examination

Chapter Question Type Question and Answer Solution (if Applicable)

1 MULTIPLE CHOICE QUESTIONS Question 1: What is the primary goal of financial management?
Answer: C. Maximizing shareholder's wealth.

Question 2: Proper-risk return management means that

Answer: B. Consistent with the objectives of the firm, an appropriate trade-off between risk and return should be determined.

Question 3: Which of the following is not a major area of concern and emphasis in modern financial management?
Answer: B. Stable short-term interest rates.

Question 4: Which of the following is not a major area of concern and emphasis in modern financial management?
Answer: C. Commodity Trading

Question 5: A financial manager’s goal of maximizing current or short-term earnings may not be appropriate because
Answer: D. All of the given choices.

Question 6: All of the following are functions of the financial manager except
Answer: C. Assigning the market price of the company's stock.

Question 7: Which of the following statements is false?

Answer: B. The treasurer would be responsible for activities such asmanaging cash balances, granting credit to customers and managing the process of issuing new securities.

2 MULTIPLE CHOICE QUESTIONS Question 1: Which of the following statements is true?

Answer: D. There are some serious problems with the financial goal of maximizing the earning of the firm.

Question 2: Corporate social responsibility is

Answer: C. The duty to embrace service to the public interest.

Question 3: A common argument against corporate involvement in socially responsible behavior is that
Answer: D. In a competitive market, such behavior incurs costs that place the company at a disadvantage

Question 4: Which of the following statements is false?

Answer: A. Because socially desirable goals can impede profitability in many instances, managers should try not to operate under the assumption of wealth maximization.

Question 5: Which of the following statement is false?

Answer: D. For as long as satisfactory level of profit is earned, the financial manager need not be concdeerned with unethical behavior.

Question 6: Integrity is an ethical requirement of all financial managers. One aspect of integrity requires
Answer: B. Avoidance of conflict of interest

3 MULTIPLE CHOICE QUESTIONS Question 1: All of the following are functions of the financial manager except
Answer: C. Assigning the market price off the company's stock.

Question 2: Which of the following statement is false?

Answer: B. The treasurer would be responsible for activities such as managing cash balances, granting credit to customers and managing the process of issuing new securities.

Question 3: Regine is a financial manager who has discovered that her company is violating environmental regulations. If her immediate superior is involved, her appropriate action is to
Answer: C. Present the matter to the next higher managerial level.

Question 4: If a financial manager discovers unethical conduct in his/her organization and fails to act, he/she will be in violation of which ethical standard(s)?
Answer: D. All of the answers are correct.

Question 5: Integrity is an ethical requirement for all financial managers. One aspect of integrity requires
Answer: B. Avoidance of conflict of interest

Question 6: A financial manager discovers a problem that could mislead users of the firm’s financial data and has informed his/her immediate superior. He/she should report the circumstances to the audit committee and/or the board of directors only if
Answer: D. the immediate superior, the firm’s chief executive officer, knows about the situation but refuses to correct it.

4 EXERCISES Exercise 1:
H. PAR VALUE 1. An arbitrary value placed on either common stock or preferred stock at the time a corporation is formed
F. BOARD OF DIRECTORS 2. The group of men and women who have the ultimate responsibility of managing the corporation.
D. STOCKHOLDERS 3. The owners of acorporation.
I. ADDITIONAL PAID IN CAPITAL 4. Any amount received by a corporation when it issues stock that is greater than the par value of the stock issued.
B. CHARTER 5. The formal document that legally allows a corporation to start operations.
G. CORPORATE OFFICERS 6. The group of men and women who manage the day-to-day operation of the corporation.
A. INCORPORATORS 7. The person or persons who submit a formal application to the appropriate government agencies to form a corporation.
E. STOCK CERTIFICATE 8. A legal document providing evidence of ownership in a corporation.
C. BYLAWS 9. Rules established to conduct the business of the corporation.

Exercise 2:
The question below are based on this selected information from the balance sheet Excelsior and Company.
Issued stocks 20x1 669847961 Issued stocks 20x2 671242137
a. What was the average selling price of the stock that had been issued as of Dec 31, 20x1? P60.01 Par value ₱60.00 Total authorized shares 900000000
Additional paid in capital 2021 ₱4,342,000.00

Average selling price = ((Number of shares issued * par value) + additional paid in capital))/ no. of shares issued 40,190,877,660 ₱40,195,219,660.00 ₱60.01

b. The par value of the outstanding shares of ordinary shares as of Dec 31, 20x2 is shown as 403 million. This is actually a rounded amount. What is the exact par value of the common stock outstanding as of that date? P40,274,528,220 Exact par value of common stock, Dec 31, 20x2 = Issued shares 20x2* par value ₱ 40,274,528,220.00

c. How many shares of common stock were issued during 20x2? 1,394,176 Issued shares of common stock 20x2= Issued shares 20x2 -Issued shares 20x1 1,394,176

d. How many shares would Excelsior be allowed to issue during 20x2? 230,152,039 Shares allowed for issuance 20x2 = Total authorized shares- Shares issued 2021 230,152,039

Exercise 3:
On Jan 2, 20x2, Hellen Sanchez formed a company called Baby Covers, Inc., which sells expensive infant clothig. Originally Hellen invested P50,000 in cash in exchange for 5,000 of the company's 50,000 authorized P1 par shares of Authorized stocks 50000 Issued stocks to Hellen 5000
common stock. By 20x7, he company had grownfrom one store to 3 successful stores. In January of 20x8, Hellen decided to finance further expansion of Baby Covers by selling additional stock.

1. How many additional shares can Baby Covers, Inc. issue during 20x8? 45,000 Additional shares available for issue = Authorized stocks - stocks issued to Hellen 45000

2. If 20,000 addditional shares were sold for P35 per share, what would the balance sheet show for ordinary shares and additional paid in capital ordinary shares? Balance sheet-Ordinary Shares: Additional Paid In Capital:
Issued stocks-Hellen 5000 Issued Stocks - Hellen 5000 ₱50,000.00 PAR VALUE Additional Issued shares 20000 ₱700,000.00 MV
Additional issued stocks 20000 5,000.00 5,000.00 ₱1.00 20000 ₱20,000.00 ₱35.00
Total stocks 25,000 APIC 45,000.00 APIC ₱680,000.00

Total Additional paid-in capital 725,000.00

3. If Hellen wanted to raise money for expansion of the company, what would be the advantage to issuing preferred stock instead of ordinary shares?
Answer: The advantage of issuing preferred stock instead of ordinary shares is that investors want more consistent dividends and they can have more dividends than common stock, so the tendency will be that the
investors will prefer more the preferred stock, hence, will lead to raising of money which is favorable to Hellen if preferred stocks will be issued.

MULTIPLE CHOICE QUESTIONS Question 1: One of the major disadvantages of a sole proprietorship is
Answer: A. That there is unlimited liability to the owner.

Question 2: The partnership form of organization

Answer: A. Avoids the double taxation of earnings and dividends found in the corporate form of organization.

Question 3: A corporation is
Answer: D. All of the above.