Short Review Questions for FM academic year 2021 PDF

Preview

Summary

This documents is related to some MCQ related to FM course. It includes some questions and answers with detail calculations of the subject....

Description

The following has been calculated for Kampot Co: Receivables days: 58 Inventory turnover: 10 times per annum Payables days: 45 Non-current asset days: 36 What is the length of the cash operating cycle?

Cash operating cycle = Inventory+ AR- AP

A 23 days

inventory turnover = 365/10 =36.5

B 49.5 days

so, 36.5+58-45= 49.5 days

C 85.5 days D 139.5 days Which of the following best describes overtrading? A Selling more than you can manufacture and/or you hold in inventory B Having too much working capital thus reducing profitability. C Selling stocks and shares outside the stock exchange opening hours. D Suffering liquidity issues as a result of growing too quickly.

Which of the following is NOT generally a benefit of a “Just in time” approach? A Lower inventory levels B Better product customization C Ease of production scheduling D Higher quality TS Co has daily demand for ball bearings of 40 a day for each of the 250 working days (50 weeks) of the year. The ball bearings are purchased from a local supplier for $2 each. The cost of placing an order is $64 per order, regardless of the size of the order. The inventory holding costs, expressed as a percentage of inventory purchase price, is 25% per annum. What is the economic order quantity? A 1,700 B 1,600 =sqrt((2*64*(40*250)/(25%*2))) C 1,620 D 600

WW Co has a current ratio of 2. Receivables are $3 million and current liabilities are $2 million. What are inventory days if cost of sales is $10 million per annum? A 36.5 days

Inventory day= Inventory/ (COS/ 365) =1M/ (10M/365 days)= 36.5 days

B 91.25 days

Inventory= CA- AR = 4M (find below)-3M = 1M

C 14.6 days

CA= Current Ratio* CL= 2*2M= 4M

D 243.3 days Which of the following services may not be provided by a debt factor? A Bad debt insurance B Advancement of credit C Receivables ledger management D Sales to customer Which of the following is NOT a potential hidden cost of increasing credit taken from suppliers? A Damage to goodwill B Early settlement discounts lost C Business disruption D Increase risk of bad debts XYZ Co has annual credit sales of $20 million and account receivable of $4 million. Working capital is finance by an overdraft at 12% interest per year. Assume 365 days in a year. What is the annual financial effect if management reduces the collection period to 60 days by offering an early settlement discount of 1% that all customers adopt? A $85,479 Benefit

Current AR = 4,000,000

B $114,521 Cost

New AR = (20,000,000x60/365)= 3,287,671

C $85,479 Cost

Interest = (current ar-new at) *12%=

D $285,479 benefit

=(4,000,000- 3,287,671)*12%= 85,479 Discount cost= 20,000,000*1%*100%=200,000 Total = interest - discount cost = 85,479-200,000= -114,521

Which of the following investment is most appropriate for investing short term cash surplus? A Fixed deposit markets B Treasury bond C Buying shares D Real estate

Which of the following is less likely to be useful when company perform customer’s credit assessment? A Ratio analysis B Physical visit of customer’s factory C No of customer’s have D Cashflow analysis The directors of Portico plc have recently engaged a firm of consultants to negotiate standard terms of trade for one of its strategic business units. This includes the agreement by Portico plc to pay a 5% penalty on any late invoice settlement. This policy is an illustration of the company’s concern for which major stakeholder? A Lenders B Trade unions C Customers D Suppliers Which of the following does NOT form part of the objectives of a corporate governance best practice framework? A Separation of chairperson and CEO roles B Establishment of audit, nomination and remuneration committees C Minimization of risk D Employment of non-executive directors. Which of the following is NOT typically a principal objective of macroeconomic policy of government? A To achieve a full employment of resources B To achieve economic growth C To achieve a balance of payments deficit

D To achieve an appropriate distribution of income and wealth Which of the following Cambodian government actions related predominantly to fiscal policy? 1 Decreasing interest rates in order to stimulate consumer spending 2 Reducing taxation while maintaining public spending 3 Using official foreign currency reserves to buy the domestic currency 4 Borrowing money from investors through open market operation (OMO) Which of the following organizations is most likely to benefit from a period of high price inflation? A An organization which has a large number of long-term payables B An exporter of goods to a country with relatively low inflation C A supplier of goods in a market where consumers are highly price sensitive and substitute imported goods are available D. A large retailer with a high level of inventory on display and low rate of inventory turnover Which is not a component of the GDP? A Consumption goods B Investment spending by firms on capital goods C Public sector’s own demand for goods D Employment rate Which of the following is not a monetary policy tool? A Reserve requirement B Open market of operations C Discount rate/ interbank rate D Balance of payment Through open market operations, the National Bank of Cambodia (NBC) Buys and Sells government securities to influence the supply of bank reserves. When the NBC wants to increase reserves, it does what? A Buys security B Sells securities C Nothing Point out which of the following is not an instrument of fiscal policy: A An increase in the interest rate

B A cut in unemployment compensation C An increase in tobacco taxes D A cut in the capital gain tax In a floating-exchange-rate system, an increase in foreign income will A reduce demand for the domestic currency, creating a real depreciation of the domestic currency. B increase demand for the domestic currency, creating a real depreciation of the domestic currency C increase demand for the domestic currency, creating a real appreciation of the domestic currency D reduce demand for the domestic currency, creating a real appreciation of the domestic currency

1. Governments have a number of economic targets as part of their fiscal policy. Which of the following government actions relate predominantly to fiscal policy? 1. 2. 3. 4. A. B. C. D.

Decreasing interest rates in order to stimulate consumer spending. Reducing taxation while maintaining public spending. Using official foreign currency reserves to buy the domestic currency. Borrowing money from the capital markets and spending it on public works. 1 only 1 and 3 only 2 and 4 only 2, 3 and 4 only

2. In not-for-profit businesses and state-run entities, a value-for-money audit can be used to measure performance. It covers three key areas: economy, efficiency and effectiveness. Which of the following could be used to describe effectiveness in this context? A. Avoiding waste of inputs B. Achieving agreed targets C. Achieving a given level of profit D. Obtaining suitable quality inputs at the lowest price 3. In relation to the financial management of a company, which of the following provides the best definition of a firm’s primary financial objective? A. To achieve long-term growth in earnings B. To maximise the level of annual dividends C. To maximise the wealth of its ordinary shareholder

D. To maximise the level of annual profits

4. CamEd Plc uses Economic Order Quantity (EOQ) model for inventory management. A decrease in which one of the following variables would increase the EOQ? A. Cost per order B. Level of buffer inventory C. Holding cost D. Quantity demanded 5. The National Bank of Cambodia follows an expansionary monetary policy. How would this typically affect businesses? A. Higher demand from customers, lower interest rates on loans and increased availability of credit B. A contraction in demand from customers, higher interest rates and less available credit C. Lower taxes, higher demand from customers but less government subsidies/available contracts D. Lower interest rates, lower exchange rates and higher tax rates 6. The directors of Portico plc have recently engaged a firm of consultants to negotiate standard terms of trade for one of its strategic business units. This includes the agreement by Portico plc will charge a 5% penalty on any late invoice settlement. Whom of the company's stakeholder will be affected?

A. Lenders B. Trade unions C. Customers D. Suppliers 7. Which of the following does NOT form part of the objectives of a corporate governance best practice framework? A. Separation of chairperson and CEO roles B. Establishment of audit, nomination and remuneration committees C. Minimisation of risk D. Employment of non-executive directors

8. Which of the following best describes overtrading? A Selling more than you can manufacture and/or you hold in inventory. B Having too much working capital thus reducing profitability. C Selling stocks and shares outside the stock exchange opening hours. D Suffering liquidity issues as a result of growing too quickly. 9. Capital investment appraisal refers to: A. Making sure that we have enough money to buy assets B. Making sure that assets pay for themselves as soon as possible C. Making sure that we have enough assets to operate D. Evaluating the costs and benefits of proposed investments in operating assets 10. Which of the following is a drawback of payback period method of investment appraisal? A. it is cash flow based B. It consider the time value of money C. it does not measure potential impact on shareholder wealth D. It is profit based

Question 1: Which of the following statements concerning financial management are correct?

(1) It is concerned with investment decisions, financing decisions and dividend decisions (2) It is concerned with financial planning and financial control (3) It considers the management of risk A. 1 and 2 only B. 1 and 3 only C. 2 and 3 only D. 1, 2 and 3 Question 2: DASANI is a bottling company and has just paid a dividend of 21 cents per share and its share price one year ago was $3.10 per share. The total shareholder return for the year was 19.7%. What is the current share price? A. $3.35 B. $3.71 C. $3.31 D. $3.50 Question 3: Which of the following is not one of the key areas with which financial manager will be a concern with? A. Investment decision B. Raising long-term finance C. Managing working capital D. Managing the quality of production Question 4: Which two of the following are likely to result in an increase in a company’s price/earnings (P/E) ratio? A. A stockbroker recommending that clients sell the company’s shares B. A company announcing the loss of a major contract C. A sudden downturn in share prices D. An announcement of increased earnings Question 5: If the Cambodia government currently has a budget deficit, its income is not covering the cost of running the country. If this budget is not revised, what could be a possible result of this situation? A. Contractionary fiscal policy B. A budget surplus C. An increase public debt D. A balanced budget Question 6: A _______ reporting focuses on issues of environment, social and governance, and is intended for a variety of stakeholders as well as being voluntary in nature, in contrast with traditional financial reporting. A. Financial B. Non-financial C. Sustainanbility D. Balanced

Question 7: Consider the following statements: (1) Weakness of domestic currency may promote exports. (2) Prices of a country’s products in the international market may fall due to weak currency value. Which of the statements given above is/are correct? A. 1 only B. 2 only C. Both 1 and 2 D. Neither 1 nor 2 Question 8: The treasury department of Angkor Plc bought an asset costing $210,000 with a $30,000 salvage value at the end of its ten-year life. If the asset provides an annual cash inflows of $30,000 each years, the payback period is_________ A. 7 years B. 7.9 years C. 8.3 years D. 6.3 years Question 9: Capital investment appraisal refers to: A. Evaluating the costs and benefits of proposed investments in operating assets B. Making sure that we have enough money to buy assets C. Making sure that assets pay for themselves as soon as possible D. Making sure that we have enough assets to operate Question 10: Which of the following changes will increase the NPV of a project? A. A decrease in the discount rate B. A decrease in the size of the cash inflows C. An increase in the initial cost of the project D. A decrease in the number of cash inflows Question 11: Which of the following is not an advantage of the IRR? A. It is a measure of absolute return B. Considers the whole life of the project C. Uses cash flows not profits D. It considers the time value of money Question 12: In not-for-profit businesses and state-run entities, a value-for-money audit can be used to measure performance. It covers three key areas: economy, efficiency and effectiveness. Which of the following could be used to describe effectiveness in this context? A. Avoiding waste of inputs B. Achieving agreed targets C. Achieving a given level of profit D. Obtaining suitable quality inputs at the lowest price

Question 13: In relation to the financial management of a company, which of the following provides the best definition of a firm’s primary financial objective? A. To achieve long‐term growth in earnings B. To maximise the level of annual dividends C. To maximise the wealth of its ordinary shareholder D. To maximise the level of annual profits Question 14: The following information relates to the ordinary shares of Phnom Pehn Water Supply Authority (PWSA). Earnings per share = $0.60 Dividend cover = 2.5x Dividend yield = 4.8% The share price of PWSA’s ordinary shares implied by the data above is______ A. $5.21 B. $4.56 C. $5.01 D. $2.50 Question 15: CamEd Business School Project X has an internal rate of return (IRR) of 14%. Project Y has an IRR of 17% Both projects have a conventional cash flow pattern (all inflows after the initial investment in year 0). If the required rate of return is: A. 14%, the net present value (NPV) of Project Y will exceed the NPV of Project X B. greater than 17%, Project Y will have a shorter payback period than Project X C. 10%, both projects will have a positive NPV, and the NPV of Project Y will exceed the NPV of Project X. D. None of the above sentence is correct Question 16: Given the following cash flows for a capital project, calculate the NPV and IRR. The required rate of return is 8%. Year Cash flow NPV A) $1,905 B) $1,905 C) $2,598 D) $3,379 Question 17: Given the following information about Vast Apparel (Cambodia) LTD: Cost of sales = $600 Gross profit = $400 Operating expenses $200 Tax rate = 30%

What are the operating profit margins and net margin, respectively? A) 40%; 20% B) 20%; 15% C) 40%; 10% D) 20%; 14% Question 18: Which of the following is not a key characteristic of not-for-profit organizations? A) Multiple stakeholders. B) Revenue orientation. C) Multiple objectives. D) Transparency. Question 19: To help Cambodian government fight recession in the wake of Covid-19 impact on businesses, the government could A) increase interest rates by decreasing money supply in the country. B) decrease government spending to balance the budget and increase taxes C) conduct contractionary fiscal policy by raising taxes. D) decrease taxes and increase government spending to increase aggregate demand. Question 20: Which of the following relationship among a company’s stakeholder is most accurately described as a principal-agent relationship? The relationship between company’s managers and its: A) Creditors B) Suppliers C) Shareholders D) Regulators...