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FM 2633 (FINANCIAL MANAGEMENT)

ISBAUK THINKING SKILLS COLLEGE

DIPLOMA IN BUSINESS MANAGEMENT
FINAL EXAMINATION
SEMESTER 6
JUNE / SEPTEMBER 2016 SESSION
BATCH 9

NAME
MATRIX NO.
DATE
SUBJECT
MANAGEMENT
CODE
TIME
DURATION
LECTURER

:
SECTION
A
B
C
TOTAL

MARKS

:
: AUGUST 2016
:
FINANCIAL

: FM 2633
:
: 3 HOURS
: MR. MAHESWARAN PERUMAL
100

(THIS QUESTION PAPER CONSISTS OF FOURTEEN (14) PRINTED PAGES WITH

THREE (3) SECTIONS)
INSTRUCTIONS TO CANDIDATES:
DO NOT OPEN UNTIL YOU ARE ASKED TO DO SO.
ANSWER ALL THE QUESTIONS IN SECTION A, B AND C. ANSWER IN THE SPACE
PROVIDED
ANY FORM OF CHEATING OR ATTEMPT TO CHEAT IS A SERIOUS OFFENCE
WHICH MAY LEAD TO DISCIPLINARY ACTIONS.

SECTION A: MULTIPLE CHOICE QUESTIONS

ANSWER ALL THE QUESTIONS IN THE SPACE PROVIDED.
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1. The

top

FM2633 (FINANCIAL MANAGEMENT)

financial

officer

in

firm

is

commonly

referred

to

as

the

_______________________.
A. Chief Financial Officer (CFO).
B. President of Finance.
C. Controller.
D. Treasurer.
2. A person who is in charge of cash management and capital expenditures is called the
________________.
A. Controller.
B. Treasurer.
C. Chief Executive Officer (CEO).
D. Credit Manager.
3. A sole proprietorship is defined as a business ___________________.
A. That is five or less years old.
B. With two or less owners.
C. That is created informally.
D. That is owned by a single individual.
4. A business entity which is treated as a legal person is called a ____________________.
A. Limited partnership.
B. Sole proprietorship.
C. General partnership.
D. Corporation.

5. The primary market refers to ______________________________________.

A. The original sale of securities by the issuer.
B. Transactions between two institutional shareholders.
C. The sale of securities by an individual shareholder.
D. The first trade of a firms securities when the financial markets open in the morning.
6. Which of the following is considered as financial institution?
A. Hospital.
B. Insurance company.
C. Home builder.
D. Private college.
7. The

primary

goal

of

financial

management

is

to

maximize

the

__________________________.
A. Current net income.
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FM2633 (FINANCIAL MANAGEMENT)

B. Net working capital.

C. Market value of the existing stock.
D. Capital structure.
8. A current asset is defined as an asset that ___________________________.
A. Was purchased after the last financial statement date.
B. Was purchased within the past twelve months.
C. Normally converts to cash within one year.
D. Is highly illiquid.
9. Shareholders equity can be defined as _____________________________.
A. Total assets plus total liabilities.
B. The market value of a firms assets.
C. Fixed assets minus long-term debt minus net working capital.
D. The residual values of a corporation after all debts have been paid.
10. Liquidity is best defined as __________________________________.
A. Ease and speed with which an asset can be converted to cash.
B. Ability to access the cash balances of a firm on a daily basis.
C. Option of a firm to sell its inventory at a greatly reduced price.
D. Market value of an asset minus the book value of the same asset.
11. The current ratio is defined as current assets _______________________.
A. Minus current liabilities.
B. Plus current liabilities.
C. Divided by total assets.
D. Divided by current liabilities.
12. The inventory turnover ratio is defined as _________________________.
A. Total sales divided by inventory.
B. Inventory times total sales.
C. Cost of goods sold divided by inventory.
D. Total sales divided by inventory times 365.
13. A firm has total assets of RM13,200, fixed assets of RM8,500, current liabilities of RM2,700
and long-term liabilities of RM5,200. What is the total debt ratio?
A. 0.57
B. 0.60
C. 1.63
D. 1.67
14. The value of an investment after one or more periods of time is called the
__________________.
A. Simple value.
B. Present value.
C. Future value.
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FM2633 (FINANCIAL MANAGEMENT)

D. Discounted value.
15. Interest earned on both the initial principal and the reinvested interest from prior periods is
called _________________.
A. Compound interest.
B. Simple interest.
C. Complex interest.
D. Interest on interest.
16. Preferred stock ___________________________________________.
A. Is always granted voting rights.
B. Pays a guaranteed dividend.
C. Is a form of debt from a tax point of view.
D. Has a higher claim in liquidation than the common stock.
17. Which of the following financial market is located in one, centralized location?
A. New York Stock Exchange (NYSE).
B. NASDAQ.
C. The over-the-counter market.
D. The European Monetary Unit.
18. Financial markets are used for trading ___________________________.
A. Both real assets and financial assets.
B. The goods and services produced by a firm.
C. Securities, such as shares of International Business of Machine (IBM).
D. The raw materials used in manufacturing.
19. The

primary

goal

of

corporate

management

should

be

to

______________________________.
A. Maximize the number of shareholders.
B. Maximize the firms profit.
C. Minimize the firms costs.
D. Maximize the shareholders wealth.
20. A firm has been told that it needs RM74,300 today to fund a RM120,000 expense 6 years
from now. What rate of interest was used in the computation?
A. 8.32 percent.
B. 8.41 percent.
C. 8.44 percent.
D. 8.49 percent.
21. Which of the following is NOT a cash outflow for the firm?
A. Depreciation.
B. Dividends.
C. Interest payments.
D. Taxes.
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FM2633 (FINANCIAL MANAGEMENT)

22. According to the accounting profession, which of the following would be considered a cashflow item from an investing activity?
A. Cash inflow from interest income.
B. Cash inflow from dividend payment.
C. Cash outflow to acquire fixed assets.
D. All of the above.
23. Which of the following is NOT a function of budgeting?
A. Decision making.
B. Planning.
C. Motivating.
D. Controlling.

24. A flexible budget is ______________________________________.

A. A budget that is constantly being changed.
B. A budget that comprises variable costs only.
C. A budget that is adjusted to reflect different costs at different activity levels.
D. A budget that will be changed at the end of every month in order to reflect the actual
costs of a department.
25. The profit margin is the amount of net profit earned for every RM1 of _________________.
A. Sales.
B. Equity.
C. Total assets.
D. Long-term debt.

ANSWER SPACE FOR SECTION A

QUESTION
1
2
3
4
5
6
7
8
9

ANSWER

QUESTION
14
15
16
17
18
19
20
21
22

ANSWER

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10
11
12
13

23
24
25

(TOTAL MARKS: 50 MARKS)

SECTION B: ESSAY QUESTIONS.
ANSWER ALL THE QUESTIONS IN THE SPACE PROVIDED.
QUESTION 1
Define financial management and state the objective of financial management.

(5 Marks)

______________________________________________________________________________
______________________________________________________________________________
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QUESTION 2
Define current assets and give FOUR (4) examples.

(5 Marks)

______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
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______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________

QUESTION 3
What are the determinants of capital structure of a company?

(10 Marks)

______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
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______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
QUESTION 4
What is meant by working capital? How is it calculated? Explain the determinants of working
capital requirements?

(10 Marks)

______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
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______________________________________________________________________________
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______________________________________________________________________________
______________________________________________________________________________
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______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
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FM2633 (FINANCIAL MANAGEMENT)

______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________

QUESTION 5
Every manager has to take THREE (3) major decisions while performing the finance function.
Briefly explain them.

(10 Marks)

______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
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______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
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FM2633 (FINANCIAL MANAGEMENT)

______________________________________________________________________________
______________________________________________________________________________

(TOTAL MARKS: 40 MARKS)

SECTION C: CALCULATION QUESTIONS.
ANSWER ALL THE QUESTIONS IN THE SPACE PROVIDED.
The following data is for Beatrice Berhad. You are required to use the data to compute the
following financial ratios:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)

Current ratio
Inventory turnover ratio
Net profit margin
Return on equity
Operating profit margin
Debt ratio
Debt to equity ratio
Return on assets
Fixed assets turnover
Receivables turnover

(1 Mark)
(1 Mark)
(1 Mark)
(1 Mark)
(1 Mark)
(1 Mark)
(1 Mark)
(1 Mark)
(1 Mark)
(1 Mark)

BALANCE SHEET AS AT 30 JUNE 2016

RM
Plant and equipment

26,881

Long-term investments and other fixed assets

20,606

Inventory

56,372

Accounts receivable

71,873

Cash and short-term investments

14,657

TOTAL ASSETS

190,389

Equity

135,013

Long-term liabilities

17,895

Current liabilities

37,841
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TOTAL LIABILITIES AND EQUITY

190,389

INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2016

RM
Sales (all credit)

254,553

Costs of goods sold

(149,806)

Selling and administrative expenses

(69,706)

Earnings before interest and tax

35,041

Interest expense

(2,525)

Earnings before tax

32,516

Taxes

(13,976)

NET INCOME

18,540

(TOTAL MARKS: 10 MARKS)

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FM2633 (FINANCIAL MANAGEMENT)

ANSWER:
RATIO
(a) Current ratio

(b
)

WORKING

ANSWER

Inventory turnover ratio

(c) Net profit margin

(d
)

Return on equity

(e) Operating profit margin

(f)

Debt ratio

(g
)

Debt to equity ratio

(h
)

Return on assets

(i)

Fixed assets turnover

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(j)

FM2633 (FINANCIAL MANAGEMENT)

Receivables turnover

-END OF QUESTION PAPER-

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ISBAUK THINKING SKILLS COLLEGE