Principles of Finance (FINC2202)

Higher Institute of Commerce and Management (HICM)

Semester: Second Semester

Level: 200

Year: 2017

Answers (200 )
Answer all questions by cycling the correct answer.
1) Total Stockholder's equity consists of (1 mark)
(a) Preferred stock and common stockholder
(b) Common stock and retained earnings
(c) Common stock and capital pain-in excess of par
(d) Preferred stock, common stock, capital paid in excess of par and retained earnings
2) Which of the following is an inflow of cash (1 mark)
(a) Funds spent in normal business operation
(b) The purchase of a new factory
(c) The sale of the firms bonds
(d) The retirement of the firms bonds
3) If fixed cost rises while other cost stay constant (1 mark)
(a) The break-even point rises
(b) The degree of operating leverage increases
(c) Total profit declines
(d) All of the above
4) Which of the following would represent a use of funds and indirectly a reduction in cash
balance? (1 mark)
(a) An increase in inventory
(b) A decrease in marketable securities
(c) An increase in accounts payable
(d) The sale of new bonds by the firm
5) Depreciation is a source of cash inflow because? (1 mark)
(a) It is a tax deductible non cash expense
(b) It implies cash for future asset purchase
(c) It is a tax deductible cash expense
(d) It is a tax expense
6) Finance is a field of study of the relationship of three things (1 mark)
(a) Time, risk and money
(b) Risk, money, investment
(c) Money, inflation, opportunity cost
(d) Time, money, opportunity cost
7) Which of the following is viewed by company owners as an appropriate measure of wealth?
(a) Company value
(b) Profits
(c) Future of the company
(d) Company image
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REPUBLIQUE DU CAMEROUN
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UNIVERSITE DE BAMENDA
P.O BOX 39 BAMENDA
TEL: 33 36 36 94
SCHOOL/FACULTY: H.I.C.M DEPARTMENT: ACCOUNTING AND FINANCE
COURSE CODE: COURSE TITLE: PRINCIPLES OF FINANCE
SEMESTER: NATURE: C.A LEVEL: 100
LECTURER: DATE: 2016/2017 HALL: DURATION:
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8) If a manager is apprehensive about the economic conditions, what path will he follow? (1
mark)
(a) He will chose to be more aggressive
(b) He will follow a conservative path
(c) He will use leverage
(d) None of the above
9) Ma Rose sells food at the Entrance into Uba for 25FCFA a spoon. The fixed cost for this
operation is 40,000FCFA meanwhile the variable cost per spoon is 20FCFA. What is the
break-even point in spoons? (1 marks)
(a) 16,000 spoons
(b) 8,000 spoons
(c) 15,000 spoons
(d) 10,000 spoons
10) What is the profit or loss on 10,000 spoons (based on question 9) ? (1 mark)
(a) 15,000FCFA
(b) 10,000FCFA
(c) 16,000FCFA
(d) 8,000FCFA
11) Financial ratios are used to: (1 mark)
(a) Measure the value of a firm
(b) Measure the speed at which the firm its activities
(c) Measure the level of turn over
(d) Measure and evaluate the operating performance of a firm
12) Probability ratios measure: (1 mark)
(a) An adequate return on sales, total assets and debts
(b) An adequate return on sales, equity and total assets
(c) An adequate return on total assets, sales and fixed assets
(d) an adequate return on sales, total assets and invested capital
13) Asset utilization ratios, measure; (1 mark)
(a) The speed at which the company is turning over accounts receivables, inventory and
sales
(b) The speed at which the firm is turning over accounts receivables, inventory and accounts
payable
(c) The speed at which the firm is turning over accounts receivables, inventory and debts
(d) The speed at which the firm is turning over accounts receivables, inventory and long
term term assets
14) Liquidity ratios measure; (1 mark)
(a) The ability of the firm to pay off its obligations as they fall due
(b) The ability of the firm to pay off its medium term obligations as they fall due
(c) The ability of the firm to pay off its working capital obligations as they fall due
(d) The ability of the firm to pay off its short term obligations as they fall due
15) Debt utilization ratios measure; (1 mark)
(a) The degree of practising the debt management the debt management policies of the firm
(b) The degree of commitment of the debt management policies of the firm
(c) The degree of planning the debt management policies of the firm
(d) The degree of prudence of the debt management policies of the firm
16) Operating leverage refers to the phenomenon whereby, a small change in sales triggers a
relatively large change in operating income. (1 mark)
(a) True
(b) False
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17) Operating leverage occurs because of; (1 mark)
(a) Fixed assets in the operations of the firm
(b) Fixed costs in the operations of the firm
(c) Variable costs in the operations of the firm
18) What happens if NI changes by a greater percentage that EBIT changes; (1 mark)
(a) Then the DFL will have a value less than 1
(b) Then the DFL will have a value greater that 1
(c) Then the DFL will have a value equal to 1
19) When does combined leverage occurs; (1 mark)
(a) When operating income changes by a larger percentage than sales
(b) When net income changes by a larger percentage than sales
(c) When income changes by a larger percentage than sales
20) In break-even analysis, the sales break-even point is; (1 mark)
(a) The point at which the operating income (EBIT) equals 1
(b) The point at which the operating income (EBIT) equals 0
(c) The point at which the operating income (EBIT) is greater than 1
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