FINANCIAL MANAGEMENT: MODULE 1 - QUIZ 1

I.​ TRUE OR FALSE 10)​The expansive goal of the company is to

1)​ Finance is the offshoot of the fusion of maximize the wealth of the shareholders.
accounting and economics. TRUE
TRUE
11)​Risk management is not a concern of the
2)​ Although finance arose because of financial manager.
accounting and economics, the three are FALSE
not interrelated.
FALSE 12)​The financial manager does not have to
work and coordinate with other executives.
3)​ An organization with effective financial FALSE
management can manage its resources
efficiently, minimize financial risk, and make 13)​The quality and reliability of the profits is not
good decisions that will help fulfill its important when maximizing profits of the
strategic objectives. firm.
TRUE FALSE

4)​ Capital markets bring together savers and 14)​The partnership has a continuity of
borrowers of stocks and bonds. existence.
TRUE FALSE

5)​ Investment decisions valuation, combination 15)​When a stockholder dies, the corporation
and analyzing values of investments. stops its existence.
TRUE FALSE

6)​ Financial management makes decisions on 16)​In a corporate setting, the president can
the choice of assets to acquire only. also be the treasurer at the same time, if the
FALSE operation is not so complicated and
transactions are not voluminous.
7)​ Profit maximization is the most important FALSE
goal of financial management.
FALSE 17)​The costs incurred for being socially
responsible are offset by the increase of
8)​ It is possible to maximize profit and at the income generated from sales.
same time be socially responsible TRUE
TRUE.
18)​The financial manager does not have to be
9)​ Financial managers are powerful because knowledgeable in trading in the financial
of what they know about finances. They are markets because there are agents who are
delegated to decide but not accountable for expert in facilitating the buying and selling of
the result of the decision he/she made. shares of stocks.
FALSE FALSE
 19)​Sole proprietors are not personally liable for 5)​ Area of finance which relates to the
the financial obligations of his/her business. achievement of organizational goals and
FALSE objectives by managing the financial
20)​When a partner dies, the partnership can go resources by deciding on the choice of
on its operations as a partnership. assets to acquire, how to raise capital and
FALSE run the company to maximize its value
➔​ FINANCIAL MANAGEMENT
21)​Corporations have unlimited liability.
FALSE 6)​ The effective and efficient utilization of
financial resources to achieve
22)​The goals of stockholders are consistent predetermined objectives of the
with the goals of the managers. organization
FALSE ➔​ FINANCIAL MANAGEMENT

23)​Providing performance-based incentives 7)​ The most important goal of financial

helps persuade managers to work for the management
best interest of the owners. ➔​ MAXIMATION OF SHAREHOLDER’S
TRUE WEALTH

24)​Giving shares of stocks to managers as 8)​ Argued that a company does not owe a
incentive will encourage him/her to responsibility to the society; only to owners
maximize the wealth of the owners. ➔​ MILTON FRIEDMAN
TRUE
9)​ Rejects the concept of shareholder primacy,
25)​Taking over the management of the instead also to customers, suppliers,
corporation is one control mechanism in the employees and other stakeholders
conflict between managers and owners. ➔​ STAKEHOLDER CAPITALISM
TRUE
10)​An organization owned by only one person
➔​ SOLE PROPIETORSHIP
II. IDENTIFICATION:
1)​ The art of recording, classifying, and 11)​An organization owned by 2 - 5 persons
summarizing money transactions and ➔​ PARTNERSHIP
events of financial character and
interpreting the results thereof 12)​Law that governs the partnerships
➔​ ACCOUNTING ➔​ CIVIL CODE OF THE PHILIPPINES

2)​ The science of wealth 13)​Right to continuous existence irrespective of

➔​ ECONOMICS death, withdrawal, insolvency, or incapacity
of the individual members of stockholders
3)​ The art and science of managing money and regardless of the transfer of stocks
➔​ FINANCE ➔​ RIGHT OF SUCCESSION

4)​ Broad category of finance involved in 14)​Law that governs the corporations
managing assets, liabilities, equity, ➔​ CORPORATION CODE OF THE
revenues, and expenses for businesses PHILIPPINES
➔​ CORPORATE FINANCE
 15)​A theory that says that the goals of the What are the major activities being supported by
managers are in conflict with those of the financial management for good decision making?
stockholders 19.​ STRATEGIC ACTIVITIES
➔​ AGENCY THEORY 20.​ FINANCING ACTIVITIES
21.​ INVESTING ACTIVITIES
●​ OPERATING ACTIVITIES
III. ENUMERATION
What are the broad categories of Finance? What are the main areas of financial risk:
1.​ PUBLIC FINANCE 22.​ CREDIT RISK
2.​ CORPORATE FINANCE 23.​ LIQUIDITY RISK
3.​ PERSONAL FINANCE 24.​ MARKET RISK
●​ OPERATIONAL RISK
What are the key areas of finance?
4.​ CAPITAL MARKET For corporations to have higher return over the long
5.​ INVESTMENT run, what should also be given attention, aside from
6.​ FINANCIAL MANAGEMENT the owners?
25.​SUPPLIERS
What are the goals of financial management? 26.​CUSTOMERS
7.​ PROFIT MAXIMATION 27.​EMPLOYEES
8.​ MAXIMIZATION OF SHAREHOLDER’S ●​ LOCAL COMMUNITY
WEALTH
9.​ SOCIAL RESPONSIBILITY What are the control mechanisms to resolve
conflicts between the owners and
What are some of the fundamental concepts of managers/agents?
financial management? 28.​ INCENTIVES
10.​ COST 29.​ TAKEOVER
11.​ CONFIDENCE 30.​STRAIGHT INVOLVEMENT OF
12.​ACCOUNTABILITY SHAREHOLDER TO MANAGEMENT
●​ RESEARCH, TIME, AND KNOWLEDGE
●​ REVISION AND ATTENTION
●​ POWER
●​ MONEY, AVAILABILITY, AND PLANNING

What are some of the functions of financial

management?
13.​FORECASTING AND PLANNING
14.​COORDINATING AND COTROLLING
15.​RISK MANAGEMENT
●​ MAKING CRUCIAL INVESTMENT AND
FINANCING DECISIONS
●​ TRADING IN FINANCIAL MARKETS

What are the legal forms of business organization?

16.​ SOLE PROPIETORSHIP
17.​ PARTNERSHIP
18.​ CORPORATION