ST. PETER BAPTIST COLLEGE FOUNDATION INC.

(Formerly St Peter Baptist Academy)

Lupi, Camarines Sur
MIDTERM EXAMINATION IN
BUSINESS FINANCE
Name: ________________________________ Score _______________________/30
Grade & Section: _______________________ Date: ________________________
Directions: Read each question carefully and choose the letter of the correct answer. Write
your answers on the provided answer sheet.

1. Finance is primarily concerned with the d. taxation

________. Answer: b
a. management of money 8. Working capital management deals with
b. study of accounting rules ________.
c. marketing of products a. long-term investments
d. production of goods b. day-to-day operations
Answer: a c. debt restructuring
2. The main objective of financial d. asset revaluation
management is to ________. Answer: b
a. increase employee satisfaction 9. Which statement best defines risk and
b. maximize shareholder wealth return?
c. minimize operational risks a. Higher risk leads to lower return
d. expand market share b. Risk and return are unrelated
Answer: b c. Higher risk generally leads to higher
3. Which of the following is an example of a expected return
financing decision? d. Low risk guarantees higher profit
a. Investing in new machinery Answer: c
b. Issuing corporate bonds 10. The relationship between finance and
c. Paying salaries economics is shown through ________.
d. Purchasing raw materials a. supply and demand of funds
Answer: b b. management hierarchy
4. Financial planning helps a company to c. government budgeting
________. d. international trade
a. avoid taxes Answer: a
b. allocate resources efficiently 11. Financial reporting provides information
c. reduce marketing expenses to ________.
d. avoid government control a. only the management
Answer: b b. all users of financial statements
5. The financial manager’s primary role is to c. employees only
________. d. competitors
a. control the company’s IT operations Answer: b
b. ensure liquidity and profitability 12. Which of the following sets accounting
c. prepare advertisements standards in the Philippines?
d. manage the HR department a. Department of Trade and Industry
Answer: b b. Commission on Audit
6. Which financial principle ensures that c. Financial Reporting Standards Council
today’s money is worth more than future (FRSC)
money? d. Bureau of Internal Revenue
a. Liquidity Principle Answer: c
b. Time Value of Money 13. The purpose of financial reporting is to
c. Profitability Principle ________.
d. Risk Management Principle a. hide financial details
Answer: b b. support decision-making
7. Financial management involves three c. comply with legal penalties
major decisions: investment, financing, d. attract investors only
and ________. Answer: b
a. production 14. What is GAAP?
b. dividend a. General Agreement on Accounting
c. marketing Policies
 b. Generally Accepted Accounting c. list of completed projects
Principles d. report for external use only
c. Government Accounting and Auditing Answer: b
Procedures 23. What does a cash budget predict?
d. General Accounting and Assessment a. Expected sales
Plan b. Future cash inflows and outflows
Answer: b c. Cost of production
15. The IFRS ensures ________. d. Fixed assets
a. global comparability of financial reports Answer: b
b. lower taxation 24. Which of the following is NOT part of a
c. faster audit results financial projection?
d. increased sales a. Sales forecast
Answer: a b. Expense estimation
16. The three main financial statements are c. Historical review
________. d. Revenue projection
a. balance sheet, income statement, and Answer: c
cash flow statement 25. The main purpose of variance analysis is
b. budget, sales report, and income to ________.
projection a. evaluate budget performance
c. inventory, payroll, and forecast sheet b. reduce cost of goods sold
d. financial plan, audit, and ledger c. increase revenue
Answer: a d. simplify record keeping
17. The balance sheet shows a company’s Answer: a
________. 26. Which ratio measures a company’s ability
a. profitability over time to meet short-term obligations?
b. financial position at a specific date a. Profit margin
c. future cash projections b. Current ratio
d. list of expenses c. Return on equity
Answer: b d. Debt ratio
18. Which financial statement shows revenues Answer: b
and expenses? 27. A high debt-to-equity ratio means
a. Balance Sheet ________.
b. Cash Flow Statement a. low financial risk
c. Income Statement b. high leverage
d. Statement of Owner’s Equity c. strong liquidity
Answer: c d. poor profitability
19. Assets minus liabilities equal ________. Answer: b
a. revenue 28. Trend analysis involves ________.
b. owner’s equity a. comparing data over time
c. profit b. checking product performance
d. capital turnover c. adjusting for inflation
Answer: b d. predicting stock market prices
20. Depreciation is recorded in which part of Answer: a
the income statement? 29. Which of the following evaluates
a. Revenue section efficiency?
b. Operating expense a. Inventory turnover
c. Net income section b. Debt ratio
d. Owner’s equity c. Current ratio
Answer: b d. Profit margin
21. A financial budget primarily helps in Answer: a
________. 30. Ratio analysis is an example of ________.
a. controlling future spending a. quantitative analysis
b. recording past transactions b. qualitative analysis
c. planning human resources c. descriptive review
d. computing tax obligations d. historical audit
Answer: a Answer: a
22. A company’s budget acts as a ________.
a. historical record
b. roadmap for financial goals
 Table of Specification (TOS)
Distribution based on sample cognitive levels: Remembering 28%, Understanding
10%, Creating 12%, Applying 34%, Evaluating 4%, Analyzing 12%.

Major Specific Numbe Rememberi Understandi Creatin Applyin Evaluati Analyzin

Area Content r of ng (28%) ng (10%) g g (34%) ng (4%) g (12%)
Area Test (12%)
Items
I. Definition
Fundamenta ,
ls of objectives
Finance and , 10 1, 2, 3, 5 4, 7 6, 8, 9, 10
Financial principles
Managemen , and
t decisions
(Items 1–
10)
II. Financial GAAP,
Reporting IFRS,
and FRSC,
Standards purpose
and 5 11, 12 13 14, 15
importanc
e of
reporting
(Items
11–15)
III. Types,
Financial elements,
Statements and uses 5 16, 17, 18 19
of 20
financial
statement
s (Items
16–20)
IV. Budgeting
Financial ,
Projections forecastin
and g, and 5 21 22 23 24, 25
Budgeting variance
analysis
(Items
21–25)
V. Financial Ratio and
Statement trend
Analysis analysis
(Items 5 26 27, 28, 29 30
26–30)

TOTAL 30 11 5 1 10 1 2