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WorksheetsBusiness Organization and Management Quiz
Total questions: 40
Worksheet time: 40mins
What are the three main forms of business organization?
Proprietorship, Corporation, Partnership
Limited Liability, Corporation, Partnership
Sole Proprietorship, Franchise, Trust
Partnership, Trust, Cooperative
What is the primary objective of management in a corporation?
Maximize employee satisfaction
Maximize shareholder wealth
Expand business operations globally
Reduce environmental impact
Free cash flows (FCFs) are:
Cash flows available after paying taxes.
Cash flows available for distribution to all investors after expenses and investments.
Cash flows used only for operational investments.
Extra cash flows kept in reserve.
What is the weighted average cost of capital (WACC)?
The return required by only shareholders.
The average return required by all investors.
The total profits divided by equity.
The average debt-to-equity ratio.
What determines the intrinsic value of a firm?
Market share and operational costs
Free cash flows and WACC
Debt levels and shareholder equity
Current stock price and dividends
Capital allocation occurs through which methods?
Direct transfers, investment banks, financial intermediaries
Government subsidies, loans, investments
Internal funding, joint ventures, collaborations
Banking systems, credit unions, microfinance
How do corporations typically fund growth after exhausting personal resources?
Venture capital, angel investors, IPOs
Selling assets, cutting costs, raising debt
Expanding operations, partnerships, tax incentives
Licensing, franchising, internal savings
Which financial market deals with securities that mature in less than one year?
Capital market
Money market
Derivatives market
Secondary market
What type of market involves buying and selling securities for immediate delivery?
Futures market
Primary market
Spot market
Over-the-counter market
Which factors primarily affect the cost of money?
Inflation, risk, time preferences for consumption, production opportunities
Supply chain, demand, tax policies, economic policies
Technological advances, global trade, debt structures, taxation
Currency exchange, government bonds, interest rates, inflation
What is an example of a primary market transaction?
Selling shares on a stock exchange
Initial public offering (IPO)
Purchasing bonds from a previous investor
Trading options contracts
How do financial intermediaries create value?
By acting as a broker in financial transactions
By generating new securities and channeling funds between savers and borrowers
By collecting fees for transaction services
By limiting financial risks through diversification
Why might interest rates differ in two regions with similar economic conditions?
Differences in demographics like age distribution
Varying taxation policies on businesses
Centralized financial institutions in one region
Presence of large global markets in one region
What is the role of a financial institution?
Provide insurance services for businesses
Facilitate transactions in financial markets
Reduce agency problems between managers and shareholders
Advise governments on fiscal policies
How do corporate governance rules help a company?
Prevents fraud by enforcing strict financial audits
Establishes policies for managing conflicts of interest
Ensures managers act in the best interest of owners
Facilitates better relationships with international banks
What is a derivative?
A primitive security
A claim based on another traded security
A primary financial instrument
A market for immediate delivery transactions
How might the intrinsic value of a company be affected by a simultaneous increase in FCF and WACC?
Increase in intrinsic value
Decrease in intrinsic value
Intrinsic value remains unchanged
Effect depends on the magnitude of changes
If inflation increases significantly, how would it affect interest rates and the financial market?
Increase interest rates, reduce capital market activity
Decrease interest rates, increase money market activity
Stabilize interest rates, focus on derivatives markets
Unpredictable fluctuations in all markets
How do financial markets influence economic development?
By stabilizing currency exchange rates
By facilitating efficient allocation of resources
By protecting local industries from global competition
By encouraging monopolies to dominate markets
What could a corporation do to improve its intrinsic value if its WACC is significantly higher than the industry average?
Increase operating costs to match industry trends
Reevaluate capital structure and optimize investments
Increase dividend payouts to retain investor confidence
Reduce the issuance of financial securities
What does the income statement report?
Assets, liabilities, and equity
Revenues, expenses, and profits/losses
Cash inflows and outflows
Shareholders' equity changes
What is the accounting equation?
Revenue = Expenses + Net Income
Assets = Liabilities + Equity
Assets = Revenue + Expenses
Liabilities = Equity - Assets
Which financial statement provides information on a company's liquidity?
Income statement
Cash flow statement
Balance sheet
Statement of equity
Where do payments to suppliers appear in the cash flow statement?
Operating activities
Investing activities
Financing activities
Equity activities
How is gross profit calculated?
Revenue - Operating Expenses
Revenue - Cost of Goods Sold
Operating Income - Non-operating Expenses
Net Income - Taxes
What does the Cash Flow Statement report?
The net income of a company
The changes in cash from operating, investing, and financing activities
The company’s revenues and expenses over a specific time
Assets, liabilities, and equity at a specific date
A company reports the following: Revenue = ₱500,000, COGS = ₱300,000, and Operating Expenses = ₱100,000. What is the Operating Income?
₱500,000
₱200,000
₱100,000
₱300,000
The beginning inventory is ₱50,000, purchases during the year are ₱200,000, and ending inventory is ₱70,000. Calculate the COGS.
₱230,000
₱180,000
₱150,000
₱220,000
A company has the following data: Total Assets = ₱600,000, Total Liabilities = ₱400,000. Calculate the Equity.
₱200,000
₱400,000
₱600,000
₱1,000,000
If cash inflows from operating activities are ₱700,000, cash outflows for investing activities are ₱300,000, and cash inflows from financing activities are ₱200,000, what is the net cash flow?
₱1,200,000
₱600,000
₱400,000
₱200,000
A company earns ₱1,000,000 in revenue and incurs ₱600,000 in COGS and ₱200,000 in operating expenses. What is the net income before taxes?
₱200,000
₱400,000
₱600,000
₱800,000
A firm has current assets of ₱400,000, current liabilities of ₱300,000, and non-current liabilities of ₱200,000. What is the working capital?
₱100,000
₱200,000
₱300,000
₱400,000
If net income is ₱250,000, dividends paid are ₱50,000, and beginning retained earnings are ₱200,000, what are the retained earnings at the end of the year?
₱250,000
₱400,000
₱450,000
₱500,000
A company purchased machinery for ₱100,000. Where is this reported on the cash flow statement?
Operating activities
Investing activities
Financing activities
Depreciation activities
The cash flow from investing activities is -₱50,000, financing activities is ₱100,000, and net cash flow is ₱120,000. Calculate cash flow from operating activities.
₱70,000
₱100,000
₱120,000
₱150,000
A firm has total assets of ₱500,000, liabilities of ₱350,000, and revenue of ₱700,000. What is the equity?
₱150,000
₱350,000
₱500,000
₱700,000
If a company's assets increase by ₱100,000, and liabilities decrease by ₱50,000, how does equity change?
Decreases by ₱50,000
Increases by ₱150,000
Remains unchanged
Increases by ₱50,000
A firm plans to decrease its liabilities by ₱200,000 by issuing equity. How will this affect its debt-to-equity ratio if liabilities are currently ₱500,000 and equity is ₱300,000?
Decrease to 0.6
Increase to 0.8
Decrease to 1.0
Remain unchanged
If a company has a current ratio of 2.5 and current liabilities of ₱200,000, what are the current assets?
₱100,000
₱250,000
₱400,000
₱500,000
A company shows a net increase in cash despite negative cash flow from operations. What could explain this?
High depreciation expenses
Large investments in machinery
Proceeds from a loan
Decreased COGS
