1. Return on sales was at 12.5%, asset turnover was only 0.75 and the present debt ratio is 0.40.
If
the company wants the profit margin raised to 15%, asset turnover to be maintained, and return
on equity to 150% of the present level, what must be the debt ratio if the amount of equity will
remain the same?
a. 0.52
b. 0.68
c. 0.61
d. 0.72
2. Below are data for a particular stock:
Dividend 2.28
P/E 19.00
Close price 75.25
Calculate the dividend payout
a. 57.6%
b. 25.3%
c. 12.0%
d. 3.0%
3. A learning curve is also known as
a. Labor Curve
b. Experience Curve
c. Growth Curve
d. Improvement Curve
4. Firm L has debt with a market value of P200,000 and a yield of 9%. The firm's equity has a
market value of P300,000, its earnings are growing at a rate of 5%, and its tax rate is 40%. A
similar firm with no debt has a cost of equity of 12%. Under the MM extension with growth,
what is Firm L's cost of equity?
a. 11.4%
b. 12.0%
c. 12.6%
d. 14.0%
5. You have the following data on three stocks:
Stock Standard Deviation Beta
A 20% 0.59
B 10% 0.61
C 12% 1.29
If you are a strict risk minimizer, you would choose Stock ____ if it is to be held in isolation and
Stock ____ if it is to be held as part of a well-diversified portfolio
a. A; A.
b. A; B.
c. B; A.
d. C; A.
6. What is the current price of a share of stock when last year’s dividend was P3.00, the growth
rate is 6%, and the investor’s required rate of return is 12%?
a. 25.00
b. 26.50
c. 50.00
d. 53.00
7. What is the required rate of return for a security with beta of 0.8 when the market return is
12%, real rate of return is 3%, and the expected inflation premium is 2%?
a. 17.8%
b. 8.6%
c. 10.6%
d. 12.6%
8. Bavaria's budget for variable overhead and fixed overhead revealed the following information
for an anticipated 40,000 hours of activity: variable overhead, P348,000; fixed overhead,
P600,000. The company actually worked 43,000 hours, and actual overhead incurred was:
variable, P365,500; fixed, P608,000. How much is the budget under static and flexible
respectively?
a. 948,000 ; 973,500
b. 973,500 ; 974,100
c. 948,000 ; 974,100
d. 974,100 ; 948,000
9. Using the data in the previous number, how much is the fixed overhead spending variance?
a. 8,000 U
b. 8,000 F
c. 37,000 U
d. 37,000 F
10. Data on Wentz Inc. for 2008 are shown below, along with the payables deferral period (PDP) for
the firms against which it benchmarks. The firm's new CFO believes that the company could
delay payments enough to increase its PDP to the benchmarks’ average. If this were done, by
how much would payables increase? Use a 365-day year.
Cost of goods sold = P75,000
Payables = P5,000
Payables deferral period (PDP) = 24.33
Benchmark payables deferral period = 30.00
a. P 764
b. P 943
c. P1,048
d. P1,164
11. The maintenance of present cost levels for products currently being manufactured via
systematic efforts to achieve the desired cost level
a. Kaizen Costing
b. Just-in-time
c. Target Costing
d. Market Costing
12. Disadvantage of Capitalism
a. High government control
b. Loss of consumer sovereignty
c. Economic Fluctuations
d. Social Justice
13. An increase in quantity demand can be described as the curve moving
a. East
b. West
c. South
d. North
14. Somerset Corporation is composed of five divisions, and each division is allocated a share of
Somerset overhead to make divisional managers aware of the cost of running the corporate
headquarters. The following information relates to the Metro Division:
Sales P7,500,000
Variable operating costs 5,100,000
Traceable fixed operating costs 1,900,000
Allocated corporate overhead 300,000
If the Metro Division is closed, 100% of the traceable fixed operating costs can be eliminated.
What will be the impact on Somerset's overall profitability if the Metro Division is closed?
a. Decrease by P200,000.
b. Decrease by P500,000.
c. Decrease by P2,100,000.
d. Decrease by P2,400,000.
15. A company has P5,000,000 inventory; P2,000,000 accounts receivable; average daily sales of
P100,000; accounts payable of P1,500,000; and average daily purchases of P50,000. What is the
length of the cash conversion period?
a. 20 days
b. 30 days
c. 40 days
d. 50 days
16. Many traditional costing systems:
a. trace manufacturing overhead to individual activities and require the development of
numerous activity-costing rates.
b. write off manufacturing overhead as an expense of the current period.
c. combine widely varying elements of overhead into a single cost pool.
d. use a host of different cost drivers (e.g., number of production setups, inspection hours,
orders processed) to improve the accuracy of product costing.
17. Delaware has computed the following unit costs for the year just ended:
Variable manufacturing cost P85
Fixed manufacturing cost 20
Variable selling and administrative cost 18
Fixed selling and administrative cost 11
Which of the following choices correctly depicts the per-unit cost of inventory under variable
costing and absorption costing?
a. Variable, P85; absorption, P105.
b. Variable, P85; absorption, P116.
c. Variable, P103; absorption, P105.
d. Variable, P103; absorption, P116.
18. Disadvantage of using ROI for investment centers
a. It is likely that another division may invest the available funds in a project improving
its ROI but will not contribute to the whole enterprise.
b. A company should have twice as much income as the debt payments cost. If debt rises
so high that a company does not have two times as much income as debt service, it
could be running into trouble.
c. Seasonal factors, depending on the industry, can also be an important consideration,
since these factors can distort ratios. Some companies always carry a higher level of
inventory at certain times of the year.
d. It lacks context as to why the individual ratios are high or low, or even whether they
should be considered high or low at all.
19. The NOCLAR project originated from an attempt to address concerns from the regulatory
community and other stakeholders that the Professional Accountant’s (PA’s) duty of ________
under the Code was acting as a barrier.
a. Integrity
b. Confidentiality
c. Objectivity
d. Professional competence and due care
20. A major accounting contribution to the managerial decision-making process in evaluating
possible courses of action is to
a. decide which actions the management should consider.
b. determine the amount of money that should be spent on a project.
c. assign responsibility for the decision.
d. provide relevant revenue and cost data about each course of action.
21. A company is considering a business in which the expected weighted average cost of capital is
10% keeping in view the associated business risk. If the company’s cost of debt is 6%, find out its
cost of equity in both countries at the debt-to-equity ratio level of 1.
a. 4%
b. 10%
c. 14%
d. 18%
22. Employee turnover and retention is most likely part of which perspective?
a. Learning/Growth
b. Internal Business
c. Customer Service
d. Financial
23. At an activity level of 25,000 units during a month, fixed overhead was budgeted at P5.60 per
unit. If units produced increased to 80,000, fixed cost ________.
a. Will increase by P308,000
b. Remains at P5.60 per unit
c. Will decrease to P140,000
d. Per unit will decrease to P1.75 per unit
24. If a factory is currently working at full capacity, how will management decide on which product
to produce?
a. Highest contribution margin per unit of scarce resource
b. Highest contribution margin per unit produced
c. Lowest cost per unit
d. Susceptible to achieve lower factory overhead than standard
25. An increasingly popular approach that integrates financial and customer performance measures
with measures in the areas of internal operations and learning and growth is known as:
a. the integrated performance measurement tool (IPMT)
b. the balanced scorecard.
c. cycle efficiency.
d. overall quality assessment (OQA)
26. Ganto Ba Talaga ang Board Exam Corporation Manufactures Pulang Manok. Ganto can
manufacture 300,000 Pulang Manok a year at a variable cost of P750,000 and affixed cost of
P450,000. Based on Ganto’s predictions, 240,000 Pulang Manok will be sold at a regular price of
P5.00 each. In addition, a special order was placed for 60,000 Pulang Manok to be sold at a 40%
discount off the regular price. The unit relevant cost per unit for Ganto’s decision is
a. 1.50
b. 2.50
c. 3.00
d. 4.00
27. A Machine renting company named Graber Inc. has a branch that handles reservations for
machine rental, the branch is also in charge of finding potential customers. The branch can be
classified as a
a. Profit center
b. Revenue Center
c. Investment Center
d. Cost Center
28. An investment project has the following characteristics:
Initial Investment 500,000
Additional investment in working capital 10,000
Annual Cash flow before income tax 140,000
Yearly tax depreciation 90,000
Terminal value 50,000
Cost of capital 10%
Income tax rate 30%
Investment life 5 years
Assume all cash flows come at the end of the year. What is the net PV of the investment?
a. 175,000
b. 58,000
c. 1,135
d. (12,340)
29. ABC invested P400,000 in a five-year project at the beginning of year 1. ABC estimates that the
annual savings from this project will amount to P130,000. The P400,000 of assets will be
depreciated over their five-year life on the straight-line basis. On investments of this type, ABC
required rate of return is 12%. What is the present value of the project?
a. 57,000
b. 250,000
c. 36,000
d. 68,000
30. Engagements should be adequately planned, supervised, and controlled. Controlling involves
the measurement of progress in attaining the engagement plan and objectives. At significant
engagement points, progress should be measured in terms of
a. time schedule, accomplishments, and quality of work.
b. accomplishments, time schedule, and expenses incurred.
c. quality of work, number of reports prepared, and time schedule.
d. accomplishments, number of personnel who played a role in the engagement, and
attendance of the participants in the engagement.
31. When the step-down method is used, the service department whose costs are allocated first is
often the department that:
a. obtains the highest yield.
b. has the lowest cost.
c. is the newest.
d. serves the greatest number of other service departments.
32. Mohawk Corporation manufactures a single product that has a cost of P350. The company uses
a 70% markup on cost to arrive at a selling price of P595, which results in a price that virtually
always exceeds that of the market leaders. If Mohawk changes to the approach known as target
costing, the company will first:
a. reduce its 70% markup rate.
b. trim its P350 cost.
c. attempt to re-engineer its product.
d. undertake a thorough study of competitors' prices.
33. Which of the following statements concerning common stock and the investment banking
process is NOT CORRECT?
a. The preemptive right gives each existing common stockholder the right to purchase his
or her proportionate share of a new stock issue.
b. If a firm sells 1,000,000 new shares of Class B stock, the transaction occurs in the
primary market.
c. Listing a large firm's stock is often considered to be beneficial to stockholders because
the increases in liquidity and reputation probably outweigh the additional costs to the
firm.
d. A tender offer is where stockholders have the right to elect the firm's directors, who in
turn select the officers who manage the business. If stockholders are dissatisfied with
management's performance, an outside group may ask the stockholders to vote for it
in an effort to take control of the business.
34. An option that gives the holder the right to sell a stock at a specified price at some future time is
a. a call option.
b. a put option.
c. an out-of-the-money option.
d. a naked option.
35. Black-Scholes is a pricing model used to determine the fair price or theoretical value for a call or
a put option based on six variables.
a. Share option
b. Derivative option
c. Warrant
d. Call option
36. Taggart Technologies is considering issuing new common stock and using the proceeds to
reduce its outstanding debt. The stock issue would have no effect on total assets, the interest
rate Taggart pays, EBIT, or the tax rate. Which of the following is likely to occur if the company
goes ahead with the stock issue?
a. The ROA will decline.
b. Taxable income will decrease.
c. The tax bill will increase.
d. Net income will decrease.
