GEN 009: Assessment

I. Problem Solving

Instructions: Solutions and answer must be written on yellow or white pad paper. Submissions without
solutions will receive zero credit—no exceptions.

Chen Xiao Xi Company

2022 2023 2024

Sales P 200,000 P210,000 P100,000

Sales Return and Allowances 40,000 25,000 6,000

Cost of Goods Sold 100,000 115,625 50,000

Selling Expenses 22,000 25,000 16,000

General Expenses 8,000 12,000 8,000

Non-operating income 6,000 2,500 3,500

Interest Expense 4,000 3,500 3,000

Income taxes (35% rate) 11,200 10,981 7,175

Net Income 20,800 20,394 13,325

A. Compute the following:

B. Prepare a Comparative Statement of Financial Performance using Vertical and Horizontal Analysis (2022
as base year) (10pts each)
II. MCQ

1. "Shareholder wealth" in a firm is represented by: 6. Below are the importance of financial
A. the number of people employed in the firm. management except:
B. the book value of the firm's assets less the book A. Planning and controlling financial resources
value B. Allow better communication among department
of its liabilities. C. To guide proper financial decision making
C. the amount of salary paid to its employees. D. Help to promote product
D. the market price per share of the firm's common 7. Which one of the following can a firm do if it
stock. effectively
2. "Don't put all your eggs in one basket" is manages its financial risks?
investment advice A. eliminate all the risks faced by the firm
related most directly to: B. reduce the price volatility it faces
A. liquidity C. guarantee the firm's financial success
B. diversification D. avoid all long-term financial risks
C. safety 8.Which among the choices given is not an objective
D. growth of
3. The purpose of financial markets is to: financial planning?
A. increase the price of common stocks. A. Planning
B. lower the yield on bonds. B. Coordination
C. allocate savings efficiently. C. Control
D. control inflation. D. Interpretation
4. How are funds allocated efficiently in a market 9. One of the major disadvantages of a sole
economy? proprietorship isa.
A. The most powerful economic unit receives the A. That there is unlimited liability to the owner
funds. B. The simplicity of decision making
B. The economic unit that is willing to pay the highest C. Low organizational costs.
expected return receives the funds. D. Low operating costs
C. The economic unit that considers itself most in 10. The partnership form of organizations.
need A. Avoids the double taxation of earnings and
of funds receives them. dividends
D. Receipt of the funds is rotated so that each found in the corporate form of organization.
economic B. Usually provides limited liability to the partners.
unit can receive them in turn. C. Has unlimited life
5. Which of the following is the best definition of D. Simplifies decision making
financial risk? 11. Which of the following statements is most
answer choices correct?
A. Risk is the possibility that an investment will lose A. One advantage of forming a corporation is that you
money. have limited liability.
B. Risk is the possibility that an investment will earn a B. Corporations face fewer regulations than sole
negative return. proprietorships.
C. Risk is the possibility that an investment's actual C. One disadvantage of being a sole proprietor is that
return will be less than its expected return. you have to pay corporate taxes, even though you
D. Risk is the uncertainty regarding the gain or loss don’t realize the benefits of being a corporation.
from D. Statements a and c are correct.
an investment. 12. Which of the following enjoys limited liability?
A. A general partnership. board and its chairman, and the board generally has
B. A corporation. the
C. A sole proprietorship. authority to remove the CEO under certain
D. None of the above. conditions.
13. Which of the following statements is most A. Statement 1 is correct
correct? B. Statement 2 is correct
A. Corporations are taxed more favorably than sole C. Both statements are correct
proprietorships. D. Neither statement is correct
B. Corporations have unlimited liability. 16. Which of the following will likely have the reported
C. Because of their size, large corporations face amounts
fewer on the balance sheet closest to their current value?
regulations than smaller corporations and sole A. Current Assets
proprietorships. B. Long-term Assets
D. Bond covenants are designed to reduce potential C. Stockholders' Equity
conflicts between stockholders and bondholders. D. Non-current Liabilities
14. Until this year, Cheers Inc. was organized as a 17. In a common-size income statement, labor
partnership. expense would
This year,the partners have decided to organize the generally be expressed as a percentage of which of
business the
as a corporation. As a result of this change in following?
organizational A. Sales
form, which of the following statements is most B. Total assets
correct? C. Total cash outflows
A. Cheers’ shareholders (the ex-partners) will now D. Total expenses
have 18. Horizontal analysis involves the study of:
limited liability. A. percentage changes in comparative financial
B. Cheers will now be subject to fewer regulations. statements
C. Cheers’ investors will now find it more difficult to B. percentage and/or dollar amount changes in
transfer ownership. various
D. Cheers will now find it more difficult to raise financial statement amounts from year to year
additional C. the change in key financial statement ratios over a
capital. certain time frame or horizon
15. Statement 1: A disadvantage of the corporate D. the changes in individual financial statement
form of amounts
organization is that corporate stockholders are more as a percentage of some related total
exposed 19. Jollifly had current assets of $67,200 and current
to personal liabilities in the event of bankruptcy than liabilities
are of $71,100 last year. This year, the current assets are
investors in a typical partnership. $82,600
Statement 2: The board of directors is the highest and the current liabilities are $85,100. The
ranking depreciation
body in a corporation, and the chairman of the board expense for the past year is $9,600 and the interest
is the paid is
highest ranking individual. The CEO generally works $8,700. What is the amount of the change in net
under the working
capital?
A. -$500 35% this July. The factor that is least likely to cause
B. $2300 this
C. $1,400 increase is that Baldwin
D. $16,900 A. Is beginning to experience high growth.
20. Beaver Sports Inc. reported the following in its B. Has inventory that is becoming obsolete.
income C. Is a seasonal company with traditionally higher
statement for the most recent year. activity in the summer months.
Net Sales $6,520,000 D. Used a material amount of cash from selling its
Cost of Goods Sold 3,150,000 short-term investments to purchase land.
Salaries Expense 525,000 25. Bobbytronics had $7,000,000 in profit for the
Total Operating Expenses 2,205,000 year.Its sales
Net Income 245,000 were $11,200,000.Calculate the profit margin.
What is the common-size percentage for gross A. 17.5%
margin for B. 62.5%
Beaver? C. $34 million
A. 33.8% D. $4.2 million
B. 48.3%
C. 51.7%
D. 56.4%
21. A company reported $75,000 of income for
2015,$80,000
for 2016,and $90,000 for 2017.The percentage
change in net
income from 2016 to 2017 was:
A. 9.1%
B. 11.1%
C. 12.5%
D. 16.7%
22. Given the following data:
Cash: 115,000
Current Assets: 955,000
Total Assets: 1,650,000
In a vertical analysis, cash is expressed as:
A. 830%.
B. 1435%.
C. 12%.
D. 7%.
23. The quick ratio EXCLUDES which of the following
accounts?
A. Accounts Receivable
B. Inventory
C. Cash
D. Marketable Securities
24. Baldwin Corporation’s inventory expressed as a
percentage of current assets increased from 25% last
July to