Gear Inc. has a total annual cash requirement of P14,700,000 which are to be paid uniformly. Gear has the opportunity to invest the money at 24% per annum. The company spends, on the average, P40 for every cash conversion to marketable securities. What is the optimal cash convers...
20 Jun 2021Jekel Company follows and aggressive financing policy in its working capital management while Michael Corporation follows a conservative financing policy. Which one of the following statements is correct? A. Jekel has low ratio of short-term debt to total debt while Michael has ...
20 Jun 2021As a company becomes more conservative with respect to working capital policy, it would tend to have a(n). A. Increase in the ratio of current liabilities to noncurrent liabilities. B. Decrease in the operating cycle C. Increase in the operating cycle D. Increase in the ratio...
20 Jun 2021Delo Co. has a debt ratio of 0.50, a total assets turnover of 0.25, and a profit margin of 10%.The president is unhappy with the current return on equity, and he thinks it could be doubled.This could be accomplished (1) by increasing the profit margin to 14% and (2) increasing de...
20 Jun 2021Salami Company has a total assets turnover of 0.30 and a profit margin of 10 percent. The president is unhappy with the current return on assets, and he thinks it could be doubled. This could be accomplished (1) by increasing the profit margin to 15 percent, and (2) by increasing...
20 Jun 2021Glo expects sales for 2002 to be P2,000,000, resulting in a return on sales of 10%. The dividend payout rate is 60%. Beginning stockholders’ equity was P850,000 and current liabilities are projected to be P300,000 at the end of 2002. What are the total equities available if the r...
20 Jun 2021JayR has debt ratio of 0.50, a total asset turnover of 0.25, and a profit margin of 10%. The president is unhappy with the current return on equity, and he thinks it could be doubled. This could be accomplished: (1) by increasing the profit margin to 14%; and, (2) by increasing d...
20 Jun 2021Calumpang Company has a total assets turnover of 0.30 and a profit margin of 10 percent.The president is unhappy with the current return on assets, and he thinks it could be doubled.This could be accomplished (1) by increasing the profit margin to 12 percent, and (2) by increasi...
20 Jun 2021Strada Corporation was organized on January 1 with the following capital structure: 10% cumulative preferred stock, par and liquidation value of P110; authorized, issued and outstanding 2,000 shares – P200,000 Common stock, par value, P5; authorized 40,000 shares; Issued...
20 Jun 2021Recto Co. has a price earnings ratio of 7, earnings per share of P2.20, and a pay out ratio of 80%. The dividend yield is A. 80.0% C. 11.4% B. 39.3% D. 31.4%
20 Jun 2021The times interest earned ratio of Maxi Company is 4.5 times. The interest expense for the year was P20,000, and the company’s tax rate is 40%. The company’s net income is: A. P22,000 C. P54,000 B. P42,000 D. P66,000
20 Jun 2021A firm’s financial risk is a function of how it manages and maintains its debt. Which one of the following sets of ratios characterizes the firm with the greatest amount of financial risk? A. High debt-to-equity ratio, high interest coverage ratio, volatile return on equity B. ...
20 Jun 2021Baguio Companys accounts receivable were P600,000 at the beginning of the year and P800,000 at the end of the year. Cash sales for the year were P300,000. The accounts receivable turnover for the year was 5 times. Baguio Companys total sales for the year were: A. P 800,000 ...
20 Jun 2021The days sales-in-receivable ratio will be understated if the company A. Uses a natural business year for its accounting period B. Uses a calendar year for its accounting period C. Uses average receivable in the ratio calculation D. Has high sales at the end of the year
20 Jun 2021Which ratio is most helpful in appraising the liquidity of current assets? A. current ratio C. debt ratio B. acid-test ratio D. accounts receivable turnover
20 Jun 2021Sales for a three year period are: Year 1, P4.0 million, Year 2, P4.6 million, and Year 3, P5.0 million. Using year 1 as the base year, the respective percentage increase in sales in year 2 and 3 are A. 115% and 125% C. 115% and 130% B. 115% and 109% D. 87%...
20 Jun 2021Payback Company is considering the purchase of a copier machine for P42,825. The copier machine will be expected to be economically productive for 4 years. The salvage value at the end of 4 years is negligible. The machine is expected to provide 15 percent internal rate of return...
20 Jun 2021Moorman Products Company is considering a new product that will sell for P100 and have a variable cost of P60. Expected volume is 20,000 units. New equipment costing P1,500,000 and having a five-year useful life and no salvage value is needed, and will be depreciated using the st...
20 Jun 2021King of Kings Company has been renting equipment during peak season in addition to its own equipment in handling standard materials. The rental cost averages P9,000 a year. The companys Investment Committee is evaluating the possibility of buying additional equipment at a cost of...
20 Jun 2021Fordem Co. is considering an investment in a machine that would reduce annual labor costsby P30,000. The machine has an expected life of 10 years with no salvage value. The machine would be depreciated according to the straight-line method over its useful life. The company’s marg...
20 Jun 2021Gene, Inc. invested in a machine with a useful life of six years and no salvage value. The machine was depreciated using the straight-line method. It was expected to produce annual cash inflow from operations, net of income taxes, of P2,000. The present value of an ordinary annui...
20 Jun 2021A weakness of the internal rate of return method for screening investment projects is that it:(E) A. does not consider the time value of money B. implicitly assumes that the company is able to reinvest cash flows from the project at the companys discount rate C. implicitly as...
20 Jun 2021Sulu Company is considering to acquire a machine in order to reduce its direct labor costs.This machine shall last for 4 years with no salvage value. His initial analysis indicated that the time-adjusted rate of return is 15 percent. At 12 percent (cost of capital to finance the...
20 Jun 2021A project has a NPV of P15,000 when the cutoff rate is 10%. The annual cash flows are P20,505 on an investment of P50,000. The profitability index for tins project is A. 1.367 C. 2.438 B. 3.333 D. 1.300
20 Jun 2021The King of Hearts, Inc. is considering to replace its old equipment with a more efficient one.The old equipment was purchased two years ago for P720,000. Though the old equipment will be used for eight years, the company elected to depreciate it ever 6 years. If the company woul...
20 Jun 2021The advantage of the Net Present Value method over the Internal Rate of Return method for screening investment projects is that it: A. does not consider the time value of moneyB. implicitly assumes that the company is able to reinvest cash flows from the project at the company...
20 Jun 2021Why do the NPV method and the IRR method sometimes produce different rankings of mutually exclusive investment projects? A. The NPV method does not assume reinvestment of cash flows while the IRR method assumes the cash flows will be reinvested at the internal rate of return. B...
20 Jun 2021If Sol Company expects to get a one-year loan to help cover the initial financing of capital project, the analysis of the project should A. offset the loan against any investment in inventory or receivable required by the project B. show the loan as an increase in the investmen...
20 Jun 2021Salve Company is considering an investment in a new cheese-cutting machine to replace its existing cheese cutter. Information on the existing machine and the replacement machine follow: Cost of the new machine P100,000 ...
20 Jun 2021Energy Company is planning to spend P84,000 for a new machine, to be depreciated on the straight-line basis over ten years with no salvage value. The related cash flow from operations,net of income taxes, is expected to be P10,000 a year for each of the first six years and P12,00...
20 Jun 2021The relationship between payback period and IRR is that (E) A. a payback period of less than one-half the life of a project will yield an IRR lower than the target rate. B. the payback period is the present value factor for the IRR. C. a project whose payback period does not m...
20 Jun 2021Which of the following is(are) closely relevant to Payback Method? (M) A. Intermediate cash flows are reinvested at zero percent. B. The use of cash inflows instead of profit. C. Avoidance of too much risk of uncertainty. D. Explicit considerations of timing of cash flows. ...
18 Jun 2021A company is considering replacing a machine with one that will save P40,000 per year in cash operating costs and have P10,000 more depreciation expense per year than the existing machine. The tax rate is 40%. Buying the new machine will increase annual net cash flows of the comp...
18 Jun 2021The Hills Company, a calendar year company, purchased a new machine for P280,000 on January 1. Depreciation for tax purposes will be P35,000 annually for eight years. The accounting (book value) rate of return (ARR.) is expected to be 15% on the initial increase in required inves...
18 Jun 2021Which of the following is NOT relevant in calculating annual net cash flows for an investment? (M) A. Interest payments on funds borrowed to finance the project. B. Depreciation on fixed assets purchased for the project. C. The income tax rate. D. Lost contribution margin if ...
18 Jun 2021Gray Company is considering replacing a machine with a book value of P200,000, a remaining useful-life of 5 years, and annual straight-line depreciation of P40,000. The existing machine has a current market value of P200,000. The replacement machine would cost P350,000, have a 5...
18 Jun 2021The Mutya ng Pasig Company, a calendar company, purchased a new machine for P280,000 on January 1. Depreciation for tax purposes will be P35,000 annually for eight years. The accounting (book value) rate of return (ARR) is expected to be 20% on the initial increase in required in...
18 Jun 2021Maxwell Company has an opportunity to acquire a new machine to replace one of its present machines. The new machines would cost P90,000, have a five-year life, and no estimated salvage value. Variable operating costs would be P100,000 per year. The present machine has a book valu...
18 Jun 2021The Zambales Company is planning to purchase a new machine which it will depreciate, for book purposes, on a straight-line basis over a ten-year period with no salvage value and a full year’s depreciation taken in the year of acquisition. The new machine is expected to produce ca...
18 Jun 2021Banahaw Company plans to discontinue a department that has a contribution margin of P240,000 and P480,000 in fixed costs. Of the fixed costs, P210,000 can be avoided. The effect of this discontinuance on Banahaw’s overall net operating income would be a(an) A. decrease of P30,00...
18 Jun 2021A business is operating at 90% of capacity and is currently purchasing a part used in its manufacturing operations for P15 per unit. The unit cost for the business to make the part is P20, including fixed costs, and P12, not including fixed costs. If 30,000 units of the part are ...
18 Jun 2021Savage Industries is a multi-product company that currently manufactures 30,000 units of Part QS42 each month for use in production. The facilities now being used to produce Part QS42 have fixed monthly cost of P150,000 and a capacity to produce 84,000 units per month. If Savage ...
18 Jun 2021Elly Industries is a multi-product company that currently manufacture 30,000 units of Part MR24 each month for use in production. The facilities now being used to produce Part MR24 have a fixed monthly costs of P150,000 and a capacity to produce 84,000 units per month. If Elly we...
18 Jun 2021For the past 12 years, the Blue Company has produced the small electric motors that fit into its main product line of dental drilling equipment. As material costs have steadily increased, the controller of the Blue Company is reviewing the decision to continue to make the small m...
18 Jun 2021Dary Co, Produces a single product. It’s normal selling price is P28 per unit. The variable costs are P18 per unit. Fixed costs are P20,000 for a normal production run of 5,000 units per month. Dary received a request for a special order that would not interfere with normal sales...
18 Jun 2021Climate Co. has considerable excess manufacturing capacity. A special job order’s cost sheet includes the following applied manufacturing overhead costs: Fixed costs P21,000 Variable costs . 33,000 The fixed...
18 Jun 2021Pueblo Company sells a product for P60. Variable cost is P32. Pueblo could accept a special order for 1,000 units at P46. If Pueblo accepted the order, how many units could it lose at the regular price before the decision became unwise? (M) A. 1,000 C. 2...
18 Jun 2021The cost to manufacture an unfinished unit is P40 (P30 variable and P10 fixed). The selling price per unit is P50. The company has unused production capacity and has determined that units could be finished and sold for P65 with an increase in variable costs of 40%. What is the a...
18 Jun 2021Jones Co. can further process Product B to produce Product C. Product B is currently selling for P30 per pound and costs P28 per pound to produce. Product C would sell for P60 per pound and would require an additional cost of P24 per pound to produce. What is the differential cos...
18 Jun 2021Indicate which of the following costs would be avoided if a segment is eliminated. 1. variable manufacturing costs 2. direct fixed costs 3. common fixed costs 4. variable selling costs 5. direct listed selling costs 6. common fixed setting costs A. 2, 3, 5, 5 ...
18 Jun 2021