BCOR 2204 FINANCE QUIZ 1 QUESTIONS ANSWERED CORRECTLY LATEST UPDATE 2026
The objective of finance - Answers Maximize profit
Finance - Answers The science (accounting) and the art (tradeoff and risk) of valuing and managing
money
NPV Model - Answers Consists of PV, FV, PMT, N, and I
Intrinsic value - Answers The value of any security is the market value
Expected balue - Answers Future cash flows
Careers in finance - Answers Wall Street professions are all about intermediation
Balance sheet - Answers Investment and finance decisions
Goal of the firm - Answers Maximize shareholder wealth
Profit maximization may not lead to the highest possible share price (3 reasons) - Answers 1. Timing
2. Profits do not necessarily result in cash flows available
3. Profit maximization fails to account for risk
Corporate governance - Answers The rules, processes, and laws by which companies are operated,
controlled, and regulated
Principal-agent relationship - Answers An arrangement in which an agent acts on behalf of a principal
Agency problems - Answers Arise when managers placepersonal goals ahead of the goals of
shareholders
Agency costs - Answers Arise from agency problems that are borne by shareholders and represent a
loss of shareholder wealth
Management compensation plans - Answers Must ensure managers' interests are aligned with
shareholders
2 ways to ensure managers' interested are aligned with shareholders - Answers 1. Incentive plans
2. Performance plans
Incentive plans - Answers Management compensation plans that tie management compensation to
share price
Ex) granting of stock options
Performance plans - Answers Tie management compensation to measures such as EPS or growth in
EPS
Ex) performance shares and/or cash bonuses
CQ: implementation of a pro-active eithcs program results in.... - Answers Increase in share price
DuPont model - Answers ROE
Financial statement analysis - Answers To help a manager understand what is happening in a
company
ROE is determined by... - Answers ROA and FLM
The DuPont system - Answers Used to dissect the firm's financial statements and to assess its
fianancial condition
Liquidity ratios - Answers The quick (acid-test) ratio excludes inventory
*we do NOT want liabilities > assets
Turnover/activity ratios - Answers TAT
Average collection period - Answers The average amount of time needed to collect accounts
receivable
Operating profit model - Answers Measures the % of each sales dollar remaining after all costs and
expenses (other than interest, taxes, and preferred stock dividends) are deducted
Net profit margin - Answers Measures the % of each sales dollar remaining after all costs and
expenses, including interest, taxes, and preferred stock dividends deducted
Times interest earned ratio - Answers Measures ability to make contracted and required debt
payments out of operational activity
Financial leverage multiplier (FLM) - Answers Measures the firm's ability to make contractual interest
payments
Price/earnings ratio - Answers Measures the amount that investors are willing to pay for each dollar
of a firm's earnings
The objective of finance - Answers Maximize profit
Finance - Answers The science (accounting) and the art (tradeoff and risk) of valuing and managing
money
NPV Model - Answers Consists of PV, FV, PMT, N, and I
Intrinsic value - Answers The value of any security is the market value
Expected balue - Answers Future cash flows
Careers in finance - Answers Wall Street professions are all about intermediation
Balance sheet - Answers Investment and finance decisions
Goal of the firm - Answers Maximize shareholder wealth
Profit maximization may not lead to the highest possible share price (3 reasons) - Answers 1. Timing
2. Profits do not necessarily result in cash flows available
3. Profit maximization fails to account for risk
Corporate governance - Answers The rules, processes, and laws by which companies are operated,
controlled, and regulated
Principal-agent relationship - Answers An arrangement in which an agent acts on behalf of a principal
Agency problems - Answers Arise when managers placepersonal goals ahead of the goals of
shareholders
Agency costs - Answers Arise from agency problems that are borne by shareholders and represent a
loss of shareholder wealth
Management compensation plans - Answers Must ensure managers' interests are aligned with
shareholders
2 ways to ensure managers' interested are aligned with shareholders - Answers 1. Incentive plans
2. Performance plans
Incentive plans - Answers Management compensation plans that tie management compensation to
share price
Ex) granting of stock options
Performance plans - Answers Tie management compensation to measures such as EPS or growth in
EPS
Ex) performance shares and/or cash bonuses
CQ: implementation of a pro-active eithcs program results in.... - Answers Increase in share price
DuPont model - Answers ROE
Financial statement analysis - Answers To help a manager understand what is happening in a
company
ROE is determined by... - Answers ROA and FLM
The DuPont system - Answers Used to dissect the firm's financial statements and to assess its
fianancial condition
Liquidity ratios - Answers The quick (acid-test) ratio excludes inventory
*we do NOT want liabilities > assets
Turnover/activity ratios - Answers TAT
Average collection period - Answers The average amount of time needed to collect accounts
receivable
Operating profit model - Answers Measures the % of each sales dollar remaining after all costs and
expenses (other than interest, taxes, and preferred stock dividends) are deducted
Net profit margin - Answers Measures the % of each sales dollar remaining after all costs and
expenses, including interest, taxes, and preferred stock dividends deducted
Times interest earned ratio - Answers Measures ability to make contracted and required debt
payments out of operational activity
Financial leverage multiplier (FLM) - Answers Measures the firm's ability to make contractual interest
payments
Price/earnings ratio - Answers Measures the amount that investors are willing to pay for each dollar
of a firm's earnings
