1|Page
SDSU BA 323 FINANCE EXAM 1 NEWEST 2026/2027
ACTUAL VERIFIED EXAM COMPLETE QUESTIONS
AND CORRECT DETAILED ANSWERS (VERIFIED
ANSWERS) |A+ GRADED||NEWEST EXAM!!!
•What are some of the limitations of financial ratios?
•What are prominent examples that show these
limitations? - ANSWER-Comparison with industry
averages is difficult for a conglomerate firm that operates
in many different divisions.
Different operating and accounting practices can distort
comparisons.
Sometimes it is hard to tell if a ratio is "good" or "bad."
Difficult to tell whether a company is, on balance, in a
strong or weak position.
•Know how a change in market conditions/corporate policy
will impact ratios
•If a company's business weakens (revenues decline,
what will happen to ROA or ROE?)
•If the company decides to increase its dividend, what will
happen to debt-to-capital ratio?
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•Think through the numerator and denominator -
ANSWER-"Average" performance is not necessarily good,
perhaps the firm should aim higher. § Seasonal factors
can distort ratios. § "Window dressing" techniques can
make statements and ratios look better than they actually
are. § Inflation has distorted many firms' balance sheets,
so analyses must be interpreted with judgment.
•What are the four factors that affect the level of interest
rates? - ANSWER-Production opportunities, time
preferences for consumption, risk, and expected inflation
What is the main goal of the corporation? - ANSWER-
Maximize shareholder value.
Who ultimately owns the corporation? What is the
relationship between shareholders, the board of directors,
and management? - ANSWER-Shareholders ultimately
own the corporation. Shareholders vote in the board of
directors.
What are the 3 most important management positions? -
ANSWER-Chief Executive Officer, Chief Financial Officer,
and Chief Operations Officer
, 3|Page
What is the Sarbanes-Oxley legislation? Why was it
passed? - ANSWER-The Sarbanes-Oxley legislation holds
CEOs and CFOs accountable for their financial reports.
Can be jailed if fraud occurs.
What is the major disadvantages and advantages of
corporations compared to other forms of business
organizations? - ANSWER-Advantages:
Unlimited Life
Easy Transfer of ownership
Limited liability
Ease of raising capital
Disadvantages:
Double taxation
Cost of setup and report filing
What is a stock's intrinsic value? In an efficient market, will
a stock's price equal the stock's intrinsic value? -
ANSWER-A stock's intrinsic value is its "true" value in
equilibrium. In theory, if the market is efficient the stock's
price should equal its intrinsic value.
SDSU BA 323 FINANCE EXAM 1 NEWEST 2026/2027
ACTUAL VERIFIED EXAM COMPLETE QUESTIONS
AND CORRECT DETAILED ANSWERS (VERIFIED
ANSWERS) |A+ GRADED||NEWEST EXAM!!!
•What are some of the limitations of financial ratios?
•What are prominent examples that show these
limitations? - ANSWER-Comparison with industry
averages is difficult for a conglomerate firm that operates
in many different divisions.
Different operating and accounting practices can distort
comparisons.
Sometimes it is hard to tell if a ratio is "good" or "bad."
Difficult to tell whether a company is, on balance, in a
strong or weak position.
•Know how a change in market conditions/corporate policy
will impact ratios
•If a company's business weakens (revenues decline,
what will happen to ROA or ROE?)
•If the company decides to increase its dividend, what will
happen to debt-to-capital ratio?
,2|Page
•Think through the numerator and denominator -
ANSWER-"Average" performance is not necessarily good,
perhaps the firm should aim higher. § Seasonal factors
can distort ratios. § "Window dressing" techniques can
make statements and ratios look better than they actually
are. § Inflation has distorted many firms' balance sheets,
so analyses must be interpreted with judgment.
•What are the four factors that affect the level of interest
rates? - ANSWER-Production opportunities, time
preferences for consumption, risk, and expected inflation
What is the main goal of the corporation? - ANSWER-
Maximize shareholder value.
Who ultimately owns the corporation? What is the
relationship between shareholders, the board of directors,
and management? - ANSWER-Shareholders ultimately
own the corporation. Shareholders vote in the board of
directors.
What are the 3 most important management positions? -
ANSWER-Chief Executive Officer, Chief Financial Officer,
and Chief Operations Officer
, 3|Page
What is the Sarbanes-Oxley legislation? Why was it
passed? - ANSWER-The Sarbanes-Oxley legislation holds
CEOs and CFOs accountable for their financial reports.
Can be jailed if fraud occurs.
What is the major disadvantages and advantages of
corporations compared to other forms of business
organizations? - ANSWER-Advantages:
Unlimited Life
Easy Transfer of ownership
Limited liability
Ease of raising capital
Disadvantages:
Double taxation
Cost of setup and report filing
What is a stock's intrinsic value? In an efficient market, will
a stock's price equal the stock's intrinsic value? -
ANSWER-A stock's intrinsic value is its "true" value in
equilibrium. In theory, if the market is efficient the stock's
price should equal its intrinsic value.
