Question 1

The Sarbanes-Oxley Act of 2002 requires that each member of the board of directors personally certify the accuracy of financial reports.

Accepted Answer

A) True 
 B)False

Question 2

The volatility of a stock's market price is indicated by

Accepted Answer

A) the highest stock price and the lowest stock price over the previous year. 
B) the price of newly issued shares compared to the price of previously issued shares. 
C) the difference between the stock's selling price and its asking price. 
D) the stock's price-earnings ratio. 
A) the highest stock price and the lowest stock price over the previous year. 
B) the price of newly issued shares compared to the price of previously issued shares. 
C) the difference between the stock's selling price and its asking price. 
D) the stock's price-earnings ratio.

Question 3

In the United States,corporate profits are taxed

Accepted Answer

A) only at the corporate level. 
B) only when investors receive dividends. 
C) at both the corporate level and when investors receive dividends. 
D) neither at the corporate level nor when investors receive dividends. 
A) only at the corporate level. 
B) only when investors receive dividends. 
C) at both the corporate level and when investors receive dividends. 
D) neither at the corporate level nor when investors receive dividends.

Question 4

What is the central role of financial intermediaries in a market economy?

Accepted Answer

A) the creation and printing of money 
B) keeping the price level stable 
C) bringing together savers and borrowers 
D) providing safe deposit boxes for people and businesses 
A) the creation and printing of money 
B) keeping the price level stable 
C) bringing together savers and borrowers 
D) providing safe deposit boxes for people and businesses

Question 5

________ is called an implicit cost,while ________ is called an explicit cost.

Accepted Answer

A) An accounting cost; an economic cost 
B) A nonmonetary opportunity cost; a cost that involves spending money 
C) A production cost; a sales cost 
D) An actual cost; a hypothetical cost 
A) An accounting cost; an economic cost 
B) A nonmonetary opportunity cost; a cost that involves spending money 
C) A production cost; a sales cost 
D) An actual cost; a hypothetical cost

Question 6

Mortgages issued to borrowers whose credit histories include failures to make payments on bills are known as ________ mortgages.

Accepted Answer

A) catastrophic 
B) variable rate 
C) subprime 
D) Alt-A 
A) catastrophic 
B) variable rate 
C) subprime 
D) Alt-A

Question 7

What is a firm's balance sheet?

Accepted Answer

A firm's balance sheet is a fi

Question 8

In a corporation,what are "inside directors" and "outside directors"?

Accepted Answer

Inside directors are members of manageme

Question 9

Economists refer to the conflict between the interests of shareholders and the interests of top management as

Accepted Answer

A) a stock-equity problem. 
B) a liability problem. 
C) a principal-agent problem. 
D) a financial intermediary problem. 
A) a stock-equity problem. 
B) a liability problem. 
C) a principal-agent problem. 
D) a financial intermediary problem.

Question 10

What are liabilities?

Accepted Answer

A) anything of value owned by a person or a business 
B) anything a person or a business owes to entities outside the business 
C) the total cost of labor for a firm 
D) only those unpaid expenses for which a business or person is making interest payments 
A) anything of value owned by a person or a business 
B) anything a person or a business owes to entities outside the business 
C) the total cost of labor for a firm 
D) only those unpaid expenses for which a business or person is making interest payments

Question 11

Traditionally,Wall Street investment banks had been organized as partnerships,but by 2000 they had converted to being publicly traded corporations.As partnerships,the principle-agent problem is ________,but as publicly traded corporations,the principal-agent problem is often ________.

Accepted Answer

A) increased; more severe 
B) increased; less severe 
C) reduced; more severe 
D) reduced; less severe 
A) increased; more severe 
B) increased; less severe 
C) reduced; more severe 
D) reduced; less severe

Question 12

How do the owners of a partnership relate to the business?

Accepted Answer

A) The owners and the business are not separate legal entities. 
B) The owners and the business are separate legal entities. 
C) The assets of the owners are considered separate from the asset of the business. 
D) None of these describe the legal relationship of the owners to the business. 
A) The owners and the business are not separate legal entities. 
B) The owners and the business are separate legal entities. 
C) The assets of the owners are considered separate from the asset of the business. 
D) None of these describe the legal relationship of the owners to the business.

Question 13

Jake sells Star Wars memorabilia on eBay.His annual revenue is $42,000 per year,the explicit costs of his business are $10,000,and the opportunity costs of his business are $18,000 per year.What is his economic profit?

Accepted Answer

A) $14,000 
B) $24,000 
C) $32,000 
D) $34,000 
A) $14,000 
B) $24,000 
C) $32,000 
D) $34,000

Question 14

Jeremy is thinking of starting up a small business selling NASCAR memorabilia.He is considering setting up his business as a sole proprietorship.What is one advantage to Jeremy of setting up his business as a sole proprietorship?

Accepted Answer

A) As a sole proprietor, Jeremy would face limited liability. 
B) As a sole proprietor, Jeremy would have the ability to share risk with shareholders. 
C) As a sole proprietor, Jeremy would have both ownership and control over the business. 
D) All of the above would be advantages of setting up his business as a sole proprietorship. 
A) As a sole proprietor, Jeremy would face limited liability. 
B) As a sole proprietor, Jeremy would have the ability to share risk with shareholders. 
C) As a sole proprietor, Jeremy would have both ownership and control over the business. 
D) All of the above would be advantages of setting up his business as a sole proprietorship.

Question 15

If a corporate bond with a face value of $5,000 pays yearly coupon payments of $100,what is the coupon rate?

Accepted Answer

A) 2% 
B) 5% 
C) 10% 
D) 20% 
A) 2% 
B) 5% 
C) 10% 
D) 20%

Question 16

How is economic profit found?

Accepted Answer

Economic profits equ

Question 17

On average,jobs at small firms pay ________ wages than jobs at large firms and are ________ likely to offer fringe benefits such as health insurance and retirement accounts.

Accepted Answer

A) higher; more 
B) lower; more 
C) higher; less 
D) lower; less 
A) higher; more 
B) lower; more 
C) higher; less 
D) lower; less

Question 18

The financial statements of firms generally are audited by

Accepted Answer

A) employees of the firm being audited. 
B) employees of private accounting firms. 
C) employees of the federal government. 
D) the board of directors of the corporation being audited. 
A) employees of the firm being audited. 
B) employees of private accounting firms. 
C) employees of the federal government. 
D) the board of directors of the corporation being audited.

Question 19

How is a stock's price-earnings ratio found?

Accepted Answer

A) by dividing the dividend by the closing price of the stock 
B) by dividing the dividend by the firm's earnings per share 
C) by dividing current market price of the stock by the firm's earnings per share 
D) by subtracting the firm's earnings per share from the closing price of the stock 
A) by dividing the dividend by the closing price of the stock 
B) by dividing the dividend by the firm's earnings per share 
C) by dividing current market price of the stock by the firm's earnings per share 
D) by subtracting the firm's earnings per share from the closing price of the stock

Question 20

What is corporate governance?

Accepted Answer

Corporate governance refers to

The Sarbanes-Oxley Act of 2002 requires that each member of the board of directors personally certify the accuracy of financial reports.

The volatility of a stock's market price is indicated by

In the United States,corporate profits are taxed

What is the central role of financial intermediaries in a market economy?

is called an implicit cost,while is called an explicit cost.

Mortgages issued to borrowers whose credit histories include failures to make payments on bills are known as ________ mortgages.

What is a firm's balance sheet?

In a corporation,what are "inside directors" and "outside directors"?

Economists refer to the conflict between the interests of shareholders and the interests of top management as

What are liabilities?

Traditionally,Wall Street investment banks had been organized as partnerships,but by 2000 they had converted to being publicly traded corporations.As partnerships,the principle-agent problem is ,but as publicly traded corporations,the principal-agent problem is often .

How do the owners of a partnership relate to the business?

Jake sells Star Wars memorabilia on eBay.His annual revenue is $42,000 per year,the explicit costs of his business are $10,000,and the opportunity costs of his business are $18,000 per year.What is his economic profit?

Jeremy is thinking of starting up a small business selling NASCAR memorabilia.He is considering setting up his business as a sole proprietorship.What is one advantage to Jeremy of setting up his business as a sole proprietorship?

If a corporate bond with a face value of $5,000 pays yearly coupon payments of $100,what is the coupon rate?

How is economic profit found?

On average,jobs at small firms pay wages than jobs at large firms and are likely to offer fringe benefits such as health insurance and retirement accounts.

The financial statements of firms generally are audited by

How is a stock's price-earnings ratio found?

What is corporate governance?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters

Exam 6: Firms, the Stock Market, and Corporate Governance

The Sarbanes-Oxley Act of 2002 requires that each member of the board of directors personally certify the accuracy of financial reports.

The volatility of a stock's market price is indicated by

In the United States,corporate profits are taxed

What is the central role of financial intermediaries in a market economy?

________ is called an implicit cost,while ________ is called an explicit cost.

Mortgages issued to borrowers whose credit histories include failures to make payments on bills are known as ________ mortgages.

What is a firm's balance sheet?

In a corporation,what are "inside directors" and "outside directors"?

Economists refer to the conflict between the interests of shareholders and the interests of top management as

What are liabilities?

Traditionally,Wall Street investment banks had been organized as partnerships,but by 2000 they had converted to being publicly traded corporations.As partnerships,the principle-agent problem is ________,but as publicly traded corporations,the principal-agent problem is often ________.

How do the owners of a partnership relate to the business?

Jake sells Star Wars memorabilia on eBay.His annual revenue is $42,000 per year,the explicit costs of his business are $10,000,and the opportunity costs of his business are $18,000 per year.What is his economic profit?

Jeremy is thinking of starting up a small business selling NASCAR memorabilia.He is considering setting up his business as a sole proprietorship.What is one advantage to Jeremy of setting up his business as a sole proprietorship?

If a corporate bond with a face value of $5,000 pays yearly coupon payments of $100,what is the coupon rate?

How is economic profit found?

On average,jobs at small firms pay ________ wages than jobs at large firms and are ________ likely to offer fringe benefits such as health insurance and retirement accounts.

The financial statements of firms generally are audited by

How is a stock's price-earnings ratio found?

What is corporate governance?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters

is called an implicit cost,while is called an explicit cost.

Traditionally,Wall Street investment banks had been organized as partnerships,but by 2000 they had converted to being publicly traded corporations.As partnerships,the principle-agent problem is ,but as publicly traded corporations,the principal-agent problem is often .

On average,jobs at small firms pay wages than jobs at large firms and are likely to offer fringe benefits such as health insurance and retirement accounts.