Question 1

What type of business is the easiest to set up?

Accepted Answer

A) sole proprietorship 
B) partnership 
C) corporation 
D) There is no difference in the ease of establishment. 
A) sole proprietorship 
B) partnership 
C) corporation 
D) There is no difference in the ease of establishment.

Question 2

Generally with bond ratings,the lower the rating,the ________ the interest rate an investor will receive and the ________ the risk that the issuer of the bond will default.

Accepted Answer

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

Question 3

If a corporation retains all its profits and distributes none of the profit to owners,how can owners benefit?

Accepted Answer

A) If the retained earnings are expected to create future profits, the market price of the firm's stock will increase and create a capital gain for stockholders if the stock is sold. 
B) Shares of stock can be converted into bonds so stockholders will be able to earn coupon payments. 
C) Owners will only benefit if some profits are paid out in the form of dividends. 
D) Owners will benefit by changing the board of directors. 
A) If the retained earnings are expected to create future profits, the market price of the firm's stock will increase and create a capital gain for stockholders if the stock is sold. 
B) Shares of stock can be converted into bonds so stockholders will be able to earn coupon payments. 
C) Owners will only benefit if some profits are paid out in the form of dividends. 
D) Owners will benefit by changing the board of directors.

Question 4

Which of the following would explain why economic profit might be less than accounting profit?

Accepted Answer

A) A firm's net income is less than its accounting profit. 
B) A firm has only explicit costs. 
C) A firm's net income is greater than its accounting profit. 
D) A firm has implicit costs as well as explicit costs. 
A) A firm's net income is less than its accounting profit. 
B) A firm has only explicit costs. 
C) A firm's net income is greater than its accounting profit. 
D) A firm has implicit costs as well as explicit costs.

Question 5

Assume you set up a sole proprietorship and your lawyer tells you that as the owner,you could stand to lose your personal wealth if the business goes bankrupt.This means a sole proprietorship

Accepted Answer

A) faces limited liability. 
B) faces unlimited liability. 
C) has little chance of succeeding. 
D) is not a good type of business to set up. 
A) faces limited liability. 
B) faces unlimited liability. 
C) has little chance of succeeding. 
D) is not a good type of business to set up.

Question 6

What is the primary difference between a sole proprietorship and a partnership?

Accepted Answer

A) Proprietorships have unlimited liability while partnerships have limited liability. 
B) Partnerships can issue stocks and bonds while proprietorships cannot. 
C) Partnerships have more owners than do proprietorships. 
D) There is no real difference between the two types of firms. 
A) Proprietorships have unlimited liability while partnerships have limited liability. 
B) Partnerships can issue stocks and bonds while proprietorships cannot. 
C) Partnerships have more owners than do proprietorships. 
D) There is no real difference between the two types of firms.

Question 7

In 2002,the Enron corporation was accused of falsifying information regarding liabilities on Enron's balance sheets,thereby

Accepted Answer

A) increasing Enron's assets on the balance sheet. 
B) reducing Enron's profit on the balance sheet. 
C) increasing Enron's net worth on the balance sheet. 
D) reducing Enron's net income on the income statement. 
A) increasing Enron's assets on the balance sheet. 
B) reducing Enron's profit on the balance sheet. 
C) increasing Enron's net worth on the balance sheet. 
D) reducing Enron's net income on the income statement.

Question 8

A firm in a market economy must do all of the following to succeed except

Accepted Answer

A) produce the goods and services that consumers want at a lower cost than consumers themselves can produce. 
B) organize the factors of production into a functioning, efficient unit. 
C) have access to sufficient funds. 
D) be organized as a corporation. 
A) produce the goods and services that consumers want at a lower cost than consumers themselves can produce. 
B) organize the factors of production into a functioning, efficient unit. 
C) have access to sufficient funds. 
D) be organized as a corporation.

Question 9

What was the source of the problems encountered by many financial firms during the late 2000s?

Accepted Answer

The primary source of the problems was t

Question 10

If the personal assets of the owners cannot be claimed if the business is bankrupt,the owners are said to have

Accepted Answer

A) unlimited liability. 
B) a proprietorship type of business. 
C) limited liability. 
D) a partnership type of business. 
A) unlimited liability. 
B) a proprietorship type of business. 
C) limited liability. 
D) a partnership type of business.

Question 11

The difference between a firm's assets and liabilities is its

Accepted Answer

A) accounting profit. 
B) economic profit. 
C) net worth. 
D) implicit costs. 
A) accounting profit. 
B) economic profit. 
C) net worth. 
D) implicit costs.

Question 12

What happens in the primary market?

Accepted Answer

A) primary inputs like electricity are sold 
B) a corporate financial manager will resell previously issued shares of stock 
C) newly issued claims are sold by the borrowing firm to the initial buyer 
D) already issued claims are sold from one investor to another 
A) primary inputs like electricity are sold 
B) a corporate financial manager will resell previously issued shares of stock 
C) newly issued claims are sold by the borrowing firm to the initial buyer 
D) already issued claims are sold from one investor to another

Question 13

Steve Ballmer is the Chief Executive Officer of Microsoft as well as a member of Microsoft's board of directors.Ballmer is therefore classified as an

Accepted Answer

A) inside director. 
B) outside director. 
C) independent director. 
D) unbiased director. 
A) inside director. 
B) outside director. 
C) independent director. 
D) unbiased director.

Question 14

What happens in the secondary market?

Accepted Answer

A) secondary inputs like electricity are sold 
B) a corporate financial manager will raise funds for expansion of the firm 
C) newly issued claims are sold by the borrowing firm to the initial buyer 
D) already issued claims are sold from one investor to another 
A) secondary inputs like electricity are sold 
B) a corporate financial manager will raise funds for expansion of the firm 
C) newly issued claims are sold by the borrowing firm to the initial buyer 
D) already issued claims are sold from one investor to another

Question 15

In October 2013,General Motors (GM)posted a price-earnings ratio of 10.13.If the price of the stock at that time was $36 per share,which of the following must have been true?

Accepted Answer

A) GM's revenues that month were $364.68 million. 
B) GM's earnings per share was $3.55. 
C) GM's coupon payment was $36 per year. 
D) GM's dividend yield for the year was 36.5%. 
A) GM's revenues that month were $364.68 million. 
B) GM's earnings per share was $3.55. 
C) GM's coupon payment was $36 per year. 
D) GM's dividend yield for the year was 36.5%.

Question 16

A firm's net worth is calculated as

Accepted Answer

A) the difference between a firm's revenues and explicit costs. 
B) the difference between a firm's revenues and implicit costs. 
C) the difference between a firm's assets and liabilities. 
D) the difference between a firm's liabilities and outstanding equities. 
A) the difference between a firm's revenues and explicit costs. 
B) the difference between a firm's revenues and implicit costs. 
C) the difference between a firm's assets and liabilities. 
D) the difference between a firm's liabilities and outstanding equities.

Question 17

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 disadvantage to Jeremy of setting up his business as a sole proprietorship?

Accepted Answer

A) As a sole proprietor, Jeremy would be taxed twice. 
B) As a sole proprietor, Jeremy would not have control of the business. 
C) As a sole proprietor, Jeremy would face unlimited liability. 
D) As a sole proprietor, Jeremy would be subject to significant rules and regulations. 
A) As a sole proprietor, Jeremy would be taxed twice. 
B) As a sole proprietor, Jeremy would not have control of the business. 
C) As a sole proprietor, Jeremy would face unlimited liability. 
D) As a sole proprietor, Jeremy would be subject to significant rules and regulations.

Question 18

If you own a bond with a 3 percent coupon rate and new bonds are paying 8 percent,what will happen to your bond's market price?

Accepted Answer

The answer of If you own a bond with a...

Question 19

Which of the following is not an advantage of starting a new business as a corporation?

Accepted Answer

A) separation of ownership and business liability 
B) enhanced ability to raise funds 
C) ability to share risks 
D) possibility of double taxation 
A) separation of ownership and business liability 
B) enhanced ability to raise funds 
C) ability to share risks 
D) possibility of double taxation

Question 20

What do economists call the situation where a hired manager does not have the same interests as the owners of the business?

Accepted Answer

A) conquest and control 
B) a financial problem 
C) a principal-agent problem 
D) a financial intermediary problem 
A) conquest and control 
B) a financial problem 
C) a principal-agent problem 
D) a financial intermediary problem

What type of business is the easiest to set up?

Generally with bond ratings,the lower the rating,the the interest rate an investor will receive and the the risk that the issuer of the bond will default.

If a corporation retains all its profits and distributes none of the profit to owners,how can owners benefit?

Which of the following would explain why economic profit might be less than accounting profit?

Assume you set up a sole proprietorship and your lawyer tells you that as the owner,you could stand to lose your personal wealth if the business goes bankrupt.This means a sole proprietorship

What is the primary difference between a sole proprietorship and a partnership?

In 2002,the Enron corporation was accused of falsifying information regarding liabilities on Enron's balance sheets,thereby

A firm in a market economy must do all of the following to succeed except

What was the source of the problems encountered by many financial firms during the late 2000s?

If the personal assets of the owners cannot be claimed if the business is bankrupt,the owners are said to have

The difference between a firm's assets and liabilities is its

What happens in the primary market?

Steve Ballmer is the Chief Executive Officer of Microsoft as well as a member of Microsoft's board of directors.Ballmer is therefore classified as an

What happens in the secondary market?

In October 2013,General Motors (GM)posted a price-earnings ratio of 10.13.If the price of the stock at that time was $36 per share,which of the following must have been true?

A firm's net worth is calculated as

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 disadvantage to Jeremy of setting up his business as a sole proprietorship?

If you own a bond with a 3 percent coupon rate and new bonds are paying 8 percent,what will happen to your bond's market price?

Which of the following is not an advantage of starting a new business as a corporation?

What do economists call the situation where a hired manager does not have the same interests as the owners of the business?

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

What type of business is the easiest to set up?

Generally with bond ratings,the lower the rating,the ________ the interest rate an investor will receive and the ________ the risk that the issuer of the bond will default.

If a corporation retains all its profits and distributes none of the profit to owners,how can owners benefit?

Which of the following would explain why economic profit might be less than accounting profit?

Assume you set up a sole proprietorship and your lawyer tells you that as the owner,you could stand to lose your personal wealth if the business goes bankrupt.This means a sole proprietorship

What is the primary difference between a sole proprietorship and a partnership?

In 2002,the Enron corporation was accused of falsifying information regarding liabilities on Enron's balance sheets,thereby

A firm in a market economy must do all of the following to succeed except

What was the source of the problems encountered by many financial firms during the late 2000s?

If the personal assets of the owners cannot be claimed if the business is bankrupt,the owners are said to have

The difference between a firm's assets and liabilities is its

What happens in the primary market?

Steve Ballmer is the Chief Executive Officer of Microsoft as well as a member of Microsoft's board of directors.Ballmer is therefore classified as an

What happens in the secondary market?

In October 2013,General Motors (GM)posted a price-earnings ratio of 10.13.If the price of the stock at that time was $36 per share,which of the following must have been true?

A firm's net worth is calculated as

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 disadvantage to Jeremy of setting up his business as a sole proprietorship?

If you own a bond with a 3 percent coupon rate and new bonds are paying 8 percent,what will happen to your bond's market price?

Which of the following is not an advantage of starting a new business as a corporation?

What do economists call the situation where a hired manager does not have the same interests as the owners of the business?

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

Generally with bond ratings,the lower the rating,the the interest rate an investor will receive and the the risk that the issuer of the bond will default.