Question 1

Define a corporation.

Accepted Answer

A corporation is a legal form

Question 2

Dividends are

Accepted Answer

A) financial securities which represent ownership in a corporation. 
B) the yearly payments associated with bonds. 
C) the interest rate paid on shares of stock. 
D) payments by a corporation to its shareholders. 
A) financial securities which represent ownership in a corporation. 
B) the yearly payments associated with bonds. 
C) the interest rate paid on shares of stock. 
D) payments by a corporation to its shareholders.

Question 3

Two of the firms involved in the accounting scandals of the early 2000s were

Accepted Answer

A) Arthur Anderson and NBC. 
B) Western Digital and General Motors. 
C) WorldCom and Enron. 
D) DuPont and Lehman Brothers. 
A) Arthur Anderson and NBC. 
B) Western Digital and General Motors. 
C) WorldCom and Enron. 
D) DuPont and Lehman Brothers.

Question 4

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

Accepted Answer

A) By setting up the business as a corporation, Jeremy would not face double taxation. 
B) By setting up the business as a corporation, Jeremy would have the ability to share risk with shareholders. 
C) By setting up the business as a corporation, 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 corporation. 
A) By setting up the business as a corporation, Jeremy would not face double taxation. 
B) By setting up the business as a corporation, Jeremy would have the ability to share risk with shareholders. 
C) By setting up the business as a corporation, 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 corporation.

Question 5

What is the difference between retained earnings and dividends?

Accepted Answer

Retained earnings are profits

Question 6

All of the following would be considered explicit costs of operating a business except

Accepted Answer

A) rent paid to a landlord. 
B) bonuses paid to employees. 
C) a normal rate of return for investors. 
D) corporate income taxes. 
A) rent paid to a landlord. 
B) bonuses paid to employees. 
C) a normal rate of return for investors. 
D) corporate income taxes.

Question 7

Which of the following statements is false?

Accepted Answer

A) Corporations can issue stocks and bonds, while proprietorships cannot. 
B) Corporations have one owner, while proprietorships have many owners. 
C) Corporations face more taxes than do proprietorships. 
D) Proprietorships have unlimited liability while corporations have limited liability. 
A) Corporations can issue stocks and bonds, while proprietorships cannot. 
B) Corporations have one owner, while proprietorships have many owners. 
C) Corporations face more taxes than do proprietorships. 
D) Proprietorships have unlimited liability while corporations have limited liability.

Question 8

In many corporations,there is "separation of ownership from control." What does this mean?

Accepted Answer

A) The shareholders control the corporation, although the board of directors owns the corporation. 
B) The managers of the corporation run the corporation, although the shareholders own the corporation. 
C) The board of directors controls corporate operations, although the managers of the corporation own the corporation. 
D) Top corporate managers only make decisions that have been approved unanimously by shareholders. 
A) The shareholders control the corporation, although the board of directors owns the corporation. 
B) The managers of the corporation run the corporation, although the shareholders own the corporation. 
C) The board of directors controls corporate operations, although the managers of the corporation own the corporation. 
D) Top corporate managers only make decisions that have been approved unanimously by shareholders.

Question 9

Who controls a sole proprietorship?

Accepted Answer

A) stockholders 
B) bondholders 
C) the owner 
D) all of these 
A) stockholders 
B) bondholders 
C) the owner 
D) all of these

Question 10

Who owns a corporation?

Accepted Answer

A) the board of directors 
B) the stockholders 
C) the employees 
D) the CEO 
A) the board of directors 
B) the stockholders 
C) the employees 
D) the CEO

Question 11

A bond is a financial security that represents

Accepted Answer

A) ownership in a corporation. 
B) the portion of profits paid to shareholders. 
C) the interest rate paid on a share of stock. 
D) a promise to repay a fixed amount of funds. 
A) ownership in a corporation. 
B) the portion of profits paid to shareholders. 
C) the interest rate paid on a share of stock. 
D) a promise to repay a fixed amount of funds.

Question 12

What is a secondary market?

Accepted Answer

A) a market where factory seconds and damaged merchandise are sold 
B) a market where newly issued bonds are sold to initial buyers by the borrowing firm 
C) a market where a newly issued stocks are sold to initial buyers by the borrowing firm 
D) a market where you can sell any stocks you own as a private investor 
A) a market where factory seconds and damaged merchandise are sold 
B) a market where newly issued bonds are sold to initial buyers by the borrowing firm 
C) a market where a newly issued stocks are sold to initial buyers by the borrowing firm 
D) a market where you can sell any stocks you own as a private investor

Question 13

During 2007,many "subprime" and "Alt-A" borrowers began to default on their mortgages.Describe "subprime" and "Alt-A" borrowers.

Accepted Answer

"Subprime" borrowers are borrowers whose

Question 14

When the coupon rate on newly issued bonds increases relative to older,outstanding bonds,what happens?

Accepted Answer

A) The market price of the older bond falls in the secondary market. 
B) The market price of the older bond rises in the secondary market. 
C) Older bonds can still be sold at their face value. 
D) Older bonds will sell for less than their face value. 
A) The market price of the older bond falls in the secondary market. 
B) The market price of the older bond rises in the secondary market. 
C) Older bonds can still be sold at their face value. 
D) Older bonds will sell for less than their face value.

Question 15

The person hired by a corporation's board of directors to run the day-to-day operations of the corporation is known as the

Accepted Answer

A) chairman of the board. 
B) chief executive officer. 
C) owner-manager. 
D) corporate governor. 
A) chairman of the board. 
B) chief executive officer. 
C) owner-manager. 
D) corporate governor.

Question 16

What are the advantages of setting up a proprietorship or partnership as opposed to a corporation?

Accepted Answer

Ease of fo

Question 17

Which of the following is a characteristic of a bond?

Accepted Answer

A) A bond represents a promise to repay a fixed amount of funds. 
B) The face value or principal plus interest is repaid at a specified period of time. 
C) The length of coupon payments is fixed by the stated maturity period. 
D) All of these are characteristic of bonds. 
A) A bond represents a promise to repay a fixed amount of funds. 
B) The face value or principal plus interest is repaid at a specified period of time. 
C) The length of coupon payments is fixed by the stated maturity period. 
D) All of these are characteristic of bonds.

Question 18

If a corporate bond with face value of $1,000 has an interest rate of eight percent paid once a year for a term of 30 years,what is the size of the coupon payment?

Accepted Answer

A) $1,000 
B) $300 
C) $80 
D) $8 
A) $1,000 
B) $300 
C) $80 
D) $8

Question 19

Dividing the current market price of a stock by the firm's earnings per share gives the firm's

Accepted Answer

A) price-earnings ratio. 
B) year-to-date percentage change. 
C) dividend yield. 
D) stock coupon maturity yield. 
A) price-earnings ratio. 
B) year-to-date percentage change. 
C) dividend yield. 
D) stock coupon maturity yield.

Question 20

The only type of business that faces unlimited liability is a sole proprietorship.

Accepted Answer

A) True 
 B)False

Define a corporation.

Dividends are

Two of the firms involved in the accounting scandals of the early 2000s were

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

What is the difference between retained earnings and dividends?

All of the following would be considered explicit costs of operating a business except

Which of the following statements is false?

In many corporations,there is "separation of ownership from control." What does this mean?

Who controls a sole proprietorship?

Who owns a corporation?

A bond is a financial security that represents

What is a secondary market?

During 2007,many "subprime" and "Alt-A" borrowers began to default on their mortgages.Describe "subprime" and "Alt-A" borrowers.

When the coupon rate on newly issued bonds increases relative to older,outstanding bonds,what happens?

The person hired by a corporation's board of directors to run the day-to-day operations of the corporation is known as the

What are the advantages of setting up a proprietorship or partnership as opposed to a corporation?

Which of the following is a characteristic of a bond?

If a corporate bond with face value of $1,000 has an interest rate of eight percent paid once a year for a term of 30 years,what is the size of the coupon payment?

Dividing the current market price of a stock by the firm's earnings per share gives the firm's

The only type of business that faces unlimited liability is a sole proprietorship.

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

Define a corporation.

Dividends are

Two of the firms involved in the accounting scandals of the early 2000s were

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

What is the difference between retained earnings and dividends?

All of the following would be considered explicit costs of operating a business except

Which of the following statements is false?

In many corporations,there is "separation of ownership from control." What does this mean?

Who controls a sole proprietorship?

Who owns a corporation?

A bond is a financial security that represents

What is a secondary market?

During 2007,many "subprime" and "Alt-A" borrowers began to default on their mortgages.Describe "subprime" and "Alt-A" borrowers.

When the coupon rate on newly issued bonds increases relative to older,outstanding bonds,what happens?

The person hired by a corporation's board of directors to run the day-to-day operations of the corporation is known as the

What are the advantages of setting up a proprietorship or partnership as opposed to a corporation?

Which of the following is a characteristic of a bond?

If a corporate bond with face value of $1,000 has an interest rate of eight percent paid once a year for a term of 30 years,what is the size of the coupon payment?

Dividing the current market price of a stock by the firm's earnings per share gives the firm's

The only type of business that faces unlimited liability is a sole proprietorship.

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