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

Included on the board of directors of Microsoft are Dina Dublon,former chief financial officer of JP Morgan Chase,the president of Harvey Mudd college Maria M.Klawe,and the vice chairman of Bank of America Charles H.Noski.These three board members do not have a direct management role with Microsoft and are therefore referred to as

Laura's Pizza Place incurs $800,000 per year in explicit costs and $100,000 in implicit costs.The restaurant earns $1.3 million in revenues.Based on this information,what is accounting profit for Laura's Pizza Place?

Unlike firms that sell stock in financial markets,which are known as ________ firms,companies which do not sell stock in financial markets are known as ________ firms.

When a business is set up as partnership,the owner of the business faces unlimited liability.

Define a sole proprietorship.

Who hires the managers of a corporation?

The existence of the principal-agent problem

Who decides who controls a corporation?

An investor is more likely to buy a firm's stock if the firm's income statement shows ________ and if its balance sheet shows ________.

If Southwest Airlines borrows $20 million from a bank to finance the renovation of their corporate offices,this is an example of

A corporation's management

Which of the following is a characteristic of stock?

When Potbelly sold stock to the public in its IPO,it did so through the NASDAQ market.This was an example of Potbelly raising funds through

Corporate managers and shareholders always have the same goals.

A decrease in liabilities will reduce a firm's net worth.

A bond's coupon payment divided by the bond's current price is equal to the bond's

Why do corporations want to keep the price of their stock high?

If a corporate bond with a face value of $2,000 pays yearly coupon payments of $50,what is the coupon rate?

Which of the following is an example of an implicit cost a firm might incur?

A sole proprietorship is