Question 1

A member of a corporate board of directors that is also a manager of the business is known as

Accepted Answer

A)  a shareholder. 
B)  an inside director. 
C)  a partner. 
D)  a corporate governor. 
A)  a shareholder. 
B)  an inside director. 
C)  a partner. 
D)  a corporate governor.

Question 2

Which of the following is an advantage of starting a new business as a corporation?

Accepted Answer

A)  double taxation 
B)  ease in setting up 
C)  low expenses of legally organizing 
D)  greater ability to raise funds 
A)  double taxation 
B)  ease in setting up 
C)  low expenses of legally organizing 
D)  greater ability to raise funds

Question 3

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 4

As a business type,corporations ________ in the United States.

Accepted Answer

A)  earn the majority of profits 
B)  are the most common 
C)  are the least common 
D)  are subject to the least amount of taxes 
A)  earn the majority of profits 
B)  are the most common 
C)  are the least common 
D)  are subject to the least amount of taxes

Question 5

Indirect finance includes the sale by a corporation of stocks or bonds,but does not include borrowing money from a bank.

Accepted Answer

A) True 
 B)False

Question 6

An implicit cost is

Accepted Answer

A)  a nonmonetary opportunity cost. 
B)  a cost unique to sole proprietorships. 
C)  a cost that involves spending money. 
D)  a cost unique to corporations. 
A)  a nonmonetary opportunity cost. 
B)  a cost unique to sole proprietorships. 
C)  a cost that involves spending money. 
D)  a cost unique to corporations.

Question 7

The way in which a corporation is structured and the impact a corporation's structure has on the firm's behavior is referred to as

Accepted Answer

A)  corporate taxation. 
B)  structure composition theory. 
C)  structural behavior. 
D)  corporate governance. 
A)  corporate taxation. 
B)  structure composition theory. 
C)  structural behavior. 
D)  corporate governance.

Question 8

A corporation is

Accepted Answer

A)  the easiest type of business to set up. 
B)  the least expensive type of business to set up. 
C)  the most difficult type of business to set up. 
D)  the least profitable type of business to set up. 
A)  the easiest type of business to set up. 
B)  the least expensive type of business to set up. 
C)  the most difficult type of business to set up. 
D)  the least profitable type of business to set up.

Question 9

Who is the seller in a primary market and who is the seller in a secondary market?

Accepted Answer

The corporation issuing a bond

Question 10

The financial statement that sums up a firm's revenues,costs,and profit over a period of time is its

Accepted Answer

A)  income statement. 
B)  balance sheet. 
C)  dividend yield statement. 
D)  price-earnings statement. 
A)  income statement. 
B)  balance sheet. 
C)  dividend yield statement. 
D)  price-earnings statement.

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 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 13

The price of a financial asset should be equal to

Accepted Answer

A)  the face value of the asset. 
B)  the present value of the sum of the coupon payments and the interest rate. 
C)  the face value of the asset divided by the interest rate. 
D)  the present value of payments to be received from owning that asset. 
A)  the face value of the asset. 
B)  the present value of the sum of the coupon payments and the interest rate. 
C)  the face value of the asset divided by the interest rate. 
D)  the present value of payments to be received from owning that asset.

Question 14

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 15

When you buy previously-issued shares of Google stock,this transaction takes place in the

Accepted Answer

A)  primary market. 
B)  bond market. 
C)  secondary market. 
D)  bear market. 
A)  primary market. 
B)  bond market. 
C)  secondary market. 
D)  bear market.

Question 16

How does the principal-agent problem extend to managers and employees?

Accepted Answer

Just as corporate shareholders (owners)c

Question 17

Assume you set up a sole proprietorship and your lawyer tells you that as the owner you will face unlimited liability.What does that mean?

Accepted Answer

A)  You are liable for organizing the business. 
B)  You could stand to lose your personal wealth if the business goes bankrupt. 
C)  There is no legal responsibility of the business in case a customer sues, as the business is legally untouchable. 
D)  None of these explain what unlimited liability means. 
A)  You are liable for organizing the business. 
B)  You could stand to lose your personal wealth if the business goes bankrupt. 
C)  There is no legal responsibility of the business in case a customer sues, as the business is legally untouchable. 
D)  None of these explain what unlimited liability means.

Question 18

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 19

If a stock's dividend is expected to grow at a constant rate of eight percent in the future and it has just paid a dividend of $1.25 a share,and you have an alternative investment of equal risk that will earn a 12 percent rate of return,what would you be willing to pay per share for this stock?

Accepted Answer

A)  $31.25 
B)  $1.40 
C)  $1.25 
D)  $1.12 
A)  $31.25 
B)  $1.40 
C)  $1.25 
D)  $1.12

Question 20

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.

A member of a corporate board of directors that is also a manager of the business is known as

Which of the following is an advantage of starting a new business as a corporation?

A firm's net worth is calculated as

As a business type,corporations ________ in the United States.

Indirect finance includes the sale by a corporation of stocks or bonds,but does not include borrowing money from a bank.

An implicit cost is

The way in which a corporation is structured and the impact a corporation's structure has on the firm's behavior is referred to as

A corporation is

Who is the seller in a primary market and who is the seller in a secondary market?

The financial statement that sums up a firm's revenues,costs,and profit over a period of time is its

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 is a stock's price-earnings ratio found?

The price of a financial asset should be equal to

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?

When you buy previously-issued shares of Google stock,this transaction takes place in the

How does the principal-agent problem extend to managers and employees?

Assume you set up a sole proprietorship and your lawyer tells you that as the owner you will face unlimited liability.What does that mean?

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

If a stock's dividend is expected to grow at a constant rate of eight percent in the future and it has just paid a dividend of $1.25 a share,and you have an alternative investment of equal risk that will earn a 12 percent rate of return,what would you be willing to pay per share for this stock?

Which of the following statements is false?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

The Economics of Health Care

Comparative Advantage and the Gains From International Trade

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

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

A member of a corporate board of directors that is also a manager of the business is known as

Which of the following is an advantage of starting a new business as a corporation?

A firm's net worth is calculated as

As a business type,corporations ________ in the United States.

Indirect finance includes the sale by a corporation of stocks or bonds,but does not include borrowing money from a bank.

An implicit cost is

The way in which a corporation is structured and the impact a corporation's structure has on the firm's behavior is referred to as

A corporation is

Who is the seller in a primary market and who is the seller in a secondary market?

The financial statement that sums up a firm's revenues,costs,and profit over a period of time is its

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 is a stock's price-earnings ratio found?

The price of a financial asset should be equal to

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?

When you buy previously-issued shares of Google stock,this transaction takes place in the

How does the principal-agent problem extend to managers and employees?

Assume you set up a sole proprietorship and your lawyer tells you that as the owner you will face unlimited liability.What does that mean?

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

If a stock's dividend is expected to grow at a constant rate of eight percent in the future and it has just paid a dividend of $1.25 a share,and you have an alternative investment of equal risk that will earn a 12 percent rate of return,what would you be willing to pay per share for this stock?

Which of the following statements is false?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

The Economics of Health Care

Comparative Advantage and the Gains From International Trade

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

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 .