Question 1

Define a sole proprietorship.

Accepted Answer

A firm own

Question 2

Compared to buying stock in a privately-held firm,investing in a public firm

Accepted Answer

A)  is often considered safer because private firms are subject to stricter SEC regulations. 
B)  is often considered riskier because public firms are subject to stricter SEC regulations. 
C)  is often considered riskier because private firms are subject to stricter SEC regulations. 
D)  is often considered safer because public firms are subject to stricter SEC regulations. 
A)  is often considered safer because private firms are subject to stricter SEC regulations. 
B)  is often considered riskier because public firms are subject to stricter SEC regulations. 
C)  is often considered riskier because private firms are subject to stricter SEC regulations. 
D)  is often considered safer because public firms are subject to stricter SEC regulations.

Question 3

Donnie's Donuts incurs $450,000 per year in explicit costs and $200,000 in implicit costs. The bakery earns $800,000 in revenues and has $2 million in net worth.Based on this information,what is the economic profit for Donnie's Donuts?

Accepted Answer

A)  $150,000 
B)  $350,000 
C)  $600,000 
D)  $1.2 million 
A)  $150,000 
B)  $350,000 
C)  $600,000 
D)  $1.2 million

Question 4

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 5

Included on the board of directors of Microsoft are Reed hastings,the founder of Netflix,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

Accepted Answer

A)  inside directors. 
B)  outside directors. 
C)  competitive directors. 
D)  honorary directors. 
A)  inside directors. 
B)  outside directors. 
C)  competitive directors. 
D)  honorary directors.

Question 6

Stockholders

Accepted Answer

A)  are liable for the debts of a corporation. 
B)  are the owners of a corporation. 
C)  control a corporation's day-to-day activities. 
D)  hire the managers of a corporation. 
A)  are liable for the debts of a corporation. 
B)  are the owners of a corporation. 
C)  control a corporation's day-to-day activities. 
D)  hire the managers of a corporation.

Question 7

Members of management serving on the board of directors of a corporation are referred to as outside directors.

Accepted Answer

A) True 
 B)False

Question 8

If you want to know the present value of a future payment received in one year,what formula can you use?

Accepted Answer

A)  Present value equals future payment times the current market rate of interest. 
B)  Present value equals future payment divided by one plus the rate of interest. 
C)  Present value equals one plus the rate of interest in decimals divided by future payment. 
D)  Present value equals future payments times one plus the rate of interest. 
A)  Present value equals future payment times the current market rate of interest. 
B)  Present value equals future payment divided by one plus the rate of interest. 
C)  Present value equals one plus the rate of interest in decimals divided by future payment. 
D)  Present value equals future payments times one plus the rate of interest.

Question 9

Anything of value owned by a person or a firm is

Accepted Answer

A)  an asset. 
B)  a liability. 
C)  wealth. 
D)  owner's yield. 
A)  an asset. 
B)  a liability. 
C)  wealth. 
D)  owner's yield.

Question 10

If Abercrombie & Fitch borrows $8 million from a bank to finance the construction of a new store,this is an example of

Accepted Answer

A)  a stock market transaction. 
B)  direct finance. 
C)  a bond market transaction. 
D)  indirect finance. 
A)  a stock market transaction. 
B)  direct finance. 
C)  a bond market transaction. 
D)  indirect finance.

Question 11

Seth's grandmother gave him a $50 savings bond for his birthday.The bond pays $50 at maturity,which is in five years.If the interest rate is 5%,the bond has a present value of $43.19.

Accepted Answer

A) True 
 B)False

Question 12

A firm's accounting profit is also its

Accepted Answer

A)  economic profit. 
B)  income statement. 
C)  net income. 
D)  statement of liabilities. 
A)  economic profit. 
B)  income statement. 
C)  net income. 
D)  statement of liabilities.

Question 13

Goodwill is listed as an asset on a firm's balance sheet.

Accepted Answer

A) True 
 B)False

Question 14

Securities dealers that trade stocks and bonds outside exchanges comprise the

Accepted Answer

A)  foreign exchange market. 
B)  over-the-counter market. 
C)  NASDAQ market. 
D)  outlet market. 
A)  foreign exchange market. 
B)  over-the-counter market. 
C)  NASDAQ market. 
D)  outlet market.

Question 15

The present value of $475 received 3 years in the future would be calculated as which of the following when the interest rate is 6 percent?

Accepted Answer

A)  475/(1.6)³ 
B)  475/(1.06)³ 
C)  475 × 1.6 × 3 
D)  3.06/475 
A)  475/(1.6)³ 
B)  475/(1.06)³ 
C)  475 × 1.6 × 3 
D)  3.06/475

Question 16

What can be done to deal with the principal-agent problem?

Accepted Answer

A)  threaten to liquidate the firm 
B)  link top manager salaries to the profits of the firm or the price of the firm's stock 
C)  have the CEO be a rotating position 
D)  forbid managers from owning any company stock 
A)  threaten to liquidate the firm 
B)  link top manager salaries to the profits of the firm or the price of the firm's stock 
C)  have the CEO be a rotating position 
D)  forbid managers from owning any company stock

Question 17

If a corporate bond with face value of $5,000 has an interest rate of 4 percent paid once a year for a term of 30 years,what is the size of the coupon payment?

Accepted Answer

A)  $4 
B)  $200 
C)  $1,250 
D)  $5,000 
A)  $4 
B)  $200 
C)  $1,250 
D)  $5,000

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

How does a firm raise external funds through direct finance?

Accepted Answer

With direct finance,funds flow

Question 20

What is the present value of $888 in a one year if the current rate of interest is five percent?

Accepted Answer

A)  $4,440 
B)  $845.71 
C)  $177.60 
D)  none of these 
A)  $4,440 
B)  $845.71 
C)  $177.60 
D)  none of these

Define a sole proprietorship.

Compared to buying stock in a privately-held firm,investing in a public firm

Donnie's Donuts incurs $450,000 per year in explicit costs and $200,000 in implicit costs. The bakery earns $800,000 in revenues and has $2 million in net worth.Based on this information,what is the economic profit for Donnie's Donuts?

What type of business is the easiest to set up?

Stockholders

Members of management serving on the board of directors of a corporation are referred to as outside directors.

If you want to know the present value of a future payment received in one year,what formula can you use?

Anything of value owned by a person or a firm is

If Abercrombie & Fitch borrows $8 million from a bank to finance the construction of a new store,this is an example of

Seth's grandmother gave him a $50 savings bond for his birthday.The bond pays $50 at maturity,which is in five years.If the interest rate is 5%,the bond has a present value of $43.19.

A firm's accounting profit is also its

Goodwill is listed as an asset on a firm's balance sheet.

Securities dealers that trade stocks and bonds outside exchanges comprise the

The present value of $475 received 3 years in the future would be calculated as which of the following when the interest rate is 6 percent?

What can be done to deal with the principal-agent problem?

If a corporate bond with face value of $5,000 has an interest rate of 4 percent paid once a year for a term of 30 years,what is the size of the coupon payment?

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

How does a firm raise external funds through direct finance?

What is the present value of $888 in a one year if the current rate of interest is five percent?

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

Define a sole proprietorship.

Compared to buying stock in a privately-held firm,investing in a public firm

Donnie's Donuts incurs $450,000 per year in explicit costs and $200,000 in implicit costs. The bakery earns $800,000 in revenues and has $2 million in net worth.Based on this information,what is the economic profit for Donnie's Donuts?

What type of business is the easiest to set up?

Stockholders

Members of management serving on the board of directors of a corporation are referred to as outside directors.

If you want to know the present value of a future payment received in one year,what formula can you use?

Anything of value owned by a person or a firm is

If Abercrombie & Fitch borrows $8 million from a bank to finance the construction of a new store,this is an example of

Seth's grandmother gave him a $50 savings bond for his birthday.The bond pays $50 at maturity,which is in five years.If the interest rate is 5%,the bond has a present value of $43.19.

A firm's accounting profit is also its

Goodwill is listed as an asset on a firm's balance sheet.

Securities dealers that trade stocks and bonds outside exchanges comprise the

The present value of $475 received 3 years in the future would be calculated as which of the following when the interest rate is 6 percent?

What can be done to deal with the principal-agent problem?

If a corporate bond with face value of $5,000 has an interest rate of 4 percent paid once a year for a term of 30 years,what is the size of the coupon payment?

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

How does a firm raise external funds through direct finance?

What is the present value of $888 in a one year if the current rate of interest is five percent?

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