Question 1

Raising funds through financial intermediaries is called

Accepted Answer

A)  direct finance. 
B)  corporate finance. 
C)  indirect finance. 
D)  dividend reinvestment. 
A)  direct finance. 
B)  corporate finance. 
C)  indirect finance. 
D)  dividend reinvestment.

Question 2

In the United States,partnership profits are taxed at the business level and then are taxed again as personal income in the form of dividend payments.

Accepted Answer

A) True 
 B)False

Question 3

The existence of ________ increases the risk of buying stock in a corporation.

Accepted Answer

A)  the principal-agent problem 
B)  corporate governance 
C)  unlimited personal liability 
D)  employee-owned corporations 
A)  the principal-agent problem 
B)  corporate governance 
C)  unlimited personal liability 
D)  employee-owned corporations

Question 4

How can a corporation's board of directors and its managers try to reduce the principal-agent problem?

Accepted Answer

A corporation's board of directors can t

Question 5

In which types of business do owners have unlimited personal liability and in which do owners have limited personal liability?

Accepted Answer

Sole proprietorships and partn

Question 6

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 7

When someone takes out a mortgage loan to buy a house,the mortgage lender can take possession of the house and sell it if the borrower defaults by failing to make payments on the loan because the house is being pledged as ________ for the loan.

Accepted Answer

A)  goodwill 
B)  a liability 
C)  insurance 
D)  collateral 
A)  goodwill 
B)  a liability 
C)  insurance 
D)  collateral

Question 8

Anything owed by a person or a firm is

Accepted Answer

A)  an asset. 
B)  a liability. 
C)  a bond. 
D)  equity. 
A)  an asset. 
B)  a liability. 
C)  a bond. 
D)  equity.

Question 9

On a balance sheet

Accepted Answer

A)  total assets must equal total liabilities plus equity. 
B)  total assets plus equity must equal total liabilities. 
C)  total assets plus total liabilities must equal zero. 
D)  total assets plus total liabilities plus equity must equal zero. 
A)  total assets must equal total liabilities plus equity. 
B)  total assets plus equity must equal total liabilities. 
C)  total assets plus total liabilities must equal zero. 
D)  total assets plus total liabilities plus equity must equal zero.

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

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 12

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 13

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 14

Abercrombie & Fitch wants to raise $8 million to finance the construction of a new store,and the company wishes to raise the funds through direct finance.Which of the following methods could it use?

Accepted Answer

A)  It could sell $8 million in bonds. 
B)  It could borrow $8 million from a bank. 
C)  It could issue $8 million in stocks. 
D)  It could choose either A or C. 
A)  It could sell $8 million in bonds. 
B)  It could borrow $8 million from a bank. 
C)  It could issue $8 million in stocks. 
D)  It could choose either A or C.

Question 15

Of the different types of businesses,a corporation has the ________ government rules and the ________ government regulations affecting it.

Accepted Answer

A)  least; least 
B)  least; most 
C)  most; least 
D)  most; most 
A)  least; least 
B)  least; most 
C)  most; least 
D)  most; most

Question 16

With state and multistate lotteries,winners are typically given the choice between a lump sum payment today or a 20 year series of annuities.How should a winner decide which is better?

Accepted Answer

The winner should decide by de

Question 17

Who selects the board of directors of a corporation?

Accepted Answer

A)  the state where the corporation is chartered 
B)  employees 
C)  stockholders 
D)  managers 
A)  the state where the corporation is chartered 
B)  employees 
C)  stockholders 
D)  managers

Question 18

How much is a bond that pays $20 in coupon payments for 4 years and $1,000 at the end of the fourth year worth if the interest rate is 5%?

Accepted Answer

A)  $822.70 
B)  $893.62 
C)  $1,070.92 
D)  $1,080 
A)  $822.70 
B)  $893.62 
C)  $1,070.92 
D)  $1,080

Question 19

The coupon rate of a bond is equal to

Accepted Answer

A)  the coupon payment. 
B)  the interest payment. 
C)  the interest rate. 
D)  the face value. 
A)  the coupon payment. 
B)  the interest payment. 
C)  the interest rate. 
D)  the face value.

Question 20

Define a corporation.

Accepted Answer

A corporation is a legal form

Raising funds through financial intermediaries is called

In the United States,partnership profits are taxed at the business level and then are taxed again as personal income in the form of dividend payments.

The existence of ________ increases the risk of buying stock in a corporation.

How can a corporation's board of directors and its managers try to reduce the principal-agent problem?

In which types of business do owners have unlimited personal liability and in which do owners have limited personal liability?

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

When someone takes out a mortgage loan to buy a house,the mortgage lender can take possession of the house and sell it if the borrower defaults by failing to make payments on the loan because the house is being pledged as ________ for the loan.

Anything owed by a person or a firm is

On a balance sheet

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

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?

Dividends are

Which of the following is a characteristic of a bond?

Abercrombie & Fitch wants to raise $8 million to finance the construction of a new store,and the company wishes to raise the funds through direct finance.Which of the following methods could it use?

Of the different types of businesses,a corporation has the government rules and the government regulations affecting it.

With state and multistate lotteries,winners are typically given the choice between a lump sum payment today or a 20 year series of annuities.How should a winner decide which is better?

Who selects the board of directors of a corporation?

How much is a bond that pays $20 in coupon payments for 4 years and $1,000 at the end of the fourth year worth if the interest rate is 5%?

The coupon rate of a bond is equal to

Define a corporation.

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

Raising funds through financial intermediaries is called

In the United States,partnership profits are taxed at the business level and then are taxed again as personal income in the form of dividend payments.

The existence of ________ increases the risk of buying stock in a corporation.

How can a corporation's board of directors and its managers try to reduce the principal-agent problem?

In which types of business do owners have unlimited personal liability and in which do owners have limited personal liability?

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

When someone takes out a mortgage loan to buy a house,the mortgage lender can take possession of the house and sell it if the borrower defaults by failing to make payments on the loan because the house is being pledged as ________ for the loan.

Anything owed by a person or a firm is

On a balance sheet

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

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?

Dividends are

Which of the following is a characteristic of a bond?

Abercrombie & Fitch wants to raise $8 million to finance the construction of a new store,and the company wishes to raise the funds through direct finance.Which of the following methods could it use?

Of the different types of businesses,a corporation has the ________ government rules and the ________ government regulations affecting it.

With state and multistate lotteries,winners are typically given the choice between a lump sum payment today or a 20 year series of annuities.How should a winner decide which is better?

Who selects the board of directors of a corporation?

How much is a bond that pays $20 in coupon payments for 4 years and $1,000 at the end of the fourth year worth if the interest rate is 5%?

The coupon rate of a bond is equal to

Define a corporation.

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

Of the different types of businesses,a corporation has the government rules and the government regulations affecting it.