Question 1

Owners of a corporation ________ through dividend payments on shares of that firm's stock.

Accepted Answer

A) retain earnings of the firm 
B) issue bonds for the firm 
C) share in the profits of the firm 
D) indirectly finance the firm 
A) retain earnings of the firm 
B) issue bonds for the firm 
C) share in the profits of the firm 
D) indirectly finance the firm

Question 2

As a form of business,a sole proprietorship

Accepted Answer

A) has limited liability. 
B) has more than one owner. 
C) cannot issue stock. 
D) has the most government rules and regulations affecting it. 
A) has limited liability. 
B) has more than one owner. 
C) cannot issue stock. 
D) has the most government rules and regulations affecting it.

Question 3

In the early 1800s,many state legislatures began to pass general incorporation laws,which

Accepted Answer

A) allowed firms to more easily be organized as corporations. 
B) made it harder for firms to organize as corporations. 
C) granted sole proprietorships and partnerships limited personal liability. 
D) allowed sole proprietorships and partnerships to issue stock. 
A) allowed firms to more easily be organized as corporations. 
B) made it harder for firms to organize as corporations. 
C) granted sole proprietorships and partnerships limited personal liability. 
D) allowed sole proprietorships and partnerships to issue stock.

Question 4

A ________ is owned by its stockholders.

Accepted Answer

A) sole proprietorship 
B) corporation 
C) partnership 
D) All of the above are correct. 
A) sole proprietorship 
B) corporation 
C) partnership 
D) All of the above are correct.

Question 5

When an investor buys a corporate bond,the face value of the bond is

Accepted Answer

A) a measure of ownership in the corporation. 
B) a loan to the corporation. 
C) the coupon rate of the bond. 
D) a dividend payment on the bond. 
A) a measure of ownership in the corporation. 
B) a loan to the corporation. 
C) the coupon rate of the bond. 
D) a dividend payment on the bond.

Question 6

Small savers who only have enough money to buy a few individual financial assets can use ________ to diversify.

Accepted Answer

A) one company's stock 
B) one company's bonds 
C) Treasury securities 
D) mutual funds 
A) one company's stock 
B) one company's bonds 
C) Treasury securities 
D) mutual funds

Question 7

Dividing the dividend payment by the stock's ________ determines the dividend yield.

Accepted Answer

A) coupon payment 
B) closing market price 
C) highest yearly price 
D) price/earnings ratio 
A) coupon payment 
B) closing market price 
C) highest yearly price 
D) price/earnings ratio

Question 8

A higher bond price indicates a lower cost of new external funds.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is true?

Accepted Answer

A) A firm's accounting profit is equal to its economic profit. 
B) Opportunity costs are the same as explicit costs. 
C) A firm's net income is the same as its accounting profit. 
D) If a firm's accounting profits are positive,its economic profits must also be positive. 
A) A firm's accounting profit is equal to its economic profit. 
B) Opportunity costs are the same as explicit costs. 
C) A firm's net income is the same as its accounting profit. 
D) If a firm's accounting profits are positive,its economic profits must also be positive.

Question 10

Explain what information that changes in the value of a firm's stocks provide for a firm's managers and for investors.

Accepted Answer

Changes in the value of a firm's stocks

Question 11

If the present value equation used to calculate the price of a stock you are considering buying is "[$12 / (0.05 - 0.02)]," which of the following is correct,assuming that dividends will grow at a constant rate?

Accepted Answer

A) The stock price is $12,the dividend growth rate is 2 percent,and the interest rate is 5 percent. 
B) The dividend is $12 per share,the dividend growth rate is 2 percent,and the interest rate is 5 percent. 
C) The stock price is $12,the dividend growth rate is 5 percent,and the interest rate is 3 percent. 
D) The dividend is $12 per share,the dividend growth rate is 5 percent,and the interest rate is 2 percent. 
A) The stock price is $12,the dividend growth rate is 2 percent,and the interest rate is 5 percent. 
B) The dividend is $12 per share,the dividend growth rate is 2 percent,and the interest rate is 5 percent. 
C) The stock price is $12,the dividend growth rate is 5 percent,and the interest rate is 3 percent. 
D) The dividend is $12 per share,the dividend growth rate is 5 percent,and the interest rate is 2 percent.

Question 12

In August 2011,Standard & Poor's (S&P)changed its rating on U.S.Treasury bonds from "AAA" to "AA+" based on the state of the federal government's budget deficit.This was the ________ a rating agency had given Treasury bonds less than a rating of "AAA."

Accepted Answer

A) first time ever 
B) second time since the year 2000 
C) first time since the Great Depression 
D) fifth time in history 
A) first time ever 
B) second time since the year 2000 
C) first time since the Great Depression 
D) fifth time in history

Question 13

________are the owners of a corporation.

Accepted Answer

A) The board of directors 
B) Stockholders 
C) Top management 
D) Bondholders 
A) The board of directors 
B) Stockholders 
C) Top management 
D) Bondholders

Question 14

Jack Dorsey is the Chief Executive Officer of Twitter as well as a member of Twitter's board of directors.Dorsey is therefore classified as an

Accepted Answer

A) inside director. 
B) outside director. 
C) independent director. 
D) unbiased director. 
A) inside director. 
B) outside director. 
C) independent director. 
D) unbiased director.

Question 15

What is the difference between a firm's assets and its liabilities?

Accepted Answer

An asset is anything

Question 16

The principal-agent problem is

Accepted Answer

A) often more severe for partnerships than for corporations. 
B) often less severe for partnerships than for corporations. 
C) severe for corporations but nonexistent for partnerships. 
D) most severe for sole proprietorships. 
A) often more severe for partnerships than for corporations. 
B) often less severe for partnerships than for corporations. 
C) severe for corporations but nonexistent for partnerships. 
D) most severe for sole proprietorships.

Question 17

Anita is the retired president of Claddagh College and currently serves on the board of directors of the Patrician Pharmaceutical Company.Anita is considered ________ of the company.

Accepted Answer

A) a managing director 
B) an inside director 
C) a silent partner 
D) an outside director 
A) a managing director 
B) an inside director 
C) a silent partner 
D) an outside director

Question 18

When mortgage loans are securitized,they are

Accepted Answer

A) bundled together by financial institutions and sold to investors. 
B) issued to borrowers with flawed credit histories. 
C) issued to borrowers who fail to document their income. 
D) guaranteed by the federal government. 
A) bundled together by financial institutions and sold to investors. 
B) issued to borrowers with flawed credit histories. 
C) issued to borrowers who fail to document their income. 
D) guaranteed by the federal government.

Question 19

If Urban Outfitters borrows $25 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 20

How do a partnership and a corporation differ?

Accepted Answer

A) Partnerships have unlimited liability while corporations have limited liability. 
B) Corporations can issue stocks and bonds,while partnerships cannot. 
C) Corporations face more taxes than do partnerships. 
D) All of these are differences between the two types of businesses. 
A) Partnerships have unlimited liability while corporations have limited liability. 
B) Corporations can issue stocks and bonds,while partnerships cannot. 
C) Corporations face more taxes than do partnerships. 
D) All of these are differences between the two types of businesses.

Owners of a corporation ________ through dividend payments on shares of that firm's stock.

As a form of business,a sole proprietorship

In the early 1800s,many state legislatures began to pass general incorporation laws,which

A ________ is owned by its stockholders.

When an investor buys a corporate bond,the face value of the bond is

Small savers who only have enough money to buy a few individual financial assets can use ________ to diversify.

Dividing the dividend payment by the stock's ________ determines the dividend yield.

A higher bond price indicates a lower cost of new external funds.

Which of the following is true?

Explain what information that changes in the value of a firm's stocks provide for a firm's managers and for investors.

If the present value equation used to calculate the price of a stock you are considering buying is "[$12 / (0.05 - 0.02)]," which of the following is correct,assuming that dividends will grow at a constant rate?

In August 2011,Standard & Poor's (S&P)changed its rating on U.S.Treasury bonds from "AAA" to "AA+" based on the state of the federal government's budget deficit.This was the ________ a rating agency had given Treasury bonds less than a rating of "AAA."

________are the owners of a corporation.

Jack Dorsey is the Chief Executive Officer of Twitter as well as a member of Twitter's board of directors.Dorsey is therefore classified as an

What is the difference between a firm's assets and its liabilities?

The principal-agent problem is

Anita is the retired president of Claddagh College and currently serves on the board of directors of the Patrician Pharmaceutical Company.Anita is considered ________ of the company.

When mortgage loans are securitized,they are

If Urban Outfitters borrows $25 million from a bank to finance the construction of a new store,this is an example of

How do a partnership and a corporation differ?

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

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

Owners of a corporation ________ through dividend payments on shares of that firm's stock.

As a form of business,a sole proprietorship

In the early 1800s,many state legislatures began to pass general incorporation laws,which

A ________ is owned by its stockholders.

When an investor buys a corporate bond,the face value of the bond is

Small savers who only have enough money to buy a few individual financial assets can use ________ to diversify.

Dividing the dividend payment by the stock's ________ determines the dividend yield.

A higher bond price indicates a lower cost of new external funds.

Which of the following is true?

Explain what information that changes in the value of a firm's stocks provide for a firm's managers and for investors.

If the present value equation used to calculate the price of a stock you are considering buying is "[$12 / (0.05 - 0.02)]," which of the following is correct,assuming that dividends will grow at a constant rate?

In August 2011,Standard & Poor's (S&P)changed its rating on U.S.Treasury bonds from "AAA" to "AA+" based on the state of the federal government's budget deficit.This was the ________ a rating agency had given Treasury bonds less than a rating of "AAA."

________are the owners of a corporation.

Jack Dorsey is the Chief Executive Officer of Twitter as well as a member of Twitter's board of directors.Dorsey is therefore classified as an

What is the difference between a firm's assets and its liabilities?

The principal-agent problem is

Anita is the retired president of Claddagh College and currently serves on the board of directors of the Patrician Pharmaceutical Company.Anita is considered ________ of the company.

When mortgage loans are securitized,they are

If Urban Outfitters borrows $25 million from a bank to finance the construction of a new store,this is an example of

How do a partnership and a corporation differ?

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