Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

If a firm fails to provide investors with at least a normal rate of return

Accepted Answer

A) it will not be able to remain in business in the long run. 
B) it will not be able to remain in business in the short run. 
C) it will shut down in the short run but will be able to remain in business in the long run. 
D) it will have a positive economic profit but a negative accounting profit. 
A) it will not be able to remain in business in the long run. 
B) it will not be able to remain in business in the short run. 
C) it will shut down in the short run but will be able to remain in business in the long run. 
D) it will have a positive economic profit but a negative accounting profit.

Question 3

With respect to business types,what does the term 'limited liability' mean?

Accepted Answer

Limited liability is a legal provision t

Question 4

Opportunity costs are implicit costs.

Accepted Answer

A) True 
 B)False

Question 5

A cost that involves spending money is

Accepted Answer

A) an implicit cost. 
B) an explicit cost. 
C) an opportunity cost. 
D) an indirect cost. 
A) an implicit cost. 
B) an explicit cost. 
C) an opportunity cost. 
D) an indirect cost.

Question 6

Explain the relationship between the interest rate on a bond and the default risk on a bond.

Accepted Answer

With bonds,the higher the defa

Question 7

If a company pays a dividend of $2 to be received one year from now,dividends are expected to grow at a rate of 3 percent per year for the indefinite future,and the interest rate is 4 percent,the price of the company's stock should be ________ per share.

Accepted Answer

A) $3.40 
B) $28.57 
C) $200.00 
D) $340.00 
A) $3.40 
B) $28.57 
C) $200.00 
D) $340.00

Question 8

Why do financial markets depend on accurate accounting and disclosure practices?

Accepted Answer

Investors in primary and secondary marke

Question 9

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

Accepted Answer

A) The owners have limited personal liability. 
B) Compared to a corporation,a partnership has fewer government rules and regulations to comply with. 
C) Business profits are not taxed. 
D) A partnership can easily attain additional funding. 
A) The owners have limited personal liability. 
B) Compared to a corporation,a partnership has fewer government rules and regulations to comply with. 
C) Business profits are not taxed. 
D) A partnership can easily attain additional funding.

Question 10

An income statement shows a firm's revenue,costs,and profit

Accepted Answer

A) for the firm's fiscal year. 
B) since the firm has been in operation. 
C) for a particular day. 
D) only if the firm is earning an accounting profit. 
A) for the firm's fiscal year. 
B) since the firm has been in operation. 
C) for a particular day. 
D) only if the firm is earning an accounting profit.

Question 11

Yolanda received a $100 savings bond for her birthday.The bond pays $100 at maturity,which is in five years.If the interest rate is 3%,the bond has a present value of $86.26.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is not an advantage of starting a new business as a sole proprietorship?

Accepted Answer

A) separation of ownership and business liability 
B) limited control over the operation of the business 
C) the initial cost in setting up the business 
D) possibility of double taxation 
A) separation of ownership and business liability 
B) limited control over the operation of the business 
C) the initial cost in setting up the business 
D) possibility of double taxation

Question 13

The limited ability to raise funds is a disadvantage for

Accepted Answer

A) sole proprietorships and partnerships. 
B) partnerships and corporations. 
C) sole proprietorships and corporations 
D) corporations. 
A) sole proprietorships and partnerships. 
B) partnerships and corporations. 
C) sole proprietorships and corporations 
D) corporations.

Question 14

The decline in new business startups

Accepted Answer

A) is not concentrated in one geographic area. 
B) is concentrated in the Northeast states. 
C) is concentrated in the Gulf Coast states. 
D) is concentrated in the Rust Belt. 
A) is not concentrated in one geographic area. 
B) is concentrated in the Northeast states. 
C) is concentrated in the Gulf Coast states. 
D) is concentrated in the Rust Belt.

Question 15

The longer you have to wait to receive a payment

Accepted Answer

A) the greater value it will have to you. 
B) the less value it will have to you. 
C) the lower the interest rate you will charge on the payment. 
D) the more you are willing to discount the payment. 
A) the greater value it will have to you. 
B) the less value it will have to you. 
C) the lower the interest rate you will charge on the payment. 
D) the more you are willing to discount the payment.

Question 16

Torrie is thinking of starting up a small business selling hand-painted wine glasses.She asks her sister,Lisette,if she'd like to join her in setting up a partnership to start the business.What is one disadvantage in joining the partnership that Lisette should consider?

Accepted Answer

A) Lisette should realize that her profits in the partnership will always be less than Torrie's profits,since Torrie had the idea to start the business. 
B) Lisette should realize that,as an owner of the business,she will be personally responsible for the debts of the business. 
C) Lisette should realize that only Torrie will be allowed to own stock in the business as the founding partner. 
D) Lisette should realize that Torrie will have complete control over the business because it was her idea. 
A) Lisette should realize that her profits in the partnership will always be less than Torrie's profits,since Torrie had the idea to start the business. 
B) Lisette should realize that,as an owner of the business,she will be personally responsible for the debts of the business. 
C) Lisette should realize that only Torrie will be allowed to own stock in the business as the founding partner. 
D) Lisette should realize that Torrie will have complete control over the business because it was her idea.

Question 17

A partnership can raise funds for expansion in which of the following ways?

Accepted Answer

A) issuing stock through financial markets 
B) issuing stock through secondary markets 
C) taking on more partners 
D) all of the above 
A) issuing stock through financial markets 
B) issuing stock through secondary markets 
C) taking on more partners 
D) all of the above

Question 18

Suppose you hit a progressive jackpot on a 25-cent Fortunemaker slot machine in a casino in Las Vegas and are given the choice of the following prizes:
Prize 1: $200,000 to be received right away,with four additional payments of $200,000 to be received each year for the next four years.
Prize 2: $750,000 to be received right away.
If the interest rate is 3 percent,what is the present value of each prize?

Accepted Answer

Prize 1: Present value = $200,

Question 19

The CEO of Dynadyne corporation has been more concerned with enhancing his lifestyle by having the company pay for expensive corporate retreats than he has been with increasing the value of the company's stock.In this situation,the CEO is ________ and the stockholders are ________.

Accepted Answer

A) the principal; the agents 
B) the agent; the principals 
C) an agent; also agents 
D) a principal; also principals 
A) the principal; the agents 
B) the agent; the principals 
C) an agent; also agents 
D) a principal; also principals

Question 20

All of the following would be considered explicit costs of operating a business except

Accepted Answer

A) utility expenses. 
B) the cost of raw materials used in production. 
C) the rental value of equipment the company owns and uses for its own production. 
D) advertising expenses. 
A) utility expenses. 
B) the cost of raw materials used in production. 
C) the rental value of equipment the company owns and uses for its own production. 
D) advertising expenses.

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

If a firm fails to provide investors with at least a normal rate of return

With respect to business types,what does the term 'limited liability' mean?

Opportunity costs are implicit costs.

A cost that involves spending money is

Explain the relationship between the interest rate on a bond and the default risk on a bond.

If a company pays a dividend of $2 to be received one year from now,dividends are expected to grow at a rate of 3 percent per year for the indefinite future,and the interest rate is 4 percent,the price of the company's stock should be ________ per share.

Why do financial markets depend on accurate accounting and disclosure practices?

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

An income statement shows a firm's revenue,costs,and profit

Yolanda received a $100 savings bond for her birthday.The bond pays $100 at maturity,which is in five years.If the interest rate is 3%,the bond has a present value of $86.26.

Which of the following is not an advantage of starting a new business as a sole proprietorship?

The limited ability to raise funds is a disadvantage for

The decline in new business startups

The longer you have to wait to receive a payment

Torrie is thinking of starting up a small business selling hand-painted wine glasses.She asks her sister,Lisette,if she'd like to join her in setting up a partnership to start the business.What is one disadvantage in joining the partnership that Lisette should consider?

A partnership can raise funds for expansion in which of the following ways?

The CEO of Dynadyne corporation has been more concerned with enhancing his lifestyle by having the company pay for expensive corporate retreats than he has been with increasing the value of the company's stock.In this situation,the CEO is and the stockholders are .

All of the following would be considered explicit costs of operating a business except

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

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

If a firm fails to provide investors with at least a normal rate of return

With respect to business types,what does the term 'limited liability' mean?

Opportunity costs are implicit costs.

A cost that involves spending money is

Explain the relationship between the interest rate on a bond and the default risk on a bond.

If a company pays a dividend of $2 to be received one year from now,dividends are expected to grow at a rate of 3 percent per year for the indefinite future,and the interest rate is 4 percent,the price of the company's stock should be ________ per share.

Why do financial markets depend on accurate accounting and disclosure practices?

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

An income statement shows a firm's revenue,costs,and profit

Yolanda received a $100 savings bond for her birthday.The bond pays $100 at maturity,which is in five years.If the interest rate is 3%,the bond has a present value of $86.26.

Which of the following is not an advantage of starting a new business as a sole proprietorship?

The limited ability to raise funds is a disadvantage for

The decline in new business startups

The longer you have to wait to receive a payment

Torrie is thinking of starting up a small business selling hand-painted wine glasses.She asks her sister,Lisette,if she'd like to join her in setting up a partnership to start the business.What is one disadvantage in joining the partnership that Lisette should consider?

A partnership can raise funds for expansion in which of the following ways?

The CEO of Dynadyne corporation has been more concerned with enhancing his lifestyle by having the company pay for expensive corporate retreats than he has been with increasing the value of the company's stock.In this situation,the CEO is ________ and the stockholders are ________.

All of the following would be considered explicit costs of operating a business except

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

The CEO of Dynadyne corporation has been more concerned with enhancing his lifestyle by having the company pay for expensive corporate retreats than he has been with increasing the value of the company's stock.In this situation,the CEO is and the stockholders are .