Question 1

From the highest to the lowest,the percentage of revenues earned by businesses in the United States is represented by which of the following?

Accepted Answer

A) sole proprietorships,partnerships,corporations 
B) partnerships,corporations,sole proprietorships 
C) corporations,partnerships,sole proprietorships 
D) corporations,sole proprietorships,partnerships 
A) sole proprietorships,partnerships,corporations 
B) partnerships,corporations,sole proprietorships 
C) corporations,partnerships,sole proprietorships 
D) corporations,sole proprietorships,partnerships

Question 2

Tying the salaries of top managers to the firm's stock price or to the profitability of the firm allows a firm's board of directors to

Accepted Answer

A) increase asymmetric information. 
B) reduce the principal-agent problem. 
C) eliminate moral hazard. 
D) avoid disclosing financial statements to investors. 
A) increase asymmetric information. 
B) reduce the principal-agent problem. 
C) eliminate moral hazard. 
D) avoid disclosing financial statements to investors.

Question 3

Arturo wants to start a business where he is the chief executive officer and the company does issue stock.The type of business Arturo wants to start is a

Accepted Answer

A) sole proprietorship. 
B) partnership. 
C) corporation. 
D) Any of the above could be correct. 
A) sole proprietorship. 
B) partnership. 
C) corporation. 
D) Any of the above could be correct.

Question 4

When an investor buys a corporate bond,the ________ is a loan to the corporation.

Accepted Answer

A) interest on the bond 
B) principal of the bond 
C) bond's dividend payments 
D) coupon payment 
A) interest on the bond 
B) principal of the bond 
C) bond's dividend payments 
D) coupon payment

Question 5

A financial statement that sums up a firm's financial position on a particular day is

Accepted Answer

A) a balance sheet. 
B) an income statement. 
C) statement of cash flow. 
D) an equity report. 
A) a balance sheet. 
B) an income statement. 
C) statement of cash flow. 
D) an equity report.

Question 6

The Sarbanes-Oxley Act of 2002

Accepted Answer

A) created the Consumer Financial Protection Bureau to be housed in the Federal Reserve. 
B) mandates that firms raise funds for expansion only through the sale of stock or from bank loans,but not from the sale of corporate bonds. 
C) requires that CEOs personally certify the accuracy of financial statements. 
D) established the Financial Stability Oversight Council to identify risks to the financial system. 
A) created the Consumer Financial Protection Bureau to be housed in the Federal Reserve. 
B) mandates that firms raise funds for expansion only through the sale of stock or from bank loans,but not from the sale of corporate bonds. 
C) requires that CEOs personally certify the accuracy of financial statements. 
D) established the Financial Stability Oversight Council to identify risks to the financial system.

Question 7

Corporations are legally owned by their board of directors.

Accepted Answer

A) True 
 B)False

Question 8

In a public corporation,asymmetric information often results in a principal-agent problem between top management and ownership.What information would help to prevent this principal-agent problem?

Accepted Answer

Top managers know more about how the com

Question 9

You have a bond that pays $125 per year in coupon payments.Which of the following would result in an increase in the price of your bond?

Accepted Answer

A) Coupon payments on newly-issued bonds rise to $140 per year. 
B) The likelihood that the firm issuing your bond will default on debt increases. 
C) The price of a share of stock in the company falls. 
D) Coupon payments on newly-issued bonds fall to $75 per year. 
A) Coupon payments on newly-issued bonds rise to $140 per year. 
B) The likelihood that the firm issuing your bond will default on debt increases. 
C) The price of a share of stock in the company falls. 
D) Coupon payments on newly-issued bonds fall to $75 per year.

Question 10

Which of the following can only be sold back to the firm that issued them?

Accepted Answer

A) stocks 
B) bonds 
C) mutual funds 
D) exchange-traded funds 
A) stocks 
B) bonds 
C) mutual funds 
D) exchange-traded funds

Question 11

Corporate managers and shareholders do not always have the same goals.

Accepted Answer

A) True 
 B)False

Question 12

By the percentage of each type of business organization in the United States,rank sole proprietorships,partnerships,and corporations in terms of the number of firms,revenue,and profits.

Accepted Answer

In terms of the number of firms,sole pro

Question 13

The Sarbanes-Oxley Act was passed in response to the 2007-2009 financial crisis.

Accepted Answer

A) True 
 B)False

Question 14

Information in a firm's financial statements

Accepted Answer

A) helps the firm's managers make decisions. 
B) assists investors who are considering buying the firm's stock. 
C) guide resource allocation in the economy. 
D) all of the above 
A) helps the firm's managers make decisions. 
B) assists investors who are considering buying the firm's stock. 
C) guide resource allocation in the economy. 
D) all of the above

Question 15

Pietro is a manager at a carwash.He has hired 10 workers to wash and detail cars for him and is considering what type of payment scheme he should set up for his workers.He can pay each of his workers $9 per hour to wash and detail cars,or he can pay his workers $12 for each car a worker washes and details.(It takes 75 minutes,on average,for an employee to wash and detail a car.)If Pietro wants to maximize the number of cars his workers wash and detail in one day,which payment scheme should he use? Explain.

Accepted Answer

If Pietro wants to maximize the number o

Question 16

If a firm raises funds by recruiting additional owners to invest in the firm

Accepted Answer

A) the firm's financial capital would increase. 
B) the firm's financial capital would decrease. 
C) the firm's stock price would decrease. 
D) the firm's net worth would decrease. 
A) the firm's financial capital would increase. 
B) the firm's financial capital would decrease. 
C) the firm's stock price would decrease. 
D) the firm's net worth would decrease.

Question 17

Mutual funds are a good and relatively inexpensive way for individual investors to diversify.

Accepted Answer

A) True 
 B)False

Question 18

Assume you and your best friend set up a partnership and your lawyer tells you that as the owners,you could each stand to lose your personal wealth if the business goes bankrupt.This means a partnership

Accepted Answer

A) faces limited liability. 
B) faces unlimited liability. 
C) has little chance of succeeding. 
D) is not a good type of business to set up. 
A) faces limited liability. 
B) faces unlimited liability. 
C) has little chance of succeeding. 
D) is not a good type of business to set up.

Question 19

In many corporations,the managers of the corporation run the corporation,although the shareholders own the corporation.In this situation

Accepted Answer

A) there are no inside directors on the board of directors. 
B) there is separation of ownership from control. 
C) there are no outside directors on the board of directors. 
D) there is no corporate governance. 
A) there are no inside directors on the board of directors. 
B) there is separation of ownership from control. 
C) there are no outside directors on the board of directors. 
D) there is no corporate governance.

Question 20

Which of the following is an example of an implicit cost a firm might incur?

Accepted Answer

A) the wages paid to employees 
B) the payment for medical insurance coverage 
C) the opportunity cost to investors of the funds invested in the firm 
D) utility payments 
A) the wages paid to employees 
B) the payment for medical insurance coverage 
C) the opportunity cost to investors of the funds invested in the firm 
D) utility payments

From the highest to the lowest,the percentage of revenues earned by businesses in the United States is represented by which of the following?

Tying the salaries of top managers to the firm's stock price or to the profitability of the firm allows a firm's board of directors to

Arturo wants to start a business where he is the chief executive officer and the company does issue stock.The type of business Arturo wants to start is a

When an investor buys a corporate bond,the ________ is a loan to the corporation.

A financial statement that sums up a firm's financial position on a particular day is

The Sarbanes-Oxley Act of 2002

Corporations are legally owned by their board of directors.

In a public corporation,asymmetric information often results in a principal-agent problem between top management and ownership.What information would help to prevent this principal-agent problem?

You have a bond that pays $125 per year in coupon payments.Which of the following would result in an increase in the price of your bond?

Which of the following can only be sold back to the firm that issued them?

Corporate managers and shareholders do not always have the same goals.

By the percentage of each type of business organization in the United States,rank sole proprietorships,partnerships,and corporations in terms of the number of firms,revenue,and profits.

The Sarbanes-Oxley Act was passed in response to the 2007-2009 financial crisis.

Information in a firm's financial statements

If a firm raises funds by recruiting additional owners to invest in the firm

Mutual funds are a good and relatively inexpensive way for individual investors to diversify.

Assume you and your best friend set up a partnership and your lawyer tells you that as the owners,you could each stand to lose your personal wealth if the business goes bankrupt.This means a partnership

In many corporations,the managers of the corporation run the corporation,although the shareholders own the corporation.In this situation

Which of the following is an example of an implicit cost a firm might incur?

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

From the highest to the lowest,the percentage of revenues earned by businesses in the United States is represented by which of the following?

Tying the salaries of top managers to the firm's stock price or to the profitability of the firm allows a firm's board of directors to

Arturo wants to start a business where he is the chief executive officer and the company does issue stock.The type of business Arturo wants to start is a

When an investor buys a corporate bond,the ________ is a loan to the corporation.

A financial statement that sums up a firm's financial position on a particular day is

The Sarbanes-Oxley Act of 2002

Corporations are legally owned by their board of directors.

In a public corporation,asymmetric information often results in a principal-agent problem between top management and ownership.What information would help to prevent this principal-agent problem?

You have a bond that pays $125 per year in coupon payments.Which of the following would result in an increase in the price of your bond?

Which of the following can only be sold back to the firm that issued them?

Corporate managers and shareholders do not always have the same goals.

By the percentage of each type of business organization in the United States,rank sole proprietorships,partnerships,and corporations in terms of the number of firms,revenue,and profits.

The Sarbanes-Oxley Act was passed in response to the 2007-2009 financial crisis.

Information in a firm's financial statements

If a firm raises funds by recruiting additional owners to invest in the firm

Mutual funds are a good and relatively inexpensive way for individual investors to diversify.

Assume you and your best friend set up a partnership and your lawyer tells you that as the owners,you could each stand to lose your personal wealth if the business goes bankrupt.This means a partnership

In many corporations,the managers of the corporation run the corporation,although the shareholders own the corporation.In this situation

Which of the following is an example of an implicit cost a firm might incur?

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