Question 1

Accounting profit is the difference between a firm's revenue and its opportunity costs.

Accepted Answer

A) True 
 B)False

Question 2

What is shown on a firm's income statement?

Accepted Answer

A) costs 
B) profits 
C) revenues 
D) All of these are shown on a firm's income statement. 
A) costs 
B) profits 
C) revenues 
D) All of these are shown on a firm's income statement.

Question 3

If you put $100 into a bank account that earns five percent interest per year,what is the formula you should use to determine the account's future value in one year?

Accepted Answer

A) Future value equals the present value divided by the rate of interest. 
B) Future value equals the present value multiplied by the rate of interest. 
C) Future value equals the present value multiplied by one plus the rate of interest in decimals. 
D) All of these yield the same answer. 
A) Future value equals the present value divided by the rate of interest. 
B) Future value equals the present value multiplied by the rate of interest. 
C) Future value equals the present value multiplied by one plus the rate of interest in decimals. 
D) All of these yield the same answer.

Question 4

In 2013,the dividend yield on Abercrombie & Fitch (ANF)stock rose from a low of 1.33% in May to 2.24% in October.Which of the following would have generated that result?

Accepted Answer

A) The closing price of ANF stock rose. 
B) ANF announced an increase in the dividend it would pay per share. 
C) The price-earnings ratio fell. 
D) ANF issued bonds with a coupon rate equal to 2.24%. 
A) The closing price of ANF stock rose. 
B) ANF announced an increase in the dividend it would pay per share. 
C) The price-earnings ratio fell. 
D) ANF issued bonds with a coupon rate equal to 2.24%.

Question 5

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 6

If a corporation goes bankrupt,bondholders have ________ on the firm's assets.

Accepted Answer

A) no claim 
B) third claim,after the IRS and stockholders, 
C) second claim,after stockholders, 
D) first claim 
A) no claim 
B) third claim,after the IRS and stockholders, 
C) second claim,after stockholders, 
D) first claim

Question 7

An investor is more likely to buy a firm's stock if the firm's income statement shows ________ and if its balance sheet shows ________.

Accepted Answer

A) a large net worth; a large price-earnings ratio 
B) a large after-tax profit; a large net worth 
C) a large price-earnings ratio; a large dividend yield 
D) low opportunity costs; large liabilities 
A) a large net worth; a large price-earnings ratio 
B) a large after-tax profit; a large net worth 
C) a large price-earnings ratio; a large dividend yield 
D) low opportunity costs; large liabilities

Question 8

Corporate managers and shareholders always have the same goals.

Accepted Answer

A) True 
 B)False

Question 9

In 2002,the Enron corporation was accused of falsifying information regarding liabilities on Enron's balance sheets,thereby

Accepted Answer

A) increasing Enron's assets on the balance sheet. 
B) reducing Enron's profit on the balance sheet. 
C) increasing Enron's net worth on the balance sheet. 
D) reducing Enron's net income on the income statement. 
A) increasing Enron's assets on the balance sheet. 
B) reducing Enron's profit on the balance sheet. 
C) increasing Enron's net worth on the balance sheet. 
D) reducing Enron's net income on the income statement.

Question 10

If you own a $1,000 face value bond with one year remaining to maturity and a 3 percent coupon rate and new bonds are paying 14 percent,what is the most you can get for your old bond?

Accepted Answer

A) $903.51 
B) $997.19 
C) $1,000 
D) $1,140 
A) $903.51 
B) $997.19 
C) $1,000 
D) $1,140

Question 11

A sole proprietorship is

Accepted Answer

A) the easiest type of business to set up. 
B) the most difficult type of business to set up. 
C) the most expensive type of business to set up. 
D) the least profitable type of business to set up. 
A) the easiest type of business to set up. 
B) the most difficult type of business to set up. 
C) the most expensive type of business to set up. 
D) the least profitable type of business to set up.

Question 12

Organizing a successful firm in a market economy has become ________ over the last century.

Accepted Answer

A) legally impossible 
B) politically impossible 
C) less difficult 
D) more difficult 
A) legally impossible 
B) politically impossible 
C) less difficult 
D) more difficult

Question 13

Which of the following is part of the secondary market?

Accepted Answer

A) New York Stock Exchange 
B) the over-the-counter market 
C) NASDAQ 
D) all of these 
A) New York Stock Exchange 
B) the over-the-counter market 
C) NASDAQ 
D) all of these

Question 14

The Sarbanes-Oxley Act of 2002 requires that each member of the board of directors personally certify the accuracy of financial reports.

Accepted Answer

A) True 
 B)False

Question 15

By tying the salaries of top corporate managers to the price of the corporation's stock,corporations hope to avoid

Accepted Answer

A) corporate governance. 
B) conflict between the CFO and the CEO. 
C) the principal-agent problem. 
D) paying high salaries to their managers. 
A) corporate governance. 
B) conflict between the CFO and the CEO. 
C) the principal-agent problem. 
D) paying high salaries to their managers.

Question 16

Which of the following is operating income?

Accepted Answer

A) explicit plus implicit costs 
B) stockholders' equity 
C) revenue minus operating expenses 
D) net profit 
A) explicit plus implicit costs 
B) stockholders' equity 
C) revenue minus operating expenses 
D) net profit

Question 17

When groups of mortgages are bundled together by financial institutions and sold to investors,these institutions are said to be ________ mortgage loans.

Accepted Answer

A) securitizing 
B) underwriting 
C) liquidating 
D) harvesting 
A) securitizing 
B) underwriting 
C) liquidating 
D) harvesting

Question 18

If a corporate bond with face value of $1,000 has an interest rate of eight percent paid once a year for a term of 30 years,what is the size of the coupon payment?

Accepted Answer

A) $1,000 
B) $300 
C) $80 
D) $8 
A) $1,000 
B) $300 
C) $80 
D) $8

Question 19

The person hired by a corporation's board of directors to run the day-to-day operations of the corporation is known as the

Accepted Answer

A) chairman of the board. 
B) chief executive officer. 
C) owner-manager. 
D) corporate governor. 
A) chairman of the board. 
B) chief executive officer. 
C) owner-manager. 
D) corporate governor.

Question 20

Which of the following would be considered an implicit cost of operating a business?

Accepted Answer

A) advertising expenses 
B) wages paid to workers 
C) a normal rate of return for investors 
D) any explicit cost 
A) advertising expenses 
B) wages paid to workers 
C) a normal rate of return for investors 
D) any explicit cost

Accounting profit is the difference between a firm's revenue and its opportunity costs.

What is shown on a firm's income statement?

If you put $100 into a bank account that earns five percent interest per year,what is the formula you should use to determine the account's future value in one year?

In 2013,the dividend yield on Abercrombie & Fitch (ANF)stock rose from a low of 1.33% in May to 2.24% in October.Which of the following would have generated that result?

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

If a corporation goes bankrupt,bondholders have ________ on the firm's assets.

An investor is more likely to buy a firm's stock if the firm's income statement shows and if its balance sheet shows .

Corporate managers and shareholders always have the same goals.

In 2002,the Enron corporation was accused of falsifying information regarding liabilities on Enron's balance sheets,thereby

If you own a $1,000 face value bond with one year remaining to maturity and a 3 percent coupon rate and new bonds are paying 14 percent,what is the most you can get for your old bond?

A sole proprietorship is

Organizing a successful firm in a market economy has become ________ over the last century.

Which of the following is part of the secondary market?

The Sarbanes-Oxley Act of 2002 requires that each member of the board of directors personally certify the accuracy of financial reports.

By tying the salaries of top corporate managers to the price of the corporation's stock,corporations hope to avoid

Which of the following is operating income?

When groups of mortgages are bundled together by financial institutions and sold to investors,these institutions are said to be ________ mortgage loans.

If a corporate bond with face value of $1,000 has an interest rate of eight percent paid once a year for a term of 30 years,what is the size of the coupon payment?

The person hired by a corporation's board of directors to run the day-to-day operations of the corporation is known as the

Which of the following would be considered an implicit cost of operating a business?

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

Accounting profit is the difference between a firm's revenue and its opportunity costs.

What is shown on a firm's income statement?

If you put $100 into a bank account that earns five percent interest per year,what is the formula you should use to determine the account's future value in one year?

In 2013,the dividend yield on Abercrombie & Fitch (ANF)stock rose from a low of 1.33% in May to 2.24% in October.Which of the following would have generated that result?

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

If a corporation goes bankrupt,bondholders have ________ on the firm's assets.

An investor is more likely to buy a firm's stock if the firm's income statement shows ________ and if its balance sheet shows ________.

Corporate managers and shareholders always have the same goals.

In 2002,the Enron corporation was accused of falsifying information regarding liabilities on Enron's balance sheets,thereby

If you own a $1,000 face value bond with one year remaining to maturity and a 3 percent coupon rate and new bonds are paying 14 percent,what is the most you can get for your old bond?

A sole proprietorship is

Organizing a successful firm in a market economy has become ________ over the last century.

Which of the following is part of the secondary market?

The Sarbanes-Oxley Act of 2002 requires that each member of the board of directors personally certify the accuracy of financial reports.

By tying the salaries of top corporate managers to the price of the corporation's stock,corporations hope to avoid

Which of the following is operating income?

When groups of mortgages are bundled together by financial institutions and sold to investors,these institutions are said to be ________ mortgage loans.

If a corporate bond with face value of $1,000 has an interest rate of eight percent paid once a year for a term of 30 years,what is the size of the coupon payment?

The person hired by a corporation's board of directors to run the day-to-day operations of the corporation is known as the

Which of the following would be considered an implicit cost of operating a business?

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

An investor is more likely to buy a firm's stock if the firm's income statement shows and if its balance sheet shows .