Question 1

Two of the firms involved in the accounting scandals of the early 2000s were

Accepted Answer

A) Arthur Anderson and NBC. 
B) Western Digital and General Motors. 
C) WorldCom and Enron. 
D) DuPont and Lehman Brothers. 
A) Arthur Anderson and NBC. 
B) Western Digital and General Motors. 
C) WorldCom and Enron. 
D) DuPont and Lehman Brothers.

Question 2

What is the difference between retained earnings and dividends?

Accepted Answer

Retained earnings are profits

Question 3

How do the owners of a partnership relate to the business?

Accepted Answer

A) The owners and the business are not separate legal entities. 
B) The owners and the business are separate legal entities. 
C) The assets of the owners are considered separate from the asset of the business. 
D) None of these describe the legal relationship of the owners to the business. 
A) The owners and the business are not separate legal entities. 
B) The owners and the business are separate legal entities. 
C) The assets of the owners are considered separate from the asset of the business. 
D) None of these describe the legal relationship of the owners to the business.

Question 4

How does a firm raise external funds through direct finance?

Accepted Answer

With direct finance,funds flow

Question 5

When an investor buys a corporate bond,

Accepted Answer

A) the investor becomes part owner of the corporation. 
B) the principal of the bond is a loan to the corporation. 
C) the interest made on the bond represents the bondholder's limited liability in the company. 
D) the face value of the bond is equal to what the investor paid for the bond. 
A) the investor becomes part owner of the corporation. 
B) the principal of the bond is a loan to the corporation. 
C) the interest made on the bond represents the bondholder's limited liability in the company. 
D) the face value of the bond is equal to what the investor paid for the bond.

Question 6

In October 2013,General Motors (GM)posted a price-earnings ratio of 10.13.If the price of the stock at that time was $36 per share,which of the following must have been true?

Accepted Answer

A) GM's revenues that month were $364.68 million. 
B) GM's earnings per share was $3.55. 
C) GM's coupon payment was $36 per year. 
D) GM's dividend yield for the year was 36.5%. 
A) GM's revenues that month were $364.68 million. 
B) GM's earnings per share was $3.55. 
C) GM's coupon payment was $36 per year. 
D) GM's dividend yield for the year was 36.5%.

Question 7

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 8

If you purchase a share of stock from your friend who initially purchased the stock three years ago,your purchase of the stock represents a transaction in the secondary financial market.

Accepted Answer

A) True 
 B)False

Question 9

When the coupon rate on newly issued bonds increases relative to older,outstanding bonds,what happens?

Accepted Answer

A) The market price of the older bond falls in the secondary market. 
B) The market price of the older bond rises in the secondary market. 
C) Older bonds can still be sold at their face value. 
D) Older bonds will sell for less than their face value. 
A) The market price of the older bond falls in the secondary market. 
B) The market price of the older bond rises in the secondary market. 
C) Older bonds can still be sold at their face value. 
D) Older bonds will sell for less than their face value.

Question 10

When Potbelly sold stock to the public in its IPO,it did so through the NASDAQ market.This was an example of Potbelly using ________ to raise funds.

Accepted Answer

A) indirect finance 
B) direct finance 
C) bonds 
D) corporate governance 
A) indirect finance 
B) direct finance 
C) bonds 
D) corporate governance

Question 11

Assume you set up a sole proprietorship and your lawyer tells you that as the owner,you could stand to lose your personal wealth if the business goes bankrupt.This means a sole proprietorship

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 12

What type of business is the easiest to set up?

Accepted Answer

A) sole proprietorship 
B) partnership 
C) corporation 
D) There is no difference in the ease of establishment. 
A) sole proprietorship 
B) partnership 
C) corporation 
D) There is no difference in the ease of establishment.

Question 13

When Zynga,the company behind the social games CityVille and Words With Friends,sold stock to the public for the first time in December 2011,funds were being raised in a ________ market,and when those newly issued shares are resold to other buyers,the sales take place in a ________ market.

Accepted Answer

A) primary; primary 
B) primary; secondary 
C) secondary; primary 
D) secondary; secondary 
A) primary; primary 
B) primary; secondary 
C) secondary; primary 
D) secondary; secondary

Question 14

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 15

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

Accepted Answer

A) True 
 B)False

Question 16

What is a secondary market?

Accepted Answer

A) a market where factory seconds and damaged merchandise are sold 
B) a market where newly issued bonds are sold to initial buyers by the borrowing firm 
C) a market where a newly issued stocks are sold to initial buyers by the borrowing firm 
D) a market where you can sell any stocks you own as a private investor 
A) a market where factory seconds and damaged merchandise are sold 
B) a market where newly issued bonds are sold to initial buyers by the borrowing firm 
C) a market where a newly issued stocks are sold to initial buyers by the borrowing firm 
D) a market where you can sell any stocks you own as a private investor

Two of the firms involved in the accounting scandals of the early 2000s were

What is the difference between retained earnings and dividends?

How do the owners of a partnership relate to the business?

How does a firm raise external funds through direct finance?

When an investor buys a corporate bond,

In October 2013,General Motors (GM)posted a price-earnings ratio of 10.13.If the price of the stock at that time was $36 per share,which of the following must have been true?

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?

If you purchase a share of stock from your friend who initially purchased the stock three years ago,your purchase of the stock represents a transaction in the secondary financial market.

When the coupon rate on newly issued bonds increases relative to older,outstanding bonds,what happens?

When Potbelly sold stock to the public in its IPO,it did so through the NASDAQ market.This was an example of Potbelly using ________ to raise funds.

Assume you set up a sole proprietorship and your lawyer tells you that as the owner,you could stand to lose your personal wealth if the business goes bankrupt.This means a sole proprietorship

What type of business is the easiest to set up?

When Zynga,the company behind the social games CityVille and Words With Friends,sold stock to the public for the first time in December 2011,funds were being raised in a market,and when those newly issued shares are resold to other buyers,the sales take place in a market.

On a balance sheet

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

What is a secondary market?

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

Two of the firms involved in the accounting scandals of the early 2000s were

What is the difference between retained earnings and dividends?

How do the owners of a partnership relate to the business?

How does a firm raise external funds through direct finance?

When an investor buys a corporate bond,

In October 2013,General Motors (GM)posted a price-earnings ratio of 10.13.If the price of the stock at that time was $36 per share,which of the following must have been true?

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?

If you purchase a share of stock from your friend who initially purchased the stock three years ago,your purchase of the stock represents a transaction in the secondary financial market.

When the coupon rate on newly issued bonds increases relative to older,outstanding bonds,what happens?

When Potbelly sold stock to the public in its IPO,it did so through the NASDAQ market.This was an example of Potbelly using ________ to raise funds.

Assume you set up a sole proprietorship and your lawyer tells you that as the owner,you could stand to lose your personal wealth if the business goes bankrupt.This means a sole proprietorship

What type of business is the easiest to set up?

When Zynga,the company behind the social games CityVille and Words With Friends,sold stock to the public for the first time in December 2011,funds were being raised in a ________ market,and when those newly issued shares are resold to other buyers,the sales take place in a ________ market.

On a balance sheet

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

What is a secondary market?

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

When Zynga,the company behind the social games CityVille and Words With Friends,sold stock to the public for the first time in December 2011,funds were being raised in a market,and when those newly issued shares are resold to other buyers,the sales take place in a market.