Question 1

Sole proprietorships are ________ type of business.

Accepted Answer

A) the most profitable 
B) the least common 
C) the most common 
D) the least risky 
A) the most profitable 
B) the least common 
C) the most common 
D) the least risky

Question 2

Define a corporation.

Accepted Answer

A corporation is a legal form

Question 3

An explicit cost is

Accepted Answer

A) a nonmonetary opportunity cost. 
B) a cost specifically related to government rules and regulations. 
C) a cost that involves spending money. 
D) a cost unique to corporations. 
A) a nonmonetary opportunity cost. 
B) a cost specifically related to government rules and regulations. 
C) a cost that involves spending money. 
D) a cost unique to corporations.

Question 4

Generally with bond ratings,the lower the rating,the ________ the interest rate an investor will receive and the ________ the risk that the issuer of the bond will default.

Accepted Answer

A) higher; higher 
B) higher; lower 
C) lower; higher 
D) lower; lower 
A) higher; higher 
B) higher; lower 
C) lower; higher 
D) lower; lower

Question 5

How is accounting profit found?

Accepted Answer

Accounting profit eq

Question 6

Tanesha sells homemade candles over the Internet.Her annual revenue is $64,000 per year,the explicit costs of her business are $17,000,and the opportunity costs of her business are $22,000.What is her economic profit?

Accepted Answer

A) $17,000 
B) $25,000 
C) $42,000 
D) $47,000 
A) $17,000 
B) $25,000 
C) $42,000 
D) $47,000

Question 7

The principal-agent problem that exists between shareholders and managers also exists between managers and workers.

Accepted Answer

A) True 
 B)False

Question 8

What is an inside director?

Accepted Answer

A) a movie director who also appears in the movie 
B) a member of a corporate board of directors that is also a manager of the business 
C) the CEO that is selected by the corporation's board of directors 
D) a board of director chair who has been in the job for at least three years 
A) a movie director who also appears in the movie 
B) a member of a corporate board of directors that is also a manager of the business 
C) the CEO that is selected by the corporation's board of directors 
D) a board of director chair who has been in the job for at least three years

Question 9

What are liabilities?

Accepted Answer

A) anything of value owned by a person or a business 
B) anything a person or a business owes to entities outside the business 
C) the total cost of labor for a firm 
D) only those unpaid expenses for which a business or person is making interest payments 
A) anything of value owned by a person or a business 
B) anything a person or a business owes to entities outside the business 
C) the total cost of labor for a firm 
D) only those unpaid expenses for which a business or person is making interest payments

Question 10

The Sarbanes-Oxley Act of 2002 requires that CEOs personally certify the accuracy of financial reports.

Accepted Answer

A) True 
 B)False

Question 11

What takes place in the indirect finance market?

Accepted Answer

A) Part ownership of corporations is sold in the form of stocks. 
B) Corporate and government bonds are sold to savers. 
C) Deposits of savers are accepted and loans made to borrowers. 
D) Government purchases of buildings and equipment are sold to the highest bidder. 
A) Part ownership of corporations is sold in the form of stocks. 
B) Corporate and government bonds are sold to savers. 
C) Deposits of savers are accepted and loans made to borrowers. 
D) Government purchases of buildings and equipment are sold to the highest bidder.

Question 12

What must balance on a balance sheet?

Accepted Answer

A) Total assets must equal total liabilities plus equity. 
B) Revenues must equal costs. 
C) Retained earnings plus dividends paid must equal earnings per share. 
D) All of these must balance. 
A) Total assets must equal total liabilities plus equity. 
B) Revenues must equal costs. 
C) Retained earnings plus dividends paid must equal earnings per share. 
D) All of these must balance.

Question 13

How can a proprietorship or partnership raise funds for expansion?

Accepted Answer

A) borrow from someone or an institution willing to lend the funds 
B) reinvest profit back into the business 
C) take on a partner or more partners 
D) Any of these would generate funds for expansion. 
A) borrow from someone or an institution willing to lend the funds 
B) reinvest profit back into the business 
C) take on a partner or more partners 
D) Any of these would generate funds for expansion.

Question 14

Seth's grandmother gave him a $50 savings bond for his birthday.The bond pays $50 at maturity,which is in five years.If the interest rate is 5%,the bond has a present value of $43.19.

Accepted Answer

A) True 
 B)False

Question 15

If Abercrombie & Fitch borrows $8 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 16

Abercrombie & Fitch wants to raise $8 million to finance the construction of a new store,and the company wishes to raise the funds through direct finance.Which of the following methods could it use?

Accepted Answer

A) It could sell $8 million in bonds. 
B) It could borrow $8 million from a bank. 
C) It could issue $8 million in stocks. 
D) It could choose either A or C. 
A) It could sell $8 million in bonds. 
B) It could borrow $8 million from a bank. 
C) It could issue $8 million in stocks. 
D) It could choose either A or C.

Question 17

The existence of the principal-agent problem

Accepted Answer

A) increases the risk of buying stock in a corporation. 
B) increases the risk of becoming the sole proprietor of a business. 
C) implies that managers that have the same incentives as the board of directors. 
D) does all of the above. 
A) increases the risk of buying stock in a corporation. 
B) increases the risk of becoming the sole proprietor of a business. 
C) implies that managers that have the same incentives as the board of directors. 
D) does all of the above.

Question 18

In addition to requiring that CEO's personally certify the accuracy of financial statements,the Sarbanes-Oxley Act of 2002 also requires that

Accepted Answer

A) CEO's conduct audits of their corporations themselves. 
B) firms raise funds for expansion through the sale of bonds only,not stocks. 
C) auditors disclose any potential conflicts of interest. 
D) corporations issue financial statements monthly rather than quarterly. 
A) CEO's conduct audits of their corporations themselves. 
B) firms raise funds for expansion through the sale of bonds only,not stocks. 
C) auditors disclose any potential conflicts of interest. 
D) corporations issue financial statements monthly rather than quarterly.

Question 19

In the United States,partnership profits are taxed at the business level and then are taxed again as personal income in the form of dividend payments.

Accepted Answer

A) True 
 B)False

Question 20

Economists refer to the conflict between the interests of shareholders and the interests of top management as

Accepted Answer

A) a stock-equity problem. 
B) a liability problem. 
C) a principal-agent problem. 
D) a financial intermediary problem. 
A) a stock-equity problem. 
B) a liability problem. 
C) a principal-agent problem. 
D) a financial intermediary problem.

Sole proprietorships are ________ type of business.

Define a corporation.

An explicit cost is

Generally with bond ratings,the lower the rating,the the interest rate an investor will receive and the the risk that the issuer of the bond will default.

How is accounting profit found?

Tanesha sells homemade candles over the Internet.Her annual revenue is $64,000 per year,the explicit costs of her business are $17,000,and the opportunity costs of her business are $22,000.What is her economic profit?

The principal-agent problem that exists between shareholders and managers also exists between managers and workers.

What is an inside director?

What are liabilities?

The Sarbanes-Oxley Act of 2002 requires that CEOs personally certify the accuracy of financial reports.

What takes place in the indirect finance market?

What must balance on a balance sheet?

How can a proprietorship or partnership raise funds for expansion?

Seth's grandmother gave him a $50 savings bond for his birthday.The bond pays $50 at maturity,which is in five years.If the interest rate is 5%,the bond has a present value of $43.19.

If Abercrombie & Fitch borrows $8 million from a bank to finance the construction of a new store,this is an example of

Abercrombie & Fitch wants to raise $8 million to finance the construction of a new store,and the company wishes to raise the funds through direct finance.Which of the following methods could it use?

The existence of the principal-agent problem

In addition to requiring that CEO's personally certify the accuracy of financial statements,the Sarbanes-Oxley Act of 2002 also requires that

In the United States,partnership profits are taxed at the business level and then are taxed again as personal income in the form of dividend payments.

Economists refer to the conflict between the interests of shareholders and the interests of top management as

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

Sole proprietorships are ________ type of business.

Define a corporation.

An explicit cost is

Generally with bond ratings,the lower the rating,the ________ the interest rate an investor will receive and the ________ the risk that the issuer of the bond will default.

How is accounting profit found?

Tanesha sells homemade candles over the Internet.Her annual revenue is $64,000 per year,the explicit costs of her business are $17,000,and the opportunity costs of her business are $22,000.What is her economic profit?

The principal-agent problem that exists between shareholders and managers also exists between managers and workers.

What is an inside director?

What are liabilities?

The Sarbanes-Oxley Act of 2002 requires that CEOs personally certify the accuracy of financial reports.

What takes place in the indirect finance market?

What must balance on a balance sheet?

How can a proprietorship or partnership raise funds for expansion?

Seth's grandmother gave him a $50 savings bond for his birthday.The bond pays $50 at maturity,which is in five years.If the interest rate is 5%,the bond has a present value of $43.19.

If Abercrombie & Fitch borrows $8 million from a bank to finance the construction of a new store,this is an example of

Abercrombie & Fitch wants to raise $8 million to finance the construction of a new store,and the company wishes to raise the funds through direct finance.Which of the following methods could it use?

The existence of the principal-agent problem

In addition to requiring that CEO's personally certify the accuracy of financial statements,the Sarbanes-Oxley Act of 2002 also requires that

In the United States,partnership profits are taxed at the business level and then are taxed again as personal income in the form of dividend payments.

Economists refer to the conflict between the interests of shareholders and the interests of top management as

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

Generally with bond ratings,the lower the rating,the the interest rate an investor will receive and the the risk that the issuer of the bond will default.