Question 1

Firms disclose financial statements in ________ and in ________.

Accepted Answer

A)  periodic filings to the federal government; annual reports to shareholders 
B)  daily filings to the federal government; daily reports to shareholders 
C)  monthly reports to shareholders; 5-year balance statements to the board of directors 
D)  weekly filings with the SEC; monthly reports to the Fed 
A)  periodic filings to the federal government; annual reports to shareholders 
B)  daily filings to the federal government; daily reports to shareholders 
C)  monthly reports to shareholders; 5-year balance statements to the board of directors 
D)  weekly filings with the SEC; monthly reports to the Fed A

Question 2

What is economic profit?

Accepted Answer

A)  gross revenue minus explicit costs 
B)  gross revenue minus implicit costs 
C)  gross revenue minus explicit and implicit costs 
D)  the same as accounting profit 
A)  gross revenue minus explicit costs 
B)  gross revenue minus implicit costs 
C)  gross revenue minus explicit and implicit costs 
D)  the same as accounting profit C

Question 3

Explain the relationships between a corporation's shareholders,its board of directors,and its top managers.

Accepted Answer

Shareholders are the legal owners of a corporation.Shareholders elect the board of directors to represent their interests.The board of directors appoint members of top management to run the day-to-day operations of the corporation.

Question 4

Why is a dollar today more valuable than a dollar a year from now?

Accepted Answer

A)  The dollar today can be immediately used to buy something. 
B)  A dollar a year from now will likely have less purchasing power because of inflation. 
C)  The unknown future is riskier than the known present. 
D)  all of these 
A)  The dollar today can be immediately used to buy something. 
B)  A dollar a year from now will likely have less purchasing power because of inflation. 
C)  The unknown future is riskier than the known present. 
D)  all of these

Question 5

How can a partnership raise funds needed for firm expansion?

Accepted Answer

By retaining earning

Question 6

Steve Ballmer is the Chief Executive Officer of Microsoft as well as a member of Microsoft's board of directors.Ballmer is therefore classified as an

Accepted Answer

A)  inside director. 
B)  outside director. 
C)  independent director. 
D)  unbiased director. 
A)  inside director. 
B)  outside director. 
C)  independent director. 
D)  unbiased director.

Question 7

Net worth and stockholders' equity are both equal to the difference between assets and liabilities.

Accepted Answer

A) True 
 B)False

Question 8

What can be done to deal with the principal-agent problem?

Accepted Answer

A)  threaten to liquidate the firm 
B)  link top manager salaries to the profits of the firm or the price of the firm's stock 
C)  have the CEO be a rotating position 
D)  forbid managers from owning any company stock 
A)  threaten to liquidate the firm 
B)  link top manager salaries to the profits of the firm or the price of the firm's stock 
C)  have the CEO be a rotating position 
D)  forbid managers from owning any company stock

Question 9

Direct finance includes the sale by a corporation of stocks or bonds,but does not include borrowing money from a bank.

Accepted Answer

A) True 
 B)False

Question 10

You have a bond that pays $60 per year in coupon payments.Which of the following would result in a decrease in the price of your bond?

Accepted Answer

A)  Coupon payments on newly-issued bonds fall to $40 per year. 
B)  The likelihood that the firm issuing your bond will default on debt decreases. 
C)  The price of a share of stock in the company rises. 
D)  Coupon payments on newly-issued bonds rise to $75 per year. 
A)  Coupon payments on newly-issued bonds fall to $40 per year. 
B)  The likelihood that the firm issuing your bond will default on debt decreases. 
C)  The price of a share of stock in the company rises. 
D)  Coupon payments on newly-issued bonds rise to $75 per year.

Question 11

Jeremy is thinking of starting up a small business selling NASCAR memorabilia.He is considering setting up his business as a sole proprietorship.What is one disadvantage to Jeremy of setting up his business as a sole proprietorship?

Accepted Answer

A)  As a sole proprietor, Jeremy would be taxed twice. 
B)  As a sole proprietor, Jeremy would not have control of the business. 
C)  As a sole proprietor, Jeremy would face unlimited liability. 
D)  As a sole proprietor, Jeremy would be subject to significant rules and regulations. 
A)  As a sole proprietor, Jeremy would be taxed twice. 
B)  As a sole proprietor, Jeremy would not have control of the business. 
C)  As a sole proprietor, Jeremy would face unlimited liability. 
D)  As a sole proprietor, Jeremy would be subject to significant rules and regulations.

Question 12

A nonmonetary opportunity cost is called a(n)________,while a cost that involves spending money is called a(n)________.

Accepted Answer

A)  accounting cost; explicit cost 
B)  implicit cost; explicit cost 
C)  accounting profit; economic profit 
D)  normal rate of return; asset 
A)  accounting cost; explicit cost 
B)  implicit cost; explicit cost 
C)  accounting profit; economic profit 
D)  normal rate of return; asset

Question 13

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 14

Generally with bond ratings,the higher the rating,the ________ the interest rate an investor will receive and the ________ 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 15

How much is a bond that pays $20 in coupon payments for 4 years and $1,000 at the end of the fourth year worth if the interest rate is 5%?

Accepted Answer

A)  $822.70 
B)  $893.62 
C)  $1,070.92 
D)  $1,080 
A)  $822.70 
B)  $893.62 
C)  $1,070.92 
D)  $1,080

Question 16

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 17

Who owns a corporation?

Accepted Answer

A)  the board of directors 
B)  the stockholders 
C)  the employees 
D)  the CEO 
A)  the board of directors 
B)  the stockholders 
C)  the employees 
D)  the CEO

Question 18

Raising funds through financial intermediaries is called

Accepted Answer

A)  direct finance. 
B)  corporate finance. 
C)  indirect finance. 
D)  dividend reinvestment. 
A)  direct finance. 
B)  corporate finance. 
C)  indirect finance. 
D)  dividend reinvestment.

Question 19

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 20

In a typical year,________ of new jobs are created by small firms.

Accepted Answer

A)  less than 5 percent 
B)  10 percent 
C)  40 percent 
D)  75 percent 
A)  less than 5 percent 
B)  10 percent 
C)  40 percent 
D)  75 percent

Firms disclose financial statements in and in .

What is economic profit?

Explain the relationships between a corporation's shareholders,its board of directors,and its top managers.

Why is a dollar today more valuable than a dollar a year from now?

How can a partnership raise funds needed for firm expansion?

Steve Ballmer is the Chief Executive Officer of Microsoft as well as a member of Microsoft's board of directors.Ballmer is therefore classified as an

Net worth and stockholders' equity are both equal to the difference between assets and liabilities.

What can be done to deal with the principal-agent problem?

Direct finance includes the sale by a corporation of stocks or bonds,but does not include borrowing money from a bank.

You have a bond that pays $60 per year in coupon payments.Which of the following would result in a decrease in the price of your bond?

Jeremy is thinking of starting up a small business selling NASCAR memorabilia.He is considering setting up his business as a sole proprietorship.What is one disadvantage to Jeremy of setting up his business as a sole proprietorship?

A nonmonetary opportunity cost is called a(n),while a cost that involves spending money is called a(n).

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

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

How much is a bond that pays $20 in coupon payments for 4 years and $1,000 at the end of the fourth year worth if the interest rate is 5%?

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

Who owns a corporation?

Raising funds through financial intermediaries is called

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?

In a typical year,________ of new jobs are created by small firms.

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

Externalities, environmental Policy, and Public Goods

Elasticity: The Responsiveness of Demand and Supply

The Economics of Health Care

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice,taxes,and the Distribution of Income

Filters

Exam 8: Firms, the Stock Market, and Corporate Governance

Firms disclose financial statements in ________ and in ________.

What is economic profit?

Explain the relationships between a corporation's shareholders,its board of directors,and its top managers.

Why is a dollar today more valuable than a dollar a year from now?

How can a partnership raise funds needed for firm expansion?

Steve Ballmer is the Chief Executive Officer of Microsoft as well as a member of Microsoft's board of directors.Ballmer is therefore classified as an

Net worth and stockholders' equity are both equal to the difference between assets and liabilities.

What can be done to deal with the principal-agent problem?

Direct finance includes the sale by a corporation of stocks or bonds,but does not include borrowing money from a bank.

You have a bond that pays $60 per year in coupon payments.Which of the following would result in a decrease in the price of your bond?

Jeremy is thinking of starting up a small business selling NASCAR memorabilia.He is considering setting up his business as a sole proprietorship.What is one disadvantage to Jeremy of setting up his business as a sole proprietorship?

A nonmonetary opportunity cost is called a(n)________,while a cost that involves spending money is called a(n)________.

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

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

How much is a bond that pays $20 in coupon payments for 4 years and $1,000 at the end of the fourth year worth if the interest rate is 5%?

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

Who owns a corporation?

Raising funds through financial intermediaries is called

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?

In a typical year,________ of new jobs are created by small firms.

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

Externalities, environmental Policy, and Public Goods

Elasticity: The Responsiveness of Demand and Supply

The Economics of Health Care

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice,taxes,and the Distribution of Income

Filters

Firms disclose financial statements in and in .

A nonmonetary opportunity cost is called a(n),while a cost that involves spending money is called a(n).

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