Question 1

What is the difference between retained earnings and dividends?

Accepted Answer

Retained earnings are profits

Question 2

If a corporation earns a profit,how do owners of the firm share in the profit?

Accepted Answer

A)  through coupon payments on that firm's bonds 
B)  through dividend payments on shares of that firm's stock 
C)  by selling any bonds or stocks owned and realizing a capital gain 
D)  by raising the interest rate on bonds 
A)  through coupon payments on that firm's bonds 
B)  through dividend payments on shares of that firm's stock 
C)  by selling any bonds or stocks owned and realizing a capital gain 
D)  by raising the interest rate on bonds

Question 3

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 4

Which of the following statements is false?

Accepted Answer

A)  Corporations can issue stocks and bonds, while proprietorships cannot. 
B)  Corporations have one owner, while proprietorships have many owners. 
C)  Corporations face more taxes than do proprietorships. 
D)  Proprietorships have unlimited liability while corporations have limited liability. 
A)  Corporations can issue stocks and bonds, while proprietorships cannot. 
B)  Corporations have one owner, while proprietorships have many owners. 
C)  Corporations face more taxes than do proprietorships. 
D)  Proprietorships have unlimited liability while corporations have limited liability.

Question 5

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 6

A corporation is

Accepted Answer

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

Question 7

Briefly describe the Sarbanes-Oxley Act and explain why it was passed.

Accepted Answer

The Sarbanes-Oxley Act of 2002 was enact

Question 8

How does the owner of a sole proprietorship relate to the business?

Accepted Answer

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

Question 9

Some corporate governance experts believe that serving on a company's board of directors for an extended length of time diminishes that member's independence from the company's CEO.If this is true,it would tend to

Accepted Answer

A)  reduce the principal-agent problem. 
B)  increase the principal-agent problem. 
C)  be in the best interest of shareholders. 
D)  have no impact on the company's performance, since the CEO is only one member of top management. 
A)  reduce the principal-agent problem. 
B)  increase the principal-agent problem. 
C)  be in the best interest of shareholders. 
D)  have no impact on the company's performance, since the CEO is only one member of top management.

Question 10

Which type of business has the most government rules and regulations affecting it?

Accepted Answer

A)  sole proprietorship 
B)  partnership 
C)  corporation 
D)  They all have the same set of rules and regulations affecting them. 
A)  sole proprietorship 
B)  partnership 
C)  corporation 
D)  They all have the same set of rules and regulations affecting them.

Question 11

Payments by a corporation to its shareholders are known as

Accepted Answer

A)  stocks. 
B)  bonds. 
C)  coupons. 
D)  dividends. 
A)  stocks. 
B)  bonds. 
C)  coupons. 
D)  dividends.

Question 12

Donnie's Donuts incurs $450,000 per year in explicit costs and $200,000 in implicit costs.The bakery earns $800,000 in revenues and has $2 million in net worth.Based on this information,what is the economic profit for Donnie's Donuts?

Accepted Answer

A)  $150,000 
B)  $350,000 
C)  $600,000 
D)  $1.2 million 
A)  $150,000 
B)  $350,000 
C)  $600,000 
D)  $1.2 million

Question 13

Explain what potential conflict exists between shareholders in a corporation and the corporation's managers.

Accepted Answer

The "principal-agent problem" exists any

Question 14

Which type of businesses earns the majority of revenues in the United States?

Accepted Answer

A)  corporations 
B)  partnerships 
C)  sole proprietorships 
D)  none of these 
A)  corporations 
B)  partnerships 
C)  sole proprietorships 
D)  none of these

Question 15

In October 2013,Abercrombie & Fitch (ANF)posted a price-earnings ratio of 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)  ANF's revenues that month were $4.68 million. 
B)  ANF's earnings per share was $2.77. 
C)  ANF's coupon payment was $23.23 per year. 
D)  ANF's dividend yield for the year was 47%. 
A)  ANF's revenues that month were $4.68 million. 
B)  ANF's earnings per share was $2.77. 
C)  ANF's coupon payment was $23.23 per year. 
D)  ANF's dividend yield for the year was 47%.

Question 16

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 17

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 18

Which of the following must a firm in a market economy do today to succeed?

Accepted Answer

A)  Produce the goods and services that consumers want at a lower cost than consumers themselves can produce. 
B)  Organize the factors of production into a functioning, efficient unit. 
C)  Have access to sufficient funds. 
D)  Market firms today must do all of these things. 
A)  Produce the goods and services that consumers want at a lower cost than consumers themselves can produce. 
B)  Organize the factors of production into a functioning, efficient unit. 
C)  Have access to sufficient funds. 
D)  Market firms today must do all of these things.

Question 19

Which type of business has the least government rules and regulations affecting it?

Accepted Answer

A)  sole proprietorship 
B)  partnership 
C)  corporation 
D)  They all have the same set of rules and regulations affecting them. 
A)  sole proprietorship 
B)  partnership 
C)  corporation 
D)  They all have the same set of rules and regulations affecting them.

Question 20

How do unlimited and limited liability differ?

Accepted Answer

Unlimited liability means that

What is the difference between retained earnings and dividends?

If a corporation earns a profit,how do owners of the firm share in the profit?

What are liabilities?

Which of the following statements is false?

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.

A corporation is

Briefly describe the Sarbanes-Oxley Act and explain why it was passed.

How does the owner of a sole proprietorship relate to the business?

Some corporate governance experts believe that serving on a company's board of directors for an extended length of time diminishes that member's independence from the company's CEO.If this is true,it would tend to

Which type of business has the most government rules and regulations affecting it?

Payments by a corporation to its shareholders are known as

Donnie's Donuts incurs $450,000 per year in explicit costs and $200,000 in implicit costs.The bakery earns $800,000 in revenues and has $2 million in net worth.Based on this information,what is the economic profit for Donnie's Donuts?

Explain what potential conflict exists between shareholders in a corporation and the corporation's managers.

Which type of businesses earns the majority of revenues in the United States?

In October 2013,Abercrombie & Fitch (ANF)posted a price-earnings ratio of 13.If the price of the stock at that time was $36 per share,which of the following must have been true?

What takes place in the indirect finance market?

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

Which of the following must a firm in a market economy do today to succeed?

Which type of business has the least government rules and regulations affecting it?

How do unlimited and limited liability differ?

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

What is the difference between retained earnings and dividends?

If a corporation earns a profit,how do owners of the firm share in the profit?

What are liabilities?

Which of the following statements is false?

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.

A corporation is

Briefly describe the Sarbanes-Oxley Act and explain why it was passed.

How does the owner of a sole proprietorship relate to the business?

Some corporate governance experts believe that serving on a company's board of directors for an extended length of time diminishes that member's independence from the company's CEO.If this is true,it would tend to

Which type of business has the most government rules and regulations affecting it?

Payments by a corporation to its shareholders are known as

Donnie's Donuts incurs $450,000 per year in explicit costs and $200,000 in implicit costs.The bakery earns $800,000 in revenues and has $2 million in net worth.Based on this information,what is the economic profit for Donnie's Donuts?

Explain what potential conflict exists between shareholders in a corporation and the corporation's managers.

Which type of businesses earns the majority of revenues in the United States?

In October 2013,Abercrombie & Fitch (ANF)posted a price-earnings ratio of 13.If the price of the stock at that time was $36 per share,which of the following must have been true?

What takes place in the indirect finance market?

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

Which of the following must a firm in a market economy do today to succeed?

Which type of business has the least government rules and regulations affecting it?

How do unlimited and limited liability differ?

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

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.