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

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

Purchasing a firm's stock in an IPO can be risky because financial information may not be fully disclosed.

In response to accounting scandals in 2002,the federal government passed legislation requiring that corporate directors have a certain level of expertise with financial information and mandating that chief executive officers personally certify the accuracy of financial statements.What is the name of this legislation?

Suppose you hit a progressive jackpot on a slot machine in a casino in Atlantic City and are given the choice of the following prizes: Prize 1: $150,000 to be received right away,with three additional payments of $150,000 to be received each year for the next three years. Prize 2: $500,000 to be received right away. If the interest rate is 5 percent,what is the present value of each prize?

Who decides who controls a corporation?

Southwest Airlines wants to raise $20 million to finance the renovation of their corporate offices,and the company wishes to raise the funds through direct finance.Which of the following methods could it use?

Corporate managers and shareholders always have the same goals.

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 accounting profit?

Goodwill is listed as an asset on a firm's balance sheet.

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?

Which is the least common type of business?

Laura's Pizza Place incurs $800,000 per year in explicit costs and $100,000 in implicit costs.The restaurant earns $1.3 million in revenues.Based on this information,what is accounting profit for Laura's Pizza Place?

The Sarbanes-Oxley Act of 2002 was passed in response to what event?

How does the owner of a corporation relate to the business?

Who hires the managers of a corporation?

What is a firm's balance sheet?

A financial security that represents a promise to repay a fixed amount of funds is a

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