Question 1

If the personal assets of the owners cannot be claimed if the business is bankrupt,the owners are said to have

Accepted Answer

A)  unlimited liability. 
B)  a proprietorship type of business. 
C)  limited liability. 
D)  a partnership type of business. 
A)  unlimited liability. 
B)  a proprietorship type of business. 
C)  limited liability. 
D)  a partnership type of business.

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Anything owed by a person or a firm is

Accepted Answer

A)  an asset. 
B)  a liability. 
C)  a bond. 
D)  equity. 
A)  an asset. 
B)  a liability. 
C)  a bond. 
D)  equity.

Question 4

Dividing the dividend payment by the stock's closing market price determines the

Accepted Answer

A)  coupon payment. 
B)  dividend yield. 
C)  price-earnings ratio. 
D)  selling price of the stock. 
A)  coupon payment. 
B)  dividend yield. 
C)  price-earnings ratio. 
D)  selling price of the stock.

Question 5

Economic profit is the difference between a firm's revenue and its opportunity costs.

Accepted Answer

A) True 
 B)False

Question 6

How does a firm raise external funds through direct finance?

Accepted Answer

With direct finance,funds flow

Question 7

The difference between a firm's assets and liabilities is its

Accepted Answer

A)  accounting profit. 
B)  economic profit. 
C)  net worth. 
D)  implicit costs. 
A)  accounting profit. 
B)  economic profit. 
C)  net worth. 
D)  implicit costs.

Question 8

David Myers,former controller for WorldCom,pleaded guilty to falsely reported costs for WorldCom that were ________ than they actually were,resulting in reported accounting profits for WorldCom that were ________ than their actual level.

Accepted Answer

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

Question 9

If a stock's dividend is expected to grow at a constant rate of 6 percent in the future and it has just paid a dividend of $3.00 per share,and you have an alternative investment of equal risk that will earn a 9 percent rate of return,what would you be willing to pay per share for this stock?

Accepted Answer

A)  $9 
B)  $20 
C)  $45 
D)  $106 
A)  $9 
B)  $20 
C)  $45 
D)  $106

Question 10

Which of the following is not an advantage of starting a new business as a proprietorship?

Accepted Answer

A)  The owner has complete control over the business. 
B)  A proprietorship has few government rules and regulations to comply with. 
C)  Business profits are only taxed once, not twice. 
D)  A proprietorship can easily attain additional funding. 
A)  The owner has complete control over the business. 
B)  A proprietorship has few government rules and regulations to comply with. 
C)  Business profits are only taxed once, not twice. 
D)  A proprietorship can easily attain additional funding.

Question 11

Who controls a partnership?

Accepted Answer

A)  stockholders 
B)  bondholders 
C)  the owners 
D)  all of these 
A)  stockholders 
B)  bondholders 
C)  the owners 
D)  all of these

Question 12

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

Question 13

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 14

What does limited liability mean?

Accepted Answer

A)  The owners of the business are personally responsible for paying expenses incurred by the business. 
B)  Only employees can have a claim on the assets of the business. 
C)  The personal assets of the owners cannot be claimed if the business is bankrupt. 
D)  Anybody with a liability against a firm can claim only what their liability refers to. 
A)  The owners of the business are personally responsible for paying expenses incurred by the business. 
B)  Only employees can have a claim on the assets of the business. 
C)  The personal assets of the owners cannot be claimed if the business is bankrupt. 
D)  Anybody with a liability against a firm can claim only what their liability refers to.

Question 15

Stockholders

Accepted Answer

A)  select the board of directors of a corporation. 
B)  select the employees of a corporation. 
C)  select the managers of a corporation. 
D)  all of the above. 
A)  select the board of directors of a corporation. 
B)  select the employees of a corporation. 
C)  select the managers of a corporation. 
D)  all of the above.

Question 16

The coupon rate of a bond is equal to

Accepted Answer

A)  the coupon payment. 
B)  the interest payment. 
C)  the interest rate. 
D)  the face value. 
A)  the coupon payment. 
B)  the interest payment. 
C)  the interest rate. 
D)  the face value.

Question 17

A sole proprietorship is

Accepted Answer

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

Question 18

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

Accepted Answer

A)  reinvesting retained earnings. 
B)  a financial intermediary. 
C)  dividend reinvestment. 
D)  a financial market. 
A)  reinvesting retained earnings. 
B)  a financial intermediary. 
C)  dividend reinvestment. 
D)  a financial market.

Question 19

All of the following represent differences between stocks and bonds except

Accepted Answer

A)  a stock can possibly pay dividends forever, but bonds have a fixed number of payments. 
B)  differences of opinion about a stock's future may vary considerably but there is less difference about a bond's future. 
C)  the future growth of a stock is more uncertain than the payments of a bond. 
D)  bonds represent partial ownership in a firm but stocks do not. 
A)  a stock can possibly pay dividends forever, but bonds have a fixed number of payments. 
B)  differences of opinion about a stock's future may vary considerably but there is less difference about a bond's future. 
C)  the future growth of a stock is more uncertain than the payments of a bond. 
D)  bonds represent partial ownership in a firm but stocks do not.

Question 20

Who controls a sole proprietorship?

Accepted Answer

A)  owner 
B)  stockholders 
C)  bondholders 
D)  employees 
A)  owner 
B)  stockholders 
C)  bondholders 
D)  employees

If the personal assets of the owners cannot be claimed if the business is bankrupt,the owners are said to have

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

Anything owed by a person or a firm is

Dividing the dividend payment by the stock's closing market price determines the

Economic profit is the difference between a firm's revenue and its opportunity costs.

How does a firm raise external funds through direct finance?

The difference between a firm's assets and liabilities is its

David Myers,former controller for WorldCom,pleaded guilty to falsely reported costs for WorldCom that were than they actually were,resulting in reported accounting profits for WorldCom that were than their actual level.

If a stock's dividend is expected to grow at a constant rate of 6 percent in the future and it has just paid a dividend of $3.00 per share,and you have an alternative investment of equal risk that will earn a 9 percent rate of return,what would you be willing to pay per share for this stock?

Which of the following is not an advantage of starting a new business as a proprietorship?

Who controls a partnership?

What is a secondary market?

An explicit cost is

What does limited liability mean?

Stockholders

The coupon rate of a bond is equal to

A sole proprietorship is

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

All of the following represent differences between stocks and bonds except

Who controls a sole proprietorship?

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

If the personal assets of the owners cannot be claimed if the business is bankrupt,the owners are said to have

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

Anything owed by a person or a firm is

Dividing the dividend payment by the stock's closing market price determines the

Economic profit is the difference between a firm's revenue and its opportunity costs.

How does a firm raise external funds through direct finance?

The difference between a firm's assets and liabilities is its

David Myers,former controller for WorldCom,pleaded guilty to falsely reported costs for WorldCom that were ________ than they actually were,resulting in reported accounting profits for WorldCom that were ________ than their actual level.

If a stock's dividend is expected to grow at a constant rate of 6 percent in the future and it has just paid a dividend of $3.00 per share,and you have an alternative investment of equal risk that will earn a 9 percent rate of return,what would you be willing to pay per share for this stock?

Which of the following is not an advantage of starting a new business as a proprietorship?

Who controls a partnership?

What is a secondary market?

An explicit cost is

What does limited liability mean?

Stockholders

The coupon rate of a bond is equal to

A sole proprietorship is

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

All of the following represent differences between stocks and bonds except

Who controls a sole proprietorship?

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

David Myers,former controller for WorldCom,pleaded guilty to falsely reported costs for WorldCom that were than they actually were,resulting in reported accounting profits for WorldCom that were than their actual level.