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

Question 2

A partnership is ________ type of business.

Accepted Answer

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

Question 3

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) $100 
A) $9 
B) $20 
C) $45 
D) $100

Question 4

When an investor buys a corporate bond,the ________ the bond is a loan to the corporation.

Accepted Answer

A) interest on 
B) face value of 
C) coupon payment on 
D) dividend payment on 
A) interest on 
B) face value of 
C) coupon payment on 
D) dividend payment on

Question 5

Both stocks and bonds have maturity dates.

Accepted Answer

A) True 
 B)False

Question 6

The only type of business that faces limited liability is a corporation.

Accepted Answer

A) True 
 B)False

Question 7

Javier wants to start a microbrewery business and is thinking of setting it up as a sole proprietorship.What are the advantages and disadvantages he will face by setting up the business as a sole proprietorship as opposed to a partnership or a corporation?

Accepted Answer

As a sole proprietorship,Javier has the

Question 8

Information in a firm's financial statements

Accepted Answer

A) helps the firm's managers make decisions. 
B) assists investors who are considering buying the firm's stock. 
C) guide resource allocation in the economy. 
D) all of the above 
A) helps the firm's managers make decisions. 
B) assists investors who are considering buying the firm's stock. 
C) guide resource allocation in the economy. 
D) all of the above

Question 9

What do economists call the situation where a hired manager does not have the same interests as the owners of the business?

Accepted Answer

A) conquest and control 
B) a financial problem 
C) a principal-agent problem 
D) a financial intermediary problem 
A) conquest and control 
B) a financial problem 
C) a principal-agent problem 
D) a financial intermediary problem

Question 10

An increase in liabilities will reduce a firm's net worth.

Accepted Answer

A) True 
 B)False

Question 11

If the final expressions in a present value equation used to calculate the price of a bond you are considering buying are "[$50 / (1 + .08)3] + [$500 / (1 + .08)3]," which of the following is correct?

Accepted Answer

A) The face value is $500,the coupon is $50,and the coupon will mature in 3 years. 
B) The face value is $50,the interest rate you need is 8 percent,and the coupon will mature in 3 years. 
C) The face value is $500,the interest rate you need is 3 percent,and the coupon will mature in 8 years. 
D) The coupon is $50,the interest rate you need is 1.08 percent,and the coupon will mature in 3 years. 
A) The face value is $500,the coupon is $50,and the coupon will mature in 3 years. 
B) The face value is $50,the interest rate you need is 8 percent,and the coupon will mature in 3 years. 
C) The face value is $500,the interest rate you need is 3 percent,and the coupon will mature in 8 years. 
D) The coupon is $50,the interest rate you need is 1.08 percent,and the coupon will mature in 3 years.

Question 12

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

Accepted Answer

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

Question 13

Who controls a sole proprietorship?

Accepted Answer

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

Question 14

________ is called an implicit cost,while ________ is called an explicit cost.

Accepted Answer

A) An accounting cost;an economic cost 
B) A nonmonetary opportunity cost;a cost that involves spending money 
C) A production cost;a sales cost 
D) An actual cost;a hypothetical cost 
A) An accounting cost;an economic cost 
B) A nonmonetary opportunity cost;a cost that involves spending money 
C) A production cost;a sales cost 
D) An actual cost;a hypothetical cost

Question 15

Veruca sells therapeutic bath salts on the Internet.Her annual revenue is $52,000 per year,the explicit costs of her business are $14,000,and the opportunity costs of her business are $17,000 per year.What is her accounting profit?

Accepted Answer

A) $14,000 
B) $21,000 
C) $31,000 
D) $38,000 
A) $14,000 
B) $21,000 
C) $31,000 
D) $38,000

Question 16

Profits that are reinvested in a firm rather than paid to the firm's owners are called

Accepted Answer

A) dividends. 
B) stock options. 
C) retained earnings. 
D) corporate bonds. 
A) dividends. 
B) stock options. 
C) retained earnings. 
D) corporate bonds.

Question 17

What is accounting 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 economic 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 economic profit

Question 18

If you own a $1,000 face value bond with one year remaining to maturity and a 3 percent coupon rate and new bonds are paying 9 percent,what is the most you can get for your old bond?

Accepted Answer

A) $917.43 
B) $944.95 
C) $970.87 
D) $1,000 
A) $917.43 
B) $944.95 
C) $970.87 
D) $1,000

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

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

Accepted Answer

A) True 
 B)False

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

Firms disclose financial statements in ________ and in ________.

A partnership is ________ type of business.

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?

When an investor buys a corporate bond,the ________ the bond is a loan to the corporation.

Both stocks and bonds have maturity dates.

The only type of business that faces limited liability is a corporation.

Javier wants to start a microbrewery business and is thinking of setting it up as a sole proprietorship.What are the advantages and disadvantages he will face by setting up the business as a sole proprietorship as opposed to a partnership or a corporation?

Information in a firm's financial statements

What do economists call the situation where a hired manager does not have the same interests as the owners of the business?

An increase in liabilities will reduce a firm's net worth.

If the final expressions in a present value equation used to calculate the price of a bond you are considering buying are "[$50 / (1 + .08)3] + [$500 / (1 + .08)3]," which of the following is correct?

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

Who controls a sole proprietorship?

________ is called an implicit cost,while ________ is called an explicit cost.

Veruca sells therapeutic bath salts on the Internet.Her annual revenue is $52,000 per year,the explicit costs of her business are $14,000,and the opportunity costs of her business are $17,000 per year.What is her accounting profit?

Profits that are reinvested in a firm rather than paid to the firm's owners are called

What is accounting profit?

If you own a $1,000 face value bond with one year remaining to maturity and a 3 percent coupon rate and new bonds are paying 9 percent,what is the most you can get for your old bond?

All of the following represent differences between stocks and bonds except

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

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

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

Firms disclose financial statements in and in .

If the final expressions in a present value equation used to calculate the price of a bond you are considering buying are "[$50 / (1 + .08)³] + [$500 / (1 + .08)³]," which of the following is correct?

is called an implicit cost,while is called an explicit cost.