Question 1

Who decides control of a corporation?

Accepted Answer

Stockholders elect a

Question 2

The possible double taxation of income is a disadvantage for

Accepted Answer

A) sole proprietorships and partnerships. 
B) partnerships and corporations. 
C) sole proprietorships and corporations 
D) corporations. 
A) sole proprietorships and partnerships. 
B) partnerships and corporations. 
C) sole proprietorships and corporations 
D) corporations.

Question 3

In 2011,Standard & Poor's (S&P)changed its rating on U.S.Treasury bonds from ________ based on the state of the federal government's budget deficit.

Accepted Answer

A) "A" to "D" 
B) "A" to "AAA" 
C) "A+" to "B+" 
D) "AAA" to "AA+" 
A) "A" to "D" 
B) "A" to "AAA" 
C) "A+" to "B+" 
D) "AAA" to "AA+"

Question 4

When you buy newly-issued shares of Twitter stock,this transaction takes place in the

Accepted Answer

A) primary market. 
B) bond market. 
C) secondary market. 
D) bear market. 
A) primary market. 
B) bond market. 
C) secondary market. 
D) bear market.

Question 5

A corporation's board of directors

Accepted Answer

A) hire the managers of the corporation. 
B) control the day-to-day activities of the corporation. 
C) are personally liable for the debts of the corporation. 
D) are the sole owners of the corporation. 
A) hire the managers of the corporation. 
B) control the day-to-day activities of the corporation. 
C) are personally liable for the debts of the corporation. 
D) are the sole owners of the corporation.

Question 6

Article Summary
In an effort to raise funds to cut debt,Fiat Chrysler is selling a stake in Ferrari through an initial public offering (IPO)to be valued at as much as $9.8 billion.17.2 million shares of stock in the company are to be sold,and the stock will be traded on the New York Stock Exchange under the symbol RACE.One analyst speculates that requests for shares in Ferrari may be ten times less than the number available.Including debt,Ferrari will have a value of about $12 billion,and chairman Piero Ferrari will keep a 10 percent stake in the new company and receive about €280 million in cash.Before taxes and interest,Ferrari's 2014 earnings were €389 million,with revenue of €2.8 billion.
-When Ferrari sells stock to the public in its IPO,it will do so through the New York Stock Exchange.This is an example of Ferrari using ________ to raise funds.

Accepted Answer

A) indirect finance 
B) direct finance 
C) bonds 
D) corporate governance 
A) indirect finance 
B) direct finance 
C) bonds 
D) corporate governance

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

The central role of ________ in a market economy is bringing together savers and borrowers.

Accepted Answer

A) corporations 
B) sole proprietors 
C) financial intermediaries 
D) stock exchanges 
A) corporations 
B) sole proprietors 
C) financial intermediaries 
D) stock exchanges

Question 9

The person hired by a corporation's board of directors to ________ is known as the chief executive officer.

Accepted Answer

A) chair the board of directors 
B) run the day-to-day operations of the corporation 
C) audit the financial records of the corporation 
D) hire additional members for the board of directors 
A) chair the board of directors 
B) run the day-to-day operations of the corporation 
C) audit the financial records of the corporation 
D) hire additional members for the board of directors

Question 10

All of the following would be considered explicit costs of operating a business except

Accepted Answer

A) utility expenses. 
B) the cost of raw materials used in production. 
C) the rental value of equipment the company owns and uses for its own production. 
D) advertising expenses. 
A) utility expenses. 
B) the cost of raw materials used in production. 
C) the rental value of equipment the company owns and uses for its own production. 
D) advertising expenses.

Question 11

If a corporate bond with a face value of $20,000 pays yearly coupon payments of $500,what is the coupon rate?

Accepted Answer

A) 2.5% 
B) 4% 
C) 25% 
D) 40% 
A) 2.5% 
B) 4% 
C) 25% 
D) 40%

Question 12

Stock prices start to rise

Accepted Answer

A) when investors are confident that the economy is more than 6 months into an economic recovery. 
B) when investors begin to expect an economic recovery will soon begin. 
C) when investors believe an economic recovery has already begun. 
D) when the unemployment rate begins to decline following a recession. 
A) when investors are confident that the economy is more than 6 months into an economic recovery. 
B) when investors begin to expect an economic recovery will soon begin. 
C) when investors believe an economic recovery has already begun. 
D) when the unemployment rate begins to decline following a recession.

Question 13

How is accounting profit calculated?

Accepted Answer

Accounting profit eq

Question 14

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

The present value of $300 received 5 years in the future would be calculated as which of the following when the interest rate is 5%?

Accepted Answer

A) 300/(1.5)5 
B) 300/(1.05)5 
C) 300 × 1.5 × 5 
D) 5.05/300 
A) 300/(1.5)5 
B) 300/(1.05)5 
C) 300 × 1.5 × 5 
D) 5.05/300

Question 16

The Dodd-Frank Act requires that each member of the board of directors personally certify the accuracy of financial reports.

Accepted Answer

A) True 
 B)False

Question 17

Included on the board of directors of Microsoft are John W.Stanton,the chairman of Trilogy Equity Partners,the president of Harvey Mudd college Maria M.Klawe,and the former vice chairman of Bank of America Charles H.Noski.These three board members do not have a direct management role with Microsoft and are therefore referred to as

Accepted Answer

A) inside directors. 
B) outside directors. 
C) competitive directors. 
D) honorary directors. 
A) inside directors. 
B) outside directors. 
C) competitive directors. 
D) honorary directors.

Question 18

The profits a corporation keeps to finance future expansion are known as

Accepted Answer

A) retained earnings. 
B) preferred stock. 
C) dividends. 
D) capital gains. 
A) retained earnings. 
B) preferred stock. 
C) dividends. 
D) capital gains.

Question 19

What is the difference between a firm's assets and its liabilities?

Accepted Answer

An asset is anything

Question 20

How is economic profit calculated?

Accepted Answer

Economic profits equ

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

Who decides control of a corporation?

The possible double taxation of income is a disadvantage for

In 2011,Standard & Poor's (S&P)changed its rating on U.S.Treasury bonds from ________ based on the state of the federal government's budget deficit.

When you buy newly-issued shares of Twitter stock,this transaction takes place in the

A corporation's board of directors

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

The central role of ________ in a market economy is bringing together savers and borrowers.

The person hired by a corporation's board of directors to ________ is known as the chief executive officer.

All of the following would be considered explicit costs of operating a business except

If a corporate bond with a face value of $20,000 pays yearly coupon payments of $500,what is the coupon rate?

Stock prices start to rise

How is accounting profit calculated?

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

The present value of $300 received 5 years in the future would be calculated as which of the following when the interest rate is 5%?

The Dodd-Frank Act requires that each member of the board of directors personally certify the accuracy of financial reports.

The profits a corporation keeps to finance future expansion are known as

What is the difference between a firm's assets and its liabilities?

How is economic profit calculated?

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

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