Exam 6: Firms, the Stock Market, and Corporate Governance

When Internet coupon site Groupon sold stock to the public for the first time following its IPO in November 2011,it did so through the NASDAQ market.This was an example of Groupon raising funds through

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

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?

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 economic profit?

An investor is more likely to buy a firm's stock if the firm's income statement shows ________ and if its balance sheet shows ________.

A normal rate of return refers to the ________ that investors must earn on the funds they invest in a firm,expressed as a percentage of the amount invested.

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

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

What is accounting profit?

How are corporate profits taxed in the United States?

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

What is shown on a firm's income statement?

Sole proprietorships are ________ type of business.

Define a partnership.

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

Direct finance includes the sale by a corporation of stocks or bonds,but does not include borrowing money from a bank.

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?

A corporation's board of directors

Which of the following is a characteristic of stock?

How can a partnership raise funds needed for firm expansion?