Question 1

If a corporation earns a profit,how do owners of the firm share in the profit?

Accepted Answer

A) through coupon payments on that firm's bonds 
B) through dividend payments on shares of that firm's stock 
C) by selling any bonds or stocks owned and realizing a capital gain 
D) by raising the interest rate on bonds 
A) through coupon payments on that firm's bonds 
B) through dividend payments on shares of that firm's stock 
C) by selling any bonds or stocks owned and realizing a capital gain 
D) by raising the interest rate on bonds

Question 2

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

Accepted Answer

A) rent paid to a landlord. 
B) bonuses paid to employees. 
C) a normal rate of return for investors. 
D) corporate income taxes. 
A) rent paid to a landlord. 
B) bonuses paid to employees. 
C) a normal rate of return for investors. 
D) corporate income taxes.

Question 3

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 4

How do firms raise external funds through indirect finance?

Accepted Answer

With indirect finance,funds fl

Question 5

When the coupon rate on newly issued bonds decreases relative to older,outstanding bonds,what happens?

Accepted Answer

A) The market price of the older bond falls in the secondary market. 
B) The market price of the older bond rises in the secondary market. 
C) Older bonds can still be sold at their face value. 
D) Older bonds will sell for more than their face value. 
A) The market price of the older bond falls in the secondary market. 
B) The market price of the older bond rises in the secondary market. 
C) Older bonds can still be sold at their face value. 
D) Older bonds will sell for more than their face value.

Question 6

Dividing the current market price of a stock by the firm's earnings per share gives the firm's

Accepted Answer

A) price-earnings ratio. 
B) year-to-date percentage change. 
C) dividend yield. 
D) stock coupon maturity yield. 
A) price-earnings ratio. 
B) year-to-date percentage change. 
C) dividend yield. 
D) stock coupon maturity yield.

Question 7

In 2011,the dividend yield on Abercrombie & Fitch (ANF)stock fell from a high of 1.39% in January to 0.96% in July.Which of the following would have generated that result?

Accepted Answer

A) The closing price of ANF stock fell. 
B) ANF announced a decrease in the dividend it would pay per share. 
C) The price-earnings ratio rose. 
D) ANF issued bonds with a coupon rate equal to 1.39%. 
A) The closing price of ANF stock fell. 
B) ANF announced a decrease in the dividend it would pay per share. 
C) The price-earnings ratio rose. 
D) ANF issued bonds with a coupon rate equal to 1.39%.

Question 8

A bond is a financial security that represents

Accepted Answer

A) ownership in a corporation. 
B) the portion of profits paid to shareholders. 
C) the interest rate paid on a share of stock. 
D) a promise to repay a fixed amount of funds. 
A) ownership in a corporation. 
B) the portion of profits paid to shareholders. 
C) the interest rate paid on a share of stock. 
D) a promise to repay a fixed amount of funds.

Question 9

A nonmonetary opportunity cost is called a(n)________,while a cost that involves spending money is called a(n)________.

Accepted Answer

A) accounting cost;explicit cost 
B) implicit cost;explicit cost 
C) accounting profit;economic profit 
D) normal rate of return;asset 
A) accounting cost;explicit cost 
B) implicit cost;explicit cost 
C) accounting profit;economic profit 
D) normal rate of return;asset

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

In November 2011,General Motors (GM)posted a price-earnings ratio of 4.73.If the price of the stock at that time was $23 per share,which of the following must have been true?

Accepted Answer

A) GM's revenues that month were $250.2 million. 
B) GM's earnings per share was $4.86. 
C) GM's coupon payment was $23 per year. 
D) GM's dividend yield for the year was 20.6%. 
A) GM's revenues that month were $250.2 million. 
B) GM's earnings per share was $4.86. 
C) GM's coupon payment was $23 per year. 
D) GM's dividend yield for the year was 20.6%.

Question 12

How does the owner of a sole proprietorship relate to the business?

Accepted Answer

A) The owner and the business are separate legal entities. 
B) The owner and the business are not separate legal entities. 
C) The assets of the owner are considered separate from the asset of the business. 
D) None of these describe the legal relationship of the owner to the business. 
A) The owner and the business are separate legal entities. 
B) The owner and the business are not separate legal entities. 
C) The assets of the owner are considered separate from the asset of the business. 
D) None of these describe the legal relationship of the owner to the business.

Question 13

If a corporate bond with a face value of $5,000 pays yearly coupon payments of $100,what is the coupon rate?

Accepted Answer

A) 2% 
B) 5% 
C) 10% 
D) 20% 
A) 2% 
B) 5% 
C) 10% 
D) 20%

Question 14

Which of the following is an advantage of starting a new business as a proprietorship?

Accepted Answer

A) The owner has limited personal liability. 
B) A proprietorship has few government rules and regulations to comply with. 
C) Business profits are not taxed. 
D) A proprietorship can easily attain additional funding. 
A) The owner has limited personal liability. 
B) A proprietorship has few government rules and regulations to comply with. 
C) Business profits are not taxed. 
D) A proprietorship can easily attain additional funding.

Question 15

If a corporation goes bankrupt,which of the following has first claim on the firm's assets?

Accepted Answer

A) stockholders 
B) the state where chartered 
C) employees 
D) bondholders 
A) stockholders 
B) the state where chartered 
C) employees 
D) bondholders

Question 16

A corporation is owned by its

Accepted Answer

A) board of directors. 
B) stockholders. 
C) employees. 
D) CEO. 
A) board of directors. 
B) stockholders. 
C) employees. 
D) CEO.

Question 17

Which of the following is part of the secondary market?

Accepted Answer

A) New York Stock Exchange 
B) the over-the-counter market 
C) NASDAQ 
D) all of these 
A) New York Stock Exchange 
B) the over-the-counter market 
C) NASDAQ 
D) all of these

Question 18

Which of the following takes place in the direct finance market?

Accepted Answer

A) Firms borrow funds from banks. 
B) Deposits from savers are accumulated and loans made to borrowers. 
C) Ownership in corporations is sold in the form of preferred stock. 
D) Banks offer savings accounts to customers. 
A) Firms borrow funds from banks. 
B) Deposits from savers are accumulated and loans made to borrowers. 
C) Ownership in corporations is sold in the form of preferred stock. 
D) Banks offer savings accounts to customers.

Question 19

What is the difference between explicit and implicit costs?

Accepted Answer

Explicit costs are out-of-pock

Question 20

The interest payment on a bond is called

Accepted Answer

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

If a corporation earns a profit,how do owners of the firm share in the profit?

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

An explicit cost is

How do firms raise external funds through indirect finance?

When the coupon rate on newly issued bonds decreases relative to older,outstanding bonds,what happens?

Dividing the current market price of a stock by the firm's earnings per share gives the firm's

In 2011,the dividend yield on Abercrombie & Fitch (ANF)stock fell from a high of 1.39% in January to 0.96% in July.Which of the following would have generated that result?

A bond is a financial security that represents

A nonmonetary opportunity cost is called a(n),while a cost that involves spending money is called a(n).

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

In November 2011,General Motors (GM)posted a price-earnings ratio of 4.73.If the price of the stock at that time was $23 per share,which of the following must have been true?

How does the owner of a sole proprietorship relate to the business?

If a corporate bond with a face value of $5,000 pays yearly coupon payments of $100,what is the coupon rate?

Which of the following is an advantage of starting a new business as a proprietorship?

If a corporation goes bankrupt,which of the following has first claim on the firm's assets?

A corporation is owned by its

Which of the following is part of the secondary market?

Which of the following takes place in the direct finance market?

What is the difference between explicit and implicit costs?

The interest payment on a bond is called

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Consumer Choice and Elasticity

Technology,production,and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage,international Trade,and Exchange Rates

Filters

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

If a corporation earns a profit,how do owners of the firm share in the profit?

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

An explicit cost is

How do firms raise external funds through indirect finance?

When the coupon rate on newly issued bonds decreases relative to older,outstanding bonds,what happens?

Dividing the current market price of a stock by the firm's earnings per share gives the firm's

In 2011,the dividend yield on Abercrombie & Fitch (ANF)stock fell from a high of 1.39% in January to 0.96% in July.Which of the following would have generated that result?

A bond is a financial security that represents

A nonmonetary opportunity cost is called a(n)________,while a cost that involves spending money is called a(n)________.

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

In November 2011,General Motors (GM)posted a price-earnings ratio of 4.73.If the price of the stock at that time was $23 per share,which of the following must have been true?

How does the owner of a sole proprietorship relate to the business?

If a corporate bond with a face value of $5,000 pays yearly coupon payments of $100,what is the coupon rate?

Which of the following is an advantage of starting a new business as a proprietorship?

If a corporation goes bankrupt,which of the following has first claim on the firm's assets?

A corporation is owned by its

Which of the following is part of the secondary market?

Which of the following takes place in the direct finance market?

What is the difference between explicit and implicit costs?

The interest payment on a bond is called

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Consumer Choice and Elasticity

Technology,production,and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage,international Trade,and Exchange Rates

Filters

A nonmonetary opportunity cost is called a(n),while a cost that involves spending money is called a(n).