Question 1

The difference between a firm's revenue and its operating expenses is the firm's operating income.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is an example of an implicit cost a firm might incur?

Accepted Answer

A) the wages paid to employees 
B) the payment for medical insurance coverage 
C) the opportunity cost to investors of the funds invested in the firm 
D) utility payments 
A) the wages paid to employees 
B) the payment for medical insurance coverage 
C) the opportunity cost to investors of the funds invested in the firm 
D) utility payments

Question 3

The decline in starting new businesses

Accepted Answer

A) is not concentrated in one industry. 
B) is concentrated primarily in high-tech industries. 
C) is concentrated primarily in health care industries. 
D) is concentrated primarily in public service industries. 
A) is not concentrated in one industry. 
B) is concentrated primarily in high-tech industries. 
C) is concentrated primarily in health care industries. 
D) is concentrated primarily in public service industries.

Question 4

If you want to know the present value of $5,000 received in one year,and the interest rate is 2 percent,what formula can you use?

Accepted Answer

A) Present value equals $5,000 times 0.02. 
B) Present value equals $5,000 divided by 1.02 
C) Present value equals 1.02 divided by $5,000. 
D) Present value equals $5,000 times 1.02. 
A) Present value equals $5,000 times 0.02. 
B) Present value equals $5,000 divided by 1.02 
C) Present value equals 1.02 divided by $5,000. 
D) Present value equals $5,000 times 1.02.

Question 5

Angelica wants to open a restaurant and is thinking of setting it up as a corporation.What are the advantages and disadvantages she will face by setting up the business as a corporation as opposed to a sole proprietorship or a partnership?

Accepted Answer

As a corporation,Angelica has the advant

Question 6

Raising funds through ________ is called indirect finance.

Accepted Answer

A) issuing stock 
B) issuing bonds 
C) financial intermediaries 
D) retaining earnings 
A) issuing stock 
B) issuing bonds 
C) financial intermediaries 
D) retaining earnings

Question 7

When mortgage loans are securitized,they are

Accepted Answer

A) bundled together by financial institutions and sold to investors. 
B) issued to borrowers with flawed credit histories. 
C) issued to borrowers who fail to document their income. 
D) guaranteed by the federal government. 
A) bundled together by financial institutions and sold to investors. 
B) issued to borrowers with flawed credit histories. 
C) issued to borrowers who fail to document their income. 
D) guaranteed by the federal government.

Question 8

The principal-agent problem is

Accepted Answer

A) often more severe for partnerships than for corporations. 
B) often less severe for partnerships than for corporations. 
C) severe for corporations but nonexistent for partnerships. 
D) most severe for sole proprietorships. 
A) often more severe for partnerships than for corporations. 
B) often less severe for partnerships than for corporations. 
C) severe for corporations but nonexistent for partnerships. 
D) most severe for sole proprietorships.

Question 9

When the coupon rate on newly issued bonds ________ relative to older,outstanding bonds,the market price of the older bond ________

Accepted Answer

A) decreases;rises in the secondary market 
B) decreases;falls in the secondary market 
C) increases;falls in the secondary market 
D) increases;falls in the primary market 
A) decreases;rises in the secondary market 
B) decreases;falls in the secondary market 
C) increases;falls in the secondary market 
D) increases;falls in the primary market

Question 10

The limited ability to raise funds 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 11

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 12

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

Accepted Answer

A) increasing WorldCom's assets on the balance sheet. 
B) reducing WorldCom's profit on the balance sheet. 
C) increasing WorldCom's net worth on the balance sheet. 
D) reducing WorldCom's net income on the income statement. 
A) increasing WorldCom's assets on the balance sheet. 
B) reducing WorldCom's profit on the balance sheet. 
C) increasing WorldCom's net worth on the balance sheet. 
D) reducing WorldCom's net income on the income statement.

Question 13

If a firm raises funds by recruiting additional owners to invest in the firm,

Accepted Answer

A) the firm's financial capital would increase. 
B) the firm's financial capital would decrease. 
C) the firm's stock price would decrease. 
D) the firm's net worth would decrease. 
A) the firm's financial capital would increase. 
B) the firm's financial capital would decrease. 
C) the firm's stock price would decrease. 
D) the firm's net worth would decrease.

Question 14

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

Accepted Answer

A) separation of ownership and business liability 
B) limited control over the operation of the business 
C) the initial cost in setting up the business 
D) possibility of double taxation 
A) separation of ownership and business liability 
B) limited control over the operation of the business 
C) the initial cost in setting up the business 
D) possibility of double taxation

Question 15

In the United States,________ percent of all firms are corporations.

Accepted Answer

A) 18 
B) 60 
C) 72 
D) 82 
A) 18 
B) 60 
C) 72 
D) 82

Question 16

Torrie is thinking of starting up a small business selling hand-painted wine glasses.She is considering setting up her business as a sole proprietorship.What is one advantage to Torrie of setting up her business as a sole proprietorship?

Accepted Answer

A) As a sole proprietor,Torrie would face limited liability. 
B) As a sole proprietor,Torrie would have the ability to share risk with shareholders. 
C) As a sole proprietor,Torrie would have both ownership and control over the business. 
D) All of the above would be advantages of setting up her business as a sole proprietorship. 
A) As a sole proprietor,Torrie would face limited liability. 
B) As a sole proprietor,Torrie would have the ability to share risk with shareholders. 
C) As a sole proprietor,Torrie would have both ownership and control over the business. 
D) All of the above would be advantages of setting up her business as a sole proprietorship.

Question 17

Which of the following are examples of explicit costs a firm might incur?

Accepted Answer

A) rent paid to the landlord 
B) taxes owed to the IRS 
C) wages earned by delivery drivers 
D) All of the above are examples of explicit costs. 
A) rent paid to the landlord 
B) taxes owed to the IRS 
C) wages earned by delivery drivers 
D) All of the above are examples of explicit costs.

Question 18

Traditionally,Wall Street investment banks had been organized as ________,but by 2000 they had converted to being ________.

Accepted Answer

A) partnerships;publicly-traded companies 
B) sole proprietorships;partnerships 
C) corporations;partnerships 
D) partnerships;sole proprietorships 
A) partnerships;publicly-traded companies 
B) sole proprietorships;partnerships 
C) corporations;partnerships 
D) partnerships;sole proprietorships

Question 19

On a balance sheet,stockholder's equity is equal to

Accepted Answer

A) assets minus liabilities. 
B) the total value of outstanding shares of stock. 
C) long-term liabilities minus current liabilities. 
D) total assets minus goodwill. 
A) assets minus liabilities. 
B) the total value of outstanding shares of stock. 
C) long-term liabilities minus current liabilities. 
D) total assets minus goodwill.

Question 20

Mutual funds sell shares to investors and use the funds to

Accepted Answer

A) purchase Treasury bonds. 
B) invest in a portfolio of financial assets. 
C) purchase newly issued shares of a particular company's stock. 
D) pay dividends. 
A) purchase Treasury bonds. 
B) invest in a portfolio of financial assets. 
C) purchase newly issued shares of a particular company's stock. 
D) pay dividends.

The difference between a firm's revenue and its operating expenses is the firm's operating income.

Which of the following is an example of an implicit cost a firm might incur?

The decline in starting new businesses

If you want to know the present value of $5,000 received in one year,and the interest rate is 2 percent,what formula can you use?

Angelica wants to open a restaurant and is thinking of setting it up as a corporation.What are the advantages and disadvantages she will face by setting up the business as a corporation as opposed to a sole proprietorship or a partnership?

Raising funds through ________ is called indirect finance.

When mortgage loans are securitized,they are

The principal-agent problem is

When the coupon rate on newly issued bonds relative to older,outstanding bonds,the market price of the older bond

The limited ability to raise funds is a disadvantage for

Stock prices start to rise

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

If a firm raises funds by recruiting additional owners to invest in the firm,

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

In the United States,________ percent of all firms are corporations.

Torrie is thinking of starting up a small business selling hand-painted wine glasses.She is considering setting up her business as a sole proprietorship.What is one advantage to Torrie of setting up her business as a sole proprietorship?

Which of the following are examples of explicit costs a firm might incur?

Traditionally,Wall Street investment banks had been organized as ,but by 2000 they had converted to being .

On a balance sheet,stockholder's equity is equal to

Mutual funds sell shares to investors and use the funds to

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

The Economics of Health Care

Comparative Advantage and the Gains From International Trade

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

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

The difference between a firm's revenue and its operating expenses is the firm's operating income.

Which of the following is an example of an implicit cost a firm might incur?

The decline in starting new businesses

If you want to know the present value of $5,000 received in one year,and the interest rate is 2 percent,what formula can you use?

Angelica wants to open a restaurant and is thinking of setting it up as a corporation.What are the advantages and disadvantages she will face by setting up the business as a corporation as opposed to a sole proprietorship or a partnership?

Raising funds through ________ is called indirect finance.

When mortgage loans are securitized,they are

The principal-agent problem is

When the coupon rate on newly issued bonds ________ relative to older,outstanding bonds,the market price of the older bond ________

The limited ability to raise funds is a disadvantage for

Stock prices start to rise

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

If a firm raises funds by recruiting additional owners to invest in the firm,

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

In the United States,________ percent of all firms are corporations.

Torrie is thinking of starting up a small business selling hand-painted wine glasses.She is considering setting up her business as a sole proprietorship.What is one advantage to Torrie of setting up her business as a sole proprietorship?

Which of the following are examples of explicit costs a firm might incur?

Traditionally,Wall Street investment banks had been organized as ________,but by 2000 they had converted to being ________.

On a balance sheet,stockholder's equity is equal to

Mutual funds sell shares to investors and use the funds to

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

The Economics of Health Care

Comparative Advantage and the Gains From International Trade

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

When the coupon rate on newly issued bonds relative to older,outstanding bonds,the market price of the older bond

Traditionally,Wall Street investment banks had been organized as ,but by 2000 they had converted to being .