Question 1

In the United States,________ profits are taxed at both the corporate level and when investors receive dividends.

Accepted Answer

A) a sole proprietor's 
B) a partnership's 
C) corporate 
D) all of the above 
A) a sole proprietor's 
B) a partnership's 
C) corporate 
D) all of the above

Question 2

Urban Outfitters wants to raise $25 million to finance the construction of a new store,and the company wishes to raise the funds through direct finance.Which of the following methods could it use?

Accepted Answer

A) It could sell $25 million in bonds. 
B) It could borrow $25 million from a bank. 
C) It could issue $25 million in stock. 
D) It could choose either A or C. 
A) It could sell $25 million in bonds. 
B) It could borrow $25 million from a bank. 
C) It could issue $25 million in stock. 
D) It could choose either A or C.

Question 3

If a firm has implicit costs as well as explicit costs,

Accepted Answer

A) accounting profit might be greater than economic profit. 
B) economic profit will always be greater than accounting profit. 
C) accounting profit will be equal to economic profit. 
D) the firm has no economic profit. 
A) accounting profit might be greater than economic profit. 
B) economic profit will always be greater than accounting profit. 
C) accounting profit will be equal to economic profit. 
D) the firm has no economic profit.

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

In a typical year,new small firms create ________ jobs.

Accepted Answer

A) 250,000 
B) 1.1 million 
C) 1.8 million 
D) 3.3 million 
A) 250,000 
B) 1.1 million 
C) 1.8 million 
D) 3.3 million

Question 6

If top managers make good decisions,the firm's profits will be ________,and the firms assets will be ________.

Accepted Answer

A) high;small relative to its liabilities 
B) high;large relative to its liabilities 
C) equal to its revenues;small relative to its liabilities 
D) low;large relative to its liabilities 
A) high;small relative to its liabilities 
B) high;large relative to its liabilities 
C) equal to its revenues;small relative to its liabilities 
D) low;large relative to its liabilities

Question 7

A cost that involves spending money is

Accepted Answer

A) an implicit cost. 
B) an explicit cost. 
C) an opportunity cost. 
D) an indirect cost. 
A) an implicit cost. 
B) an explicit cost. 
C) an opportunity cost. 
D) an indirect cost.

Question 8

Damian wants to start a business where he is the only owner and the company does not issue stock.The type of business Damian wants to start is a

Accepted Answer

A) sole proprietorship. 
B) partnership. 
C) corporation. 
D) Any of the above could be correct. 
A) sole proprietorship. 
B) partnership. 
C) corporation. 
D) Any of the above could be correct.

Question 9

Aimee sells hand-embroidered dog apparel over the Internet.Her annual revenue is $128,000 per year,the explicit costs of her business are $42,000,and the opportunity costs of her business are $30,000.What is her accounting profit?

Accepted Answer

A) $12,000 
B) $56,000 
C) $86,000 
D) $98,000 
A) $12,000 
B) $56,000 
C) $86,000 
D) $98,000

Question 10

How is the interest rate on a bond calculated?

Accepted Answer

The interest rate,or coupon ra

Question 11

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 12

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 13

________ are the owners of a corporation.

Accepted Answer

A) The board of directors 
B) Stockholders 
C) Top management 
D) Bondholders 
A) The board of directors 
B) Stockholders 
C) Top management 
D) Bondholders

Question 14

You have a bond that pays $18 per year in coupon payments.Which of the following would result in a decrease in the price of your bond?

Accepted Answer

A) Coupon payments on newly-issued bonds fall to $15 per year. 
B) The likelihood that the firm issuing your bond will default on debt decreases. 
C) The price of a share of stock in the company rises. 
D) Coupon payments on newly-issued bonds rise to $22 per year. 
A) Coupon payments on newly-issued bonds fall to $15 per year. 
B) The likelihood that the firm issuing your bond will default on debt decreases. 
C) The price of a share of stock in the company rises. 
D) Coupon payments on newly-issued bonds rise to $22 per year.

Question 15

Anything owed by a person or a firm is

Accepted Answer

A) an asset. 
B) a liability. 
C) wealth. 
D) owner's yield. 
A) an asset. 
B) a liability. 
C) wealth. 
D) owner's yield.

Question 16

The interest rate on a bond is calculated as

Accepted Answer

A) the coupon divided by the face value. 
B) the coupon times the face value. 
C) the face value divided by the coupon. 
D) the face value divided by the coupon plus the face value. 
A) the coupon divided by the face value. 
B) the coupon times the face value. 
C) the face value divided by the coupon. 
D) the face value divided by the coupon plus the face value.

Question 17

Tying the salaries of top managers to the firm's stock price or to the profitability of the firm allows a firm's board of directors to

Accepted Answer

A) increase asymmetric information. 
B) reduce the principal-agent problem. 
C) eliminate moral hazard. 
D) avoid disclosing financial statements to investors. 
A) increase asymmetric information. 
B) reduce the principal-agent problem. 
C) eliminate moral hazard. 
D) avoid disclosing financial statements to investors.

Question 18

Yolanda received a $100 savings bond for her birthday.The bond pays $100 at maturity,which is in five years.If the interest rate is 3%,the bond has a present value of $86.26.

Accepted Answer

A) True 
 B)False

Question 19

How do a partnership and a corporation differ?

Accepted Answer

A) Partnerships have unlimited liability while corporations have limited liability. 
B) Corporations can issue stocks and bonds,while partnerships cannot. 
C) Corporations face more taxes than do partnerships. 
D) All of these are differences between the two types of businesses. 
A) Partnerships have unlimited liability while corporations have limited liability. 
B) Corporations can issue stocks and bonds,while partnerships cannot. 
C) Corporations face more taxes than do partnerships. 
D) All of these are differences between the two types of businesses.

Question 20

The owner or owners control the day-to-day activities of which of the following types of business?

Accepted Answer

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

In the United States,________ profits are taxed at both the corporate level and when investors receive dividends.

Urban Outfitters wants to raise $25 million to finance the construction of a new store,and the company wishes to raise the funds through direct finance.Which of the following methods could it use?

If a firm has implicit costs as well as explicit costs,

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

In a typical year,new small firms create ________ jobs.

If top managers make good decisions,the firm's profits will be ,and the firms assets will be .

A cost that involves spending money is

Damian wants to start a business where he is the only owner and the company does not issue stock.The type of business Damian wants to start is a

Aimee sells hand-embroidered dog apparel over the Internet.Her annual revenue is $128,000 per year,the explicit costs of her business are $42,000,and the opportunity costs of her business are $30,000.What is her accounting profit?

How is the interest rate on a bond calculated?

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

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

________ are the owners of a corporation.

You have a bond that pays $18 per year in coupon payments.Which of the following would result in a decrease in the price of your bond?

Anything owed by a person or a firm is

The interest rate on a bond is calculated as

Tying the salaries of top managers to the firm's stock price or to the profitability of the firm allows a firm's board of directors to

Yolanda received a $100 savings bond for her birthday.The bond pays $100 at maturity,which is in five years.If the interest rate is 3%,the bond has a present value of $86.26.

How do a partnership and a corporation differ?

The owner or owners control the day-to-day activities of which of the following types of business?

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

In the United States,________ profits are taxed at both the corporate level and when investors receive dividends.

Urban Outfitters wants to raise $25 million to finance the construction of a new store,and the company wishes to raise the funds through direct finance.Which of the following methods could it use?

If a firm has implicit costs as well as explicit costs,

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

In a typical year,new small firms create ________ jobs.

If top managers make good decisions,the firm's profits will be ________,and the firms assets will be ________.

A cost that involves spending money is

Damian wants to start a business where he is the only owner and the company does not issue stock.The type of business Damian wants to start is a

Aimee sells hand-embroidered dog apparel over the Internet.Her annual revenue is $128,000 per year,the explicit costs of her business are $42,000,and the opportunity costs of her business are $30,000.What is her accounting profit?

How is the interest rate on a bond calculated?

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

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

________ are the owners of a corporation.

You have a bond that pays $18 per year in coupon payments.Which of the following would result in a decrease in the price of your bond?

Anything owed by a person or a firm is

The interest rate on a bond is calculated as

Tying the salaries of top managers to the firm's stock price or to the profitability of the firm allows a firm's board of directors to

Yolanda received a $100 savings bond for her birthday.The bond pays $100 at maturity,which is in five years.If the interest rate is 3%,the bond has a present value of $86.26.

How do a partnership and a corporation differ?

The owner or owners control the day-to-day activities of which of the following types of business?

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

If top managers make good decisions,the firm's profits will be ,and the firms assets will be .