Question 1

Shontae wants to start a pet hotel and is thinking of setting it up as a partnership with her sister Victoria.What are the advantages and disadvantages she will face by setting up the business as a partnership as opposed to a sole proprietorship or a corporation?

Accepted Answer

As a partnership,Shontae has the advanta...

Question 2

Some economists believe that one factor that caused the financial crisis of 2007-2009 was top managers of large financial services firms making riskier investments than were in the best interests of the firms' shareholders.

Accepted Answer

A) True 
 B)False

Question 3

All of the following are characteristics of a bond except

Accepted Answer

A)  a bond represents a promise to repay a fixed amount of funds.
B)  the face value is repaid when the bond matures.
C)  the coupon payment is the interest payment on the bond.
D)  bonds generally pay dividends each year.

Question 4

To reduce the principal-agent problem,

Accepted Answer

A)  boards-of-directors can tie the salaries of top management to the profitability of the firm.
B)  managers can take on more risk than they disclose to investors.
C)  managers can inflate profits on financial statements.
D)  managers can hide liabilities by not disclosing them on financial statements.

Question 5

The shareholders of a corporation

Accepted Answer

A)  are inside directors of the corporation.
B)  are only comprised of top management for a large corporation.
C)  directly manage the corporation.
D)  elect a board of directors to represent their interests.

Question 6

In the United States,corporate profits are taxed at the corporate level but are not taxed as personal income in the form of dividend payments.

Accepted Answer

A) True 
 B)False

Question 7

How much is a bond that pays $80 in coupon payments for 4 years and $1,000 at the end of the fourth year worth if the interest rate is 6%?

Accepted Answer

A)  $855.46
B)  $1,045.56
C)  $1,069.30
D)  $1,140.00

Question 8

A future payment's present value is

Accepted Answer

A)  the value in today's dollars of funds to be paid or received today.
B)  the value in a future date's dollars of funds to be paid or received in the future.
C)  the value in today's dollars of funds to be paid or received in the future.
D)  the value in a future date's dollars of funds to be paid or received today.

Question 9

Giorgio wants to build a new distribution warehouse for his sporting goods business and is going to issue new shares of stock to do so.This is an example of using ________ for his building project.

Accepted Answer

A)  direct finance
B)  indirect finance
C)  retained earnings
D)  dividends

Question 10

If a company pays a dividend of $2 to be received one year from now,dividends are expected to grow at a rate of 3 percent per year for the indefinite future,and the interest rate is 4 percent,the price of the company's stock should be ________ per share.

Accepted Answer

A)  $3.40
B)  $28.57
C)  $200.00
D)  $340.00

Question 11

Explain what information that changes in the value of a firm's stocks provide for a firm's managers and for investors.

Accepted Answer

Changes in the value of a firm's stocks ...

Question 12

Included on the board of directors of Twitter are Peter Currie,president of Currie Capital LLC,the CEO of 1stdibs.com David Rosenblatt,and PureTech Health senior independent director Marjorie Scardino.These three board members do not have a direct management role with Twitter and are therefore referred to as

Accepted Answer

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

Question 13

On a balance sheet,stockholders' equity is listed as an asset.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

An asset is anything...

Question 15

Unlimited personal liability is a disadvantage for

Accepted Answer

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

Question 16

Torrie is thinking of starting up a small business selling hand-painted wine glasses.She asks her sister,Lisette,if she'd like to join her in setting up a partnership to start the business.What is one disadvantage in joining the partnership that Lisette should consider?

Accepted Answer

A)  Lisette should realize that her profits in the partnership will always be less than Torrie's profits,since Torrie had the idea to start the business.
B)  Lisette should realize that,as an owner of the business,she will be personally responsible for the debts of the business.
C)  Lisette should realize that only Torrie will be allowed to own stock in the business as the founding partner.
D)  Lisette should realize that Torrie will have complete control over the business because it was her idea.

Question 17

Mortgage-backed securities are similar to bonds in that the investor who buys one receives

Accepted Answer

A)  federal insurance to cover the value of the security.
B)  partial ownership of the company that issued the security.
C)  dividend payments.
D)  regular interest payments.

Question 18

From the highest percentage to the lowest percentage,the number of firms by business type in the United States is represented by which of the following?

Accepted Answer

A)  sole proprietorships,corporations,partnerships
B)  sole proprietorships,partnerships,corporations
C)  corporations,partnerships,sole proprietorships
D)  corporations,sole proprietorships,partnerships

Question 19

You have a bond that pays $125 per year in coupon payments.Which of the following would result in an increase in the price of your bond?

Accepted Answer

A)  Coupon payments on newly-issued bonds rise to $140 per year.
B)  The likelihood that the firm issuing your bond will default on debt increases.
C)  The price of a share of stock in the company falls.
D)  Coupon payments on newly-issued bonds fall to $75 per year.

Question 20

If a firm fails to provide investors with at least a normal rate of return,

Accepted Answer

A)  it will not be able to remain in business in the long run.
B)  it will not be able to remain in business in the short run.
C)  it will shut down in the short run but will be able to remain in business in the long run.
D)  it will have a positive economic profit but a negative accounting profit.

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

If a firm fails to provide investors with at least a normal rate of return,

Correct Answer
verified

From the highest percentage to the lowest percentage,the number of firms by business type in the United States is represented by which of the following?

Correct Answer
verified

In the United States,corporate profits are taxed at the corporate level but are not taxed as personal income in the form of dividend payments.

Correct Answer
verified

How much is a bond that pays $80 in coupon payments for 4 years and $1,000 at the end of the fourth year worth if the interest rate is 6%?

Correct Answer
verified

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

Correct Answer
verified
An asset is anything...
View Answer

Explain what information that changes in the value of a firm's stocks provide for a firm's managers and for investors.

Correct Answer
verified
Changes in the value of a firm's stocks ...
View Answer

Unlimited personal liability is a disadvantage for

Correct Answer
verified

A future payment's present value is

Correct Answer
verified

All of the following are characteristics of a bond except

Correct Answer
verified

Giorgio wants to build a new distribution warehouse for his sporting goods business and is going to issue new shares of stock to do so.This is an example of using ________ for his building project.

Correct Answer
verified

Mortgage-backed securities are similar to bonds in that the investor who buys one receives

Correct Answer
verified

If a company pays a dividend of $2 to be received one year from now,dividends are expected to grow at a rate of 3 percent per year for the indefinite future,and the interest rate is 4 percent,the price of the company's stock should be ________ per share.

Correct Answer
verified

On a balance sheet,stockholders' equity is listed as an asset.

Correct Answer
verified

Torrie is thinking of starting up a small business selling hand-painted wine glasses.She asks her sister,Lisette,if she'd like to join her in setting up a partnership to start the business.What is one disadvantage in joining the partnership that Lisette should consider?

Correct Answer
verified

Shontae wants to start a pet hotel and is thinking of setting it up as a partnership with her sister Victoria.What are the advantages and disadvantages she will face by setting up the business as a partnership as opposed to a sole proprietorship or a corporation?

Correct Answer
verified
As a partnership,Shontae has the advanta...
View Answer

You have a bond that pays $125 per year in coupon payments.Which of the following would result in an increase in the price of your bond?

Correct Answer
verified

Some economists believe that one factor that caused the financial crisis of 2007-2009 was top managers of large financial services firms making riskier investments than were in the best interests of the firms' shareholders.

Correct Answer
verified

The shareholders of a corporation

Correct Answer
verified

To reduce the principal-agent problem,

Correct Answer
verified

Correct Answer
verified

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

If a firm fails to provide investors with at least a normal rate of return,

Correct AnswerverifiedShow Answer

From the highest percentage to the lowest percentage,the number of firms by business type in the United States is represented by which of the following?

Correct AnswerverifiedShow Answer

In the United States,corporate profits are taxed at the corporate level but are not taxed as personal income in the form of dividend payments.

Correct AnswerverifiedShow Answer

How much is a bond that pays $80 in coupon payments for 4 years and $1,000 at the end of the fourth year worth if the interest rate is 6%?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedAn asset is anything...View AnswerShow Answer

Explain what information that changes in the value of a firm's stocks provide for a firm's managers and for investors.

Correct AnswerverifiedChanges in the value of a firm's stocks ...View AnswerShow Answer

Unlimited personal liability is a disadvantage for

Correct AnswerverifiedShow Answer

A future payment's present value is

Correct AnswerverifiedShow Answer

All of the following are characteristics of a bond except

Correct AnswerverifiedShow Answer

Giorgio wants to build a new distribution warehouse for his sporting goods business and is going to issue new shares of stock to do so.This is an example of using ________ for his building project.

Correct AnswerverifiedShow Answer

Mortgage-backed securities are similar to bonds in that the investor who buys one receives

Correct AnswerverifiedShow Answer

If a company pays a dividend of $2 to be received one year from now,dividends are expected to grow at a rate of 3 percent per year for the indefinite future,and the interest rate is 4 percent,the price of the company's stock should be ________ per share.

Correct AnswerverifiedShow Answer

On a balance sheet,stockholders' equity is listed as an asset.

Correct AnswerverifiedShow Answer

Torrie is thinking of starting up a small business selling hand-painted wine glasses.She asks her sister,Lisette,if she'd like to join her in setting up a partnership to start the business.What is one disadvantage in joining the partnership that Lisette should consider?

Correct AnswerverifiedShow Answer

Shontae wants to start a pet hotel and is thinking of setting it up as a partnership with her sister Victoria.What are the advantages and disadvantages she will face by setting up the business as a partnership as opposed to a sole proprietorship or a corporation?

Correct AnswerverifiedAs a partnership,Shontae has the advanta...View AnswerShow Answer

You have a bond that pays $125 per year in coupon payments.Which of the following would result in an increase in the price of your bond?

Correct AnswerverifiedShow Answer

Some economists believe that one factor that caused the financial crisis of 2007-2009 was top managers of large financial services firms making riskier investments than were in the best interests of the firms' shareholders.

Correct AnswerverifiedShow Answer

The shareholders of a corporation

Correct AnswerverifiedShow Answer

To reduce the principal-agent problem,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
An asset is anything...
View Answer

Correct Answer
verified
Changes in the value of a firm's stocks ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
As a partnership,Shontae has the advanta...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified