Question 1

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

Question 2

What does unlimited liability mean?

Accepted Answer

A)  The owners of the business are personally responsible for paying expenses incurred by the business.
B)  Only employees can have a claim on the assets of the business.
C)  The personal assets of the owners cannot be claimed if the business is bankrupt.
D)  Anybody with a liability against a firm can claim up to three times their liability.

Question 3

Tommy's Teddy Bears incurs $300,000 per year in explicit costs and $50,000 in implicit costs.The shop earns $600,000 in revenues and has $1.1 million in net worth.Based on this information,what is economic profit for Tommy's Teddy Bears?

Accepted Answer

A)  $250,000
B)  $300,000
C)  $500,000
D)  $1.35 million

Question 4

Describe the three main categories of firms.

Accepted Answer

The three main types of firms are sole p...

Question 5

Yolanda wants to expand her microbrewery business by buying out a competitor and is going to sell newly-issued corporate bonds to do so.This is an example of using ________ for her expansion plans.

Accepted Answer

A)  direct finance
B)  indirect finance
C)  coupon payments
D)  retained earnings

Question 6

Profits that are reinvested in a firm rather than paid to the firm's owners are called

Accepted Answer

A)  dividends.
B)  stock options.
C)  retained earnings.
D)  corporate bonds.

Question 7

The Aristocrat Corporation has taken out a loan to buy manufacturing equipment.The loan represents ________ for the company.

Accepted Answer

A)  an asset
B)  a liability
C)  a bond
D)  equity

Question 8

From the highest to the lowest,the percentage of profits earned by businesses in the United States is represented by which of the following?

Accepted Answer

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

Question 9

A firm's managers need information on the firm's revenue and costs as well as information on the value of a firm's assets and the amount of the firm's debts to answer three basic questions.Which of the following is not one of those three basic questions?

Accepted Answer

A)  What to produce?
B)  How to produce it?
C)  What price to charge?
D)  Where to produce?

Question 10

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

Accepted Answer

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

Question 11

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 12

A bond is a financial security that represents a promise to repay

Accepted Answer

A)  a yearly interest payment only.
B)  a yearly principal payment only.
C)  a yearly interest payment and a principal payment.
D)  Bonds are investments that do not promise any kind of repayment.

Question 13

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 14

What is the present value of $960 in one year if the current rate of interest is 6 percent?

Accepted Answer

A)  $676.76
B)  $905.66
C)  $1,017.60
D)  $1,449.46

Question 15

Gross revenue minus explicit costs equals

Accepted Answer

A)  accounting profit.
B)  economic profit.
C)  opportunity cost.
D)  implicit cost.

Question 16

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 17

The rules of accounting generally require that ________ be included in a firm's financial records.

Accepted Answer

A)  only implicit costs
B)  only explicit costs
C)  both explicit costs and implicit costs
D)  neither explicit costs nor implicit costs

Question 18

Dividends are

Accepted Answer

A)  the interest payments on bonds.
B)  the principal payments on bonds.
C)  fixed payments to bondholders.
D)  payments by a corporation to its shareholders.

Question 19

Snap became the first firm in the history of U.S.financial markets to have an IPO that consisted entirely of non-voting shares.

Accepted Answer

A) True 
 B)False

Question 20

If a corporate bond with a face value of $20,000 pays yearly coupon payments of $500,what is the coupon rate?

Accepted Answer

A)  2.5%
B)  4%
C)  25%
D)  40%

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

Tommy's Teddy Bears incurs $300,000 per year in explicit costs and $50,000 in implicit costs.The shop earns $600,000 in revenues and has $1.1 million in net worth.Based on this information,what is economic profit for Tommy's Teddy Bears?

Correct AnswerverifiedShow Answer

What does unlimited liability mean?

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The shareholders of a corporation

Correct AnswerverifiedShow Answer

Describe the three main categories of firms.

Correct AnswerverifiedThe three main types of firms are sole p...View AnswerShow Answer

From the highest to the lowest,the percentage of profits earned by businesses in the United States is represented by which of the following?

Correct AnswerverifiedShow Answer

Gross revenue minus explicit costs equals

Correct AnswerverifiedShow Answer

Unlimited personal liability is a disadvantage for

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A firm's managers need information on the firm's revenue and costs as well as information on the value of a firm's assets and the amount of the firm's debts to answer three basic questions.Which of the following is not one of those three basic questions?

Correct AnswerverifiedShow Answer

What is the present value of $960 in one year if the current rate of interest is 6 percent?

Correct AnswerverifiedShow Answer

A bond is a financial security that represents a promise to repay

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Yolanda wants to expand her microbrewery business by buying out a competitor and is going to sell newly-issued corporate bonds to do so.This is an example of using ________ for her expansion plans.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The rules of accounting generally require that ________ be included in a firm's financial records.

Correct AnswerverifiedShow Answer

If a corporate bond with a face value of $20,000 pays yearly coupon payments of $500,what is the coupon rate?

Correct AnswerverifiedShow Answer

Profits that are reinvested in a firm rather than paid to the firm's owners are called

Correct AnswerverifiedShow Answer

Snap became the first firm in the history of U.S.financial markets to have an IPO that consisted entirely of non-voting shares.

Correct AnswerverifiedShow Answer

The Aristocrat Corporation has taken out a loan to buy manufacturing equipment.The loan represents ________ for the company.

Correct AnswerverifiedShow Answer

Dividends are

Correct AnswerverifiedShow Answer

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The three main types of firms are sole p...
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When the coupon rate on newly issued bonds relative to older,outstanding bonds,the market price of the older bond .

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