Question 1

What are the advantages of setting up a corporation as opposed to a proprietorship or partnership?

Accepted Answer

Corporations have li...

Question 2

Included on the board of directors of Microsoft are John W.Stanton, the chairman of Trilogy Equity Partners, the president of Harvey Mudd college Maria M.Klawe, and the former vice chairman of Bank of America Charles H.Noski.These three board members do not have a direct management role with Microsoft and are therefore referred to as

Accepted Answer

A)  inside directors.
B)  outside directors.
C)  competitive directors.
D)  honorary directors.E) C) and D)
F) None of the above

Question 3

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

Accepted Answer

A)  the out-of-pocket expense to hire resources
B)  taxes owed to the state and Federal governments
C)  the rental value of the office space the company owns and uses for itself
D)  the revenue a firm generates in using its resourcesE) A) and D)
F) B) and C)

Question 4

Who selects the board of directors of a corporation?

Accepted Answer

A)  the state where the corporation is chartered
B)  employees
C)  stockholders
D)  managersE) C) and D)
F) B) and C)

Question 5

How has organizing a successful firm in a market economy changed over the last century?

Accepted Answer

A)  It has become easier as more and more firms discover how to do it.
B)  As government intervention has decreased, firms now have more freedom.
C)  There has been no change one way or the other over the last century.
D)  It has become more difficult to organize an efficient and successful firm.E) C) and D)
F) A) and D)

Question 6

Traditionally, Wall Street investment banks had been organized as partnerships, but by 2000 they had converted to being publicly traded companies.As partnerships, the principal-agent problem is ________ because there is ________ separation of ownership from control.

Accepted Answer

A)  reduced; much
B)  reduced; little
C)  increased; much
D)  increased; littleE) A) and C)
F) None of the above

Question 7

What is a firm's balance sheet?

Accepted Answer

A firm's balance sheet is a fi...

Question 8

The present value of $300 received 5 years in the future would be calculated as which of the following when the interest rate is 5%?

Accepted Answer

A)  300/(1.5) ⁵
B)  300/(1.05) ⁵
C)  300 × 1.5 × 5
D)  5.05/300E) C) and D)
F) A) and B)

Question 9

What role do well-functioning financial markets play in a market economy?

Accepted Answer

They allocate saved ...

Question 10

If a corporate bond with face value of $5,000 has an interest rate of 4 percent paid once a year for a term of 30 years, what is the size of the coupon payment?

Accepted Answer

A)  $4
B)  $200
C)  $1,250
D)  $5,000E) B) and D)
F) All of the above

Question 11

David Myers, former controller for WorldCom, pleaded guilty to falsely reporting costs for WorldCom that were ________ than they actually were, resulting in reported accounting profits for WorldCom that were ________ than their actual level.

Accepted Answer

A)  higher; higher
B)  lower; higher
C)  lower; lower
D)  higher; lowerE) A) and B)
F) A) and C)

Question 12

When groups of mortgages are bundled together by financial institutions and sold to investors, these institutions are said to be ________ mortgage loans.

Accepted Answer

A)  securitizing
B)  underwriting
C)  liquidating
D)  harvestingE) B) and C)
F) A) and D)

Question 13

When a business is set up as a sole proprietorship, the owner of the business faces limited liability.

Accepted Answer

A) True 
 B)False

Question 14

A decrease in liabilities will reduce a firm's accounting profit.

Accepted Answer

A) True 
 B)False

Question 15

If you put $100 into a bank account that earns five percent interest per year, what is the formula you should use to determine the account's future value in one year?

Accepted Answer

A)  Future value = (Present value / i) 
B)  Future value = (Present value x i) 
C)  Future value = [Present value x (1 + i) ]
D)  All of these yield the same answer.E) None of the above
F) All of the above

Question 16

Before its IPO, Facebook was an example of a private firm.As a private firm, Facebook was

Accepted Answer

A)  not subject to government regulations and taxation.
B)  run by stockholders and a board of directors.
C)  run by its founder, Mark Zuckerberg.
D)  not legally allowed to raise funds through venture capital firms.E) A) and D)
F) None of the above

Question 17

A firm in a market economy must do all of the following to succeed except

Accepted Answer

A)  produce the goods and services that consumers want at a lower cost than consumers themselves can produce.
B)  organize the factors of production into a functioning, efficient unit.
C)  have access to sufficient funds.
D)  be organized as a corporation.E) C) and D)
F) None of the above

Question 18

The owners of a ________ have a separate legal distinction from the business.

Accepted Answer

A)  corporation
B)  partnership
C)  sole proprietorship
D)  All of the above are correct.E) B) and C)
F) C) and D)

Question 19

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.E) A) and D)
F) All of the above

Question 20

Briefly describe the Sarbanes-Oxley Act and explain why it was passed.

Accepted Answer

The Sarbanes-Oxley Act of 2002 was enact...

Exam 8: Firms, the Stock Market, and Corporate Governance

How has organizing a successful firm in a market economy changed over the last century?

Correct Answer
verified

The owners of a ________ have a separate legal distinction from the business.

Correct Answer
verified

The present value of $300 received 5 years in the future would be calculated as which of the following when the interest rate is 5%?

Correct Answer
verified

If a corporate bond with face value of $5,000 has an interest rate of 4 percent paid once a year for a term of 30 years, what is the size of the coupon payment?

Correct Answer
verified

What is a firm's balance sheet?

Correct Answer
verified
A firm's balance sheet is a fi...
View Answer

Correct Answer
verified

Who selects the board of directors of a corporation?

Correct Answer
verified

A firm in a market economy must do all of the following to succeed except

Correct Answer
verified

When a business is set up as a sole proprietorship, the owner of the business faces limited liability.

Correct Answer
verified

Before its IPO, Facebook was an example of a private firm.As a private firm, Facebook was

Correct Answer
verified

Briefly describe the Sarbanes-Oxley Act and explain why it was passed.

Correct Answer
verified
The Sarbanes-Oxley Act of 2002 was enact...
View Answer

If you put $100 into a bank account that earns five percent interest per year, what is the formula you should use to determine the account's future value in one year?

Correct Answer
verified

A decrease in liabilities will reduce a firm's accounting profit.

Correct Answer
verified

What are the advantages of setting up a corporation as opposed to a proprietorship or partnership?

Correct Answer
verified
Corporations have li...
View Answer

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

Correct Answer
verified

What role do well-functioning financial markets play in a market economy?

Correct Answer
verified
They allocate saved ...
View Answer

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

Correct Answer
verified

Traditionally, Wall Street investment banks had been organized as partnerships, but by 2000 they had converted to being publicly traded companies.As partnerships, the principal-agent problem is because there is separation of ownership from control.

Correct Answer
verified

When groups of mortgages are bundled together by financial institutions and sold to investors, these institutions are said to be ________ mortgage loans.

Correct Answer
verified

David Myers, former controller for WorldCom, pleaded guilty to falsely reporting costs for WorldCom that were than they actually were, resulting in reported accounting profits for WorldCom that were than their actual level.

Correct Answer
verified

Exam 8: Firms, the Stock Market, and Corporate Governance

How has organizing a successful firm in a market economy changed over the last century?

Correct AnswerverifiedShow Answer

The owners of a ________ have a separate legal distinction from the business.

Correct AnswerverifiedShow Answer

The present value of $300 received 5 years in the future would be calculated as which of the following when the interest rate is 5%?

Correct AnswerverifiedShow Answer

If a corporate bond with face value of $5,000 has an interest rate of 4 percent paid once a year for a term of 30 years, what is the size of the coupon payment?

Correct AnswerverifiedShow Answer

What is a firm's balance sheet?

Correct AnswerverifiedA firm's balance sheet is a fi...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Who selects the board of directors of a corporation?

Correct AnswerverifiedShow Answer

A firm in a market economy must do all of the following to succeed except

Correct AnswerverifiedShow Answer

When a business is set up as a sole proprietorship, the owner of the business faces limited liability.

Correct AnswerverifiedShow Answer

Before its IPO, Facebook was an example of a private firm.As a private firm, Facebook was

Correct AnswerverifiedShow Answer

Briefly describe the Sarbanes-Oxley Act and explain why it was passed.

Correct AnswerverifiedThe Sarbanes-Oxley Act of 2002 was enact...View AnswerShow Answer

If you put $100 into a bank account that earns five percent interest per year, what is the formula you should use to determine the account's future value in one year?

Correct AnswerverifiedShow Answer

A decrease in liabilities will reduce a firm's accounting profit.

Correct AnswerverifiedShow Answer

What are the advantages of setting up a corporation as opposed to a proprietorship or partnership?

Correct AnswerverifiedCorporations have li...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

What role do well-functioning financial markets play in a market economy?

Correct AnswerverifiedThey allocate saved ...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Traditionally, Wall Street investment banks had been organized as partnerships, but by 2000 they had converted to being publicly traded companies.As partnerships, the principal-agent problem is ________ because there is ________ separation of ownership from control.

Correct AnswerverifiedShow Answer

When groups of mortgages are bundled together by financial institutions and sold to investors, these institutions are said to be ________ mortgage loans.

Correct AnswerverifiedShow Answer

David Myers, former controller for WorldCom, pleaded guilty to falsely reporting costs for WorldCom that were ________ than they actually were, resulting in reported accounting profits for WorldCom that were ________ than their actual level.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A firm's balance sheet is a fi...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The Sarbanes-Oxley Act of 2002 was enact...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Corporations have li...
View Answer

Correct Answer
verified

Correct Answer
verified
They allocate saved ...
View Answer

Correct Answer
verified

Traditionally, Wall Street investment banks had been organized as partnerships, but by 2000 they had converted to being publicly traded companies.As partnerships, the principal-agent problem is because there is separation of ownership from control.

Correct Answer
verified

Correct Answer
verified

David Myers, former controller for WorldCom, pleaded guilty to falsely reporting costs for WorldCom that were than they actually were, resulting in reported accounting profits for WorldCom that were than their actual level.

Correct Answer
verified