Question 1

Corporate governance involves the way in which

Accepted Answer

A)   the government nationalizes corporations.
B)   the government licenses corporations.
C)   a corporation is subject to government regulations.
D)   a corporation is structured.

Question 2

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; little

Question 3

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.

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

A bond is a financial security that represents

Accepted Answer

A)   ownership in a corporation.
B)   the portion of profits paid to shareholders.
C)   the interest rate paid on a share of stock.
D)   a promise to repay a fixed amount of funds.

Question 6

In May 2012,Facebook stock sold for $38 per share in its initial public offering (IPO) .More than a year later,in June 2013,the value of Facebook stock

Accepted Answer

A)   had more than doubled in price.
B)   had declined by nearly 40 percent from the IPO price.
C)   languished at the same $38 per share price.
D)   had increased by almost 60 percent from the IPO price.

Question 7

The Sarbanes-Oxley Act of 2002 requires that CEOs personally certify the accuracy of financial reports.

Accepted Answer

A) True 
 B)False

Question 8

When Potbelly sold stock to the public in its IPO,it did so through the NASDAQ market.This was an example of Potbelly using ________ to raise funds.

Accepted Answer

A)   indirect finance
B)   direct finance
C)   bonds
D)   corporate governance

Question 9

How do the owners of a partnership relate to the business?

Accepted Answer

A)   The owners and the business are not separate legal entities.
B)   The owners and the business are separate legal entities.
C)   The assets of the owners are considered separate from the asset of the business.
D)   None of these describe the legal relationship of the owners to the business.

Question 10

Dividing the current market price of a stock by the firm's earnings per share gives the firm's

Accepted Answer

A)   price-earnings ratio.
B)   year-to-date percentage change.
C)   dividend yield.
D)   stock coupon maturity yield.

Question 11

Define a sole proprietorship.

Accepted Answer

A firm own...

Question 12

Which of the following is operating income?

Accepted Answer

A)   explicit plus implicit costs
B)   stockholders' equity
C)   revenue minus operating expenses
D)   net profit

Question 13

If a corporate bond with a face value of $5,000 pays yearly coupon payments of $100,what is the coupon rate?

Accepted Answer

A)   2%
B)   5%
C)   10%
D)   20%

Question 14

When an investor buys a corporate bond,the ________ the bond is a loan to the corporation.

Accepted Answer

A)   interest on
B)   face value of
C)   coupon payment on
D)   dividend payment on

Question 15

How can a sole proprietorship raise funds needed for firm expansion?

Accepted Answer

By retaining earning...

Question 16

The present value of $475 received 3 years in the future would be calculated as which of the following when the interest rate is 6 percent?

Accepted Answer

A)   475/(1.6) 3
B)   475/(1.06) 3
C)   475 × 1.6 × 3
D)   3.06/475

Question 17

How is accounting profit found?

Accepted Answer

Accounting profit eq...

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.

Question 19

Who controls a partnership?

Accepted Answer

A)   the owners
B)   stockholders
C)   bondholders
D)   employees

Question 20

In the United States,corporate profits are taxed at the corporate level and then are taxed again as personal income in the form of dividend payments.

Accepted Answer

A) True 
 B)False

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

How do the owners of a partnership relate to the business?

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In the United States,corporate profits are taxed at the corporate level and then are taxed again as personal income in the form of dividend payments.

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Who controls a partnership?

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Define a sole proprietorship.

Correct AnswerverifiedA firm own...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

How can a sole proprietorship raise funds needed for firm expansion?

Correct AnswerverifiedBy retaining earning...View AnswerShow Answer

How is accounting profit found?

Correct AnswerverifiedAccounting profit eq...View AnswerShow Answer

A bond is a financial security that represents

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When Potbelly sold stock to the public in its IPO,it did so through the NASDAQ market.This was an example of Potbelly using ________ to raise funds.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Dividing the current market price of a stock by the firm's earnings per share gives the firm's

Correct AnswerverifiedShow Answer

In May 2012,Facebook stock sold for $38 per share in its initial public offering (IPO) .More than a year later,in June 2013,the value of Facebook stock

Correct AnswerverifiedShow Answer

Corporate governance involves the way in which

Correct AnswerverifiedShow Answer

When an investor buys a corporate bond,the ________ the bond is a loan to the corporation.

Correct AnswerverifiedShow Answer

The Sarbanes-Oxley Act of 2002 requires that CEOs personally certify the accuracy of financial reports.

Correct AnswerverifiedShow Answer

If a corporate bond with a face value of $5,000 pays yearly coupon payments of $100,what is the coupon rate?

Correct AnswerverifiedShow Answer

Which of the following is operating income?

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

The present value of $475 received 3 years in the future would be calculated as which of the following when the interest rate is 6 percent?

Correct AnswerverifiedShow Answer

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A firm own...
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By retaining earning...
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Accounting profit eq...
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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
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Correct Answer
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