Question 1

______ are the portion of profits paid to holders of a company's stock.

Accepted Answer

A)  Bonds 
B)  Retained earnings 
C)  Dividends 
D)  Bitcoins 
A)  Bonds 
B)  Retained earnings 
C)  Dividends 
D)  Bitcoins

Question 2

A disadvantage of a partnership is that:

Accepted Answer

A)  there is flexibility in decision making. 
B)  profits are taxed only once. 
C)  profits are taxed twice. 
D)  there are unlimited personal legal liabilities. 
A)  there is flexibility in decision making. 
B)  profits are taxed only once. 
C)  profits are taxed twice. 
D)  there are unlimited personal legal liabilities.

Question 3

A corporation has 2 million shares of stock outstanding. It decides to buy back 500,000 shares. The market price is $8. What is the market dollar value of the stock buyback?

Accepted Answer

A)  $500,000 
B)  $4 million 
C)  $8 million 
D)  $16 million 
A)  $500,000 
B)  $4 million 
C)  $8 million 
D)  $16 million

Question 4

The owners of a _____ cannot be sued individually.

Accepted Answer

A)  sole proprietorship 
B)  partnership 
C)  dual partnership 
D)  corporation 
A)  sole proprietorship 
B)  partnership 
C)  dual partnership 
D)  corporation

Question 5

_____ is a benefit of diversification.

Accepted Answer

A)  Avoiding management issues 
B)  Sustaining product quality 
C)  Increasing sales to reach production capacity 
D)  Reducing risk exposure 
A)  Avoiding management issues 
B)  Sustaining product quality 
C)  Increasing sales to reach production capacity 
D)  Reducing risk exposure

Question 6

When a firm expands into a country with highly competitive markets, it may be attempting to:

Accepted Answer

A)  increase country risk. 
B)  sustain product quality. 
C)  prevent a rival from dominating the market. 
D)  reduce debt. 
A)  increase country risk. 
B)  sustain product quality. 
C)  prevent a rival from dominating the market. 
D)  reduce debt.

Question 7

_____ are part of a stakeholder group impacted by corporate policy decisions.

Accepted Answer

A)  Stock exchanges 
B)  Employees 
C)  Foreign countries 
D)  People who live at least a thousand miles away 
A)  Stock exchanges 
B)  Employees 
C)  Foreign countries 
D)  People who live at least a thousand miles away

Question 8

_____ can raise money by selling bonds.

Accepted Answer

A)  Sole proprietorships 
B)  Partnerships 
C)  Dual partnerships 
D)  Corporations 
A)  Sole proprietorships 
B)  Partnerships 
C)  Dual partnerships 
D)  Corporations

Question 9

A _____ is the legal structure that accounts for the majority of business revenues and profits.

Accepted Answer

A)  sole proprietorship 
B)  partnership 
C)  limited liability company 
D)  corporation 
A)  sole proprietorship 
B)  partnership 
C)  limited liability company 
D)  corporation

Question 10

The management of XYZ Corporation is considering acquiring another firm in an effort to expand the company. Stockholders of XYZ feel that the company is big enough and does not need to expand. This is an example of:

Accepted Answer

A)  the principal-agent problem. 
B)  the principal problem. 
C)  asymmetric information. 
D)  skin-in-the-game. 
A)  the principal-agent problem. 
B)  the principal problem. 
C)  asymmetric information. 
D)  skin-in-the-game.

Question 11

XYZ Corporation is a U.S. fruit company. When XYZ Corporation purchases bananas from India and Brazil for distribution to U.S. grocery stores, it may pay:

Accepted Answer

A)  an excise tax. 
B)  a sales tax. 
C)  a tariff. 
D)  a duty. 
A)  an excise tax. 
B)  a sales tax. 
C)  a tariff. 
D)  a duty.

Question 12

When a multinational firm expands into a country because its currency has depreciated, the firm is attempting to:

Accepted Answer

A)  diversify. 
B)  sustain product quality. 
C)  increase sales to reach production capacity. 
D)  take advantage of lower business operations costs. 
A)  diversify. 
B)  sustain product quality. 
C)  increase sales to reach production capacity. 
D)  take advantage of lower business operations costs.

Question 13

Kate and Lucy are opening a gift shop together. They do not want to incorporate and are not concerned about personal liability. What business structure will they choose?

Accepted Answer

A)  sole proprietorship 
B)  partnership 
C)  limited liability company 
D)  franchise 
A)  sole proprietorship 
B)  partnership 
C)  limited liability company 
D)  franchise

Question 14

One method that businesses use to overcome the principal-agent problem is to:

Accepted Answer

A)  not require the board of directors to oversee management. 
B)  reward executives and managers who make poor decisions. 
C)  incentivize management. 
D)  not give employees a stake in the business. 
A)  not require the board of directors to oversee management. 
B)  reward executives and managers who make poor decisions. 
C)  incentivize management. 
D)  not give employees a stake in the business.

Question 15

_____ are profits that a corporation does not immediately return to stockholders.

Accepted Answer

A)  Stock buybacks 
B)  Dividend payments 
C)  Bond issuances 
D)  Retained earnings 
A)  Stock buybacks 
B)  Dividend payments 
C)  Bond issuances 
D)  Retained earnings

Question 16

One method that businesses use to overcome the principal-agent problem is to:

Accepted Answer

A)  require the board of directors to provide oversight on management. 
B)  reward management regardless of performance. 
C)  deny management stock options. 
D)  not give employees a stake in the business. 
A)  require the board of directors to provide oversight on management. 
B)  reward management regardless of performance. 
C)  deny management stock options. 
D)  not give employees a stake in the business.

Question 17

One method that businesses use to overcome the principal-agent problem is to:

Accepted Answer

A)  not require the board of directors to oversee management. 
B)  not reward executives and managers who make poor decisions. 
C)  not give stock options to management. 
D)  not give employees a stake in the business. 
A)  not require the board of directors to oversee management. 
B)  not reward executives and managers who make poor decisions. 
C)  not give stock options to management. 
D)  not give employees a stake in the business.

Question 18

Which of the following would probably cause a business's retained earnings to decrease?

Accepted Answer

A)  a suspension of stock buybacks 
B)  a suspension of dividend payments 
C)  an increase in profits 
D)  a decrease in profits 
A)  a suspension of stock buybacks 
B)  a suspension of dividend payments 
C)  an increase in profits 
D)  a decrease in profits

Question 19

Barry owns stock in XYX Corporation. It has a _____ yield of 4.9%, which makes it attractive as an income source.

Accepted Answer

A)  bond 
B)  dividend 
C)  stock 
D)  buyback 
A)  bond 
B)  dividend 
C)  stock 
D)  buyback

Question 20

What are some of the advantages and disadvantages of global expansion by a firm?

Accepted Answer

The disadvantages of global expansion in

Exam 9: Organizing a Business

______ are the portion of profits paid to holders of a company's stock.

A disadvantage of a partnership is that:

A corporation has 2 million shares of stock outstanding. It decides to buy back 500,000 shares. The market price is $8. What is the market dollar value of the stock buyback?

The owners of a _____ cannot be sued individually.

_____ is a benefit of diversification.

When a firm expands into a country with highly competitive markets, it may be attempting to:

_____ are part of a stakeholder group impacted by corporate policy decisions.

_____ can raise money by selling bonds.

A _____ is the legal structure that accounts for the majority of business revenues and profits.

The management of XYZ Corporation is considering acquiring another firm in an effort to expand the company. Stockholders of XYZ feel that the company is big enough and does not need to expand. This is an example of:

XYZ Corporation is a U.S. fruit company. When XYZ Corporation purchases bananas from India and Brazil for distribution to U.S. grocery stores, it may pay:

When a multinational firm expands into a country because its currency has depreciated, the firm is attempting to:

Kate and Lucy are opening a gift shop together. They do not want to incorporate and are not concerned about personal liability. What business structure will they choose?

One method that businesses use to overcome the principal-agent problem is to:

_____ are profits that a corporation does not immediately return to stockholders.

One method that businesses use to overcome the principal-agent problem is to:

One method that businesses use to overcome the principal-agent problem is to:

Which of the following would probably cause a business's retained earnings to decrease?

Barry owns stock in XYX Corporation. It has a _____ yield of 4.9%, which makes it attractive as an income source.

What are some of the advantages and disadvantages of global expansion by a firm?

The Basics of Economics

Why We Trade

The Supply and Demand Model

Elasticity

Consumer Choice

The Economic Efficiency of Markets

Taxation: An Economic Analysis

Externalities, the Environment, and Public Goods

Stocks and Bonds

The Cost of Doing Business

Perfect Competition

Monopoly and Antitrust Laws

Monopolistic Competition and Price Discrimination

Oligopoly

Behavioral Economics and Strategy

Labor and Other Resources

The Distribution of Income

Information and Health Economics

GDP and the Price Level

Unemployment and the Business Cycle

Long Run Economic Growth

Saving, Investment, and the Federal Budget Deficit

The Monetary System

Money and the Price Level in the Long Run

Aggregate Supply and Aggregate Demand

Monetary Policy and Interest Rates

Fiscal Policy and the Business Cycle

The Aggregate Expenditure Model

Inflation Expectations and Stabilization Policies

International Trade

Foreign Exchange Markets

International Finance

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