Question 1

If top managers make good decisions,the firm's profits will be ________,and the firms assets will be ________.

Accepted Answer

A) high; small relative to its liabilities 
B) high; large relative to its liabilities 
C) equal to its revenues; small relative to its liabilities 
D) low; large relative to its liabilities 
A) high; small relative to its liabilities 
B) high; large relative to its liabilities 
C) equal to its revenues; small relative to its liabilities 
D) low; large relative to its liabilities B

Question 2

Urban Outfitters wants to raise $25 million to finance the construction of a new store,and the company wishes to raise the funds through direct finance.Which of the following methods could it use?

Accepted Answer

A) It could sell $25 million in bonds. 
B) It could borrow $25 million from a bank. 
C) It could issue $25 million in stock. 
D) It could choose either A or C. 
A) It could sell $25 million in bonds. 
B) It could borrow $25 million from a bank. 
C) It could issue $25 million in stock. 
D) It could choose either A or C. D

Question 3

If you borrow $5,000 from your bank to purchase shares of Snap from your cousin Vinny,this is an example of obtaining ________ financing and purchasing the stock in a ________ market.

Accepted Answer

A) direct; primary 
B) direct; secondary 
C) indirect; primary 
D) indirect; secondary 
A) direct; primary 
B) direct; secondary 
C) indirect; primary 
D) indirect; secondary B

Question 4

Implicit costs are ________ and explicit costs are ________.

Accepted Answer

A) nonmonetary costs; also nonmonetary costs 
B) nonmonetary costs; costs that involve spending money 
C) costs that involve spending money; nonmonetary costs 
D) costs that involve spending money; also costs that involve spending money 
A) nonmonetary costs; also nonmonetary costs 
B) nonmonetary costs; costs that involve spending money 
C) costs that involve spending money; nonmonetary costs 
D) costs that involve spending money; also costs that involve spending money

Question 5

If a firm has implicit costs as well as explicit costs

Accepted Answer

A) net income will always be less than accounting profit. 
B) accounting profit will be zero. 
C) net income will always be greater than accounting profit. 
D) economic profit will be less than accounting profit. 
A) net income will always be less than accounting profit. 
B) accounting profit will be zero. 
C) net income will always be greater than accounting profit. 
D) economic profit will be less than accounting profit.

Question 6

In the United States,________ percent of all firms are partnerships.

Accepted Answer

A) 4 
B) 10 
C) 14 
D) 26 
A) 4 
B) 10 
C) 14 
D) 26

Question 7

Stock prices start to rise

Accepted Answer

A) when investors are confident that the economy is more than 6 months into an economic recovery. 
B) when investors begin to expect an economic recovery will soon begin. 
C) when investors believe an economic recovery has already begun. 
D) when the unemployment rate begins to decline following a recession. 
A) when investors are confident that the economy is more than 6 months into an economic recovery. 
B) when investors begin to expect an economic recovery will soon begin. 
C) when investors believe an economic recovery has already begun. 
D) when the unemployment rate begins to decline following a recession.

Question 8

Mutual funds sell shares to investors and use the funds to

Accepted Answer

A) purchase Treasury bonds. 
B) invest in a portfolio of financial assets. 
C) purchase newly issued shares of a particular company's stock. 
D) pay dividends. 
A) purchase Treasury bonds. 
B) invest in a portfolio of financial assets. 
C) purchase newly issued shares of a particular company's stock. 
D) pay dividends.

Question 9

Anything owed by a person or a firm is

Accepted Answer

A) an asset. 
B) a liability. 
C) wealth. 
D) owner's yield. 
A) an asset. 
B) a liability. 
C) wealth. 
D) owner's yield.

Question 10

In the United States,________ percent of all firms are corporations.

Accepted Answer

A) 18 
B) 60 
C) 72 
D) 82 
A) 18 
B) 60 
C) 72 
D) 82

Question 11

Mortgage-backed securities are groups of mortgages that are bundled together and sold to investors.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) Firms borrow funds from their retained earnings. 
B) Borrowers take out loans from banks. 
C) Loans to corporations are made from the sale of corporate bonds. 
D) Savers make funds available to borrowers by making deposits to savings accounts. 
A) Firms borrow funds from their retained earnings. 
B) Borrowers take out loans from banks. 
C) Loans to corporations are made from the sale of corporate bonds. 
D) Savers make funds available to borrowers by making deposits to savings accounts.

Question 13

How is the separation of ownership from control related to the principal-agent problem?

Accepted Answer

The principal-agent problem results when

Question 14

If you own a $1,000 face value bond with one year remaining to maturity and a 7 percent coupon rate and new bonds are paying 11 percent,what is the most you can get for your old bond today?

Accepted Answer

A) $1,028.85 
B) $1,000.00 
C) $963.96 
D) $952.30 
A) $1,028.85 
B) $1,000.00 
C) $963.96 
D) $952.30

Question 15

The typical firm in many industries has become ________ over the past 100 years,and efficiently organizing production has become ________.

Accepted Answer

A) larger; more difficult 
B) smaller; more difficult 
C) larger; easier 
D) smaller; easier 
A) larger; more difficult 
B) smaller; more difficult 
C) larger; easier 
D) smaller; easier

Question 16

Assume you and your cousin Vinny set up a partnership and your lawyer tells you that as the owners you will each face unlimited liability.What does that mean?

Accepted Answer

A) You are each liable for organizing the business. 
B) Each of you could stand to lose your personal wealth if the business goes bankrupt. 
C) There is no legal responsibility of the business in case a customer sues,as the business is legally untouchable. 
D) None of these explain what unlimited liability means. 
A) You are each liable for organizing the business. 
B) Each of you could stand to lose your personal wealth if the business goes bankrupt. 
C) There is no legal responsibility of the business in case a customer sues,as the business is legally untouchable. 
D) None of these explain what unlimited liability means.

Question 17

Why is a bond considered to be a loan but a share of stock is not?

Accepted Answer

A bond is a loan because the firm promis

Question 18

All of the following are shown on a firm's income statement except

Accepted Answer

A) costs 
B) profits 
C) revenues 
D) rate of return for investors 
A) costs 
B) profits 
C) revenues 
D) rate of return for investors

Question 19

On a balance sheet,stockholder's equity is equal to

Accepted Answer

A) assets minus liabilities. 
B) the total value of outstanding shares of stock. 
C) long-term liabilities minus current liabilities. 
D) total assets minus goodwill. 
A) assets minus liabilities. 
B) the total value of outstanding shares of stock. 
C) long-term liabilities minus current liabilities. 
D) total assets minus goodwill.

Question 20

Which of the following is the most important of the over-the-counter markets?

Accepted Answer

A) New York Stock Exchange 
B) the S&P 500 
C) the NASDAQ Composite Index 
D) the Chicago Mercantile Exchange 
A) New York Stock Exchange 
B) the S&P 500 
C) the NASDAQ Composite Index 
D) the Chicago Mercantile Exchange

If top managers make good decisions,the firm's profits will be ,and the firms assets will be .

Urban Outfitters wants to raise $25 million to finance the construction of a new store,and the company wishes to raise the funds through direct finance.Which of the following methods could it use?

If you borrow $5,000 from your bank to purchase shares of Snap from your cousin Vinny,this is an example of obtaining financing and purchasing the stock in a market.

Implicit costs are and explicit costs are .

If a firm has implicit costs as well as explicit costs

In the United States,________ percent of all firms are partnerships.

Stock prices start to rise

Mutual funds sell shares to investors and use the funds to

Anything owed by a person or a firm is

In the United States,________ percent of all firms are corporations.

Mortgage-backed securities are groups of mortgages that are bundled together and sold to investors.

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

How is the separation of ownership from control related to the principal-agent problem?

If you own a $1,000 face value bond with one year remaining to maturity and a 7 percent coupon rate and new bonds are paying 11 percent,what is the most you can get for your old bond today?

The typical firm in many industries has become over the past 100 years,and efficiently organizing production has become .

Assume you and your cousin Vinny set up a partnership and your lawyer tells you that as the owners you will each face unlimited liability.What does that mean?

Why is a bond considered to be a loan but a share of stock is not?

All of the following are shown on a firm's income statement except

On a balance sheet,stockholder's equity is equal to

Which of the following is the most important of the over-the-counter markets?

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

The Economics of Health Care

Comparative Advantage and the Gains From International Trade

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money,Banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

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

If top managers make good decisions,the firm's profits will be ________,and the firms assets will be ________.

Urban Outfitters wants to raise $25 million to finance the construction of a new store,and the company wishes to raise the funds through direct finance.Which of the following methods could it use?

If you borrow $5,000 from your bank to purchase shares of Snap from your cousin Vinny,this is an example of obtaining ________ financing and purchasing the stock in a ________ market.

Implicit costs are ________ and explicit costs are ________.

If a firm has implicit costs as well as explicit costs

In the United States,________ percent of all firms are partnerships.

Stock prices start to rise

Mutual funds sell shares to investors and use the funds to

Anything owed by a person or a firm is

In the United States,________ percent of all firms are corporations.

Mortgage-backed securities are groups of mortgages that are bundled together and sold to investors.

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

How is the separation of ownership from control related to the principal-agent problem?

If you own a $1,000 face value bond with one year remaining to maturity and a 7 percent coupon rate and new bonds are paying 11 percent,what is the most you can get for your old bond today?

The typical firm in many industries has become ________ over the past 100 years,and efficiently organizing production has become ________.

Assume you and your cousin Vinny set up a partnership and your lawyer tells you that as the owners you will each face unlimited liability.What does that mean?

Why is a bond considered to be a loan but a share of stock is not?

All of the following are shown on a firm's income statement except

On a balance sheet,stockholder's equity is equal to

Which of the following is the most important of the over-the-counter markets?

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

The Economics of Health Care

Comparative Advantage and the Gains From International Trade

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money,Banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

If top managers make good decisions,the firm's profits will be ,and the firms assets will be .

If you borrow $5,000 from your bank to purchase shares of Snap from your cousin Vinny,this is an example of obtaining financing and purchasing the stock in a market.

Implicit costs are and explicit costs are .

The typical firm in many industries has become over the past 100 years,and efficiently organizing production has become .