Quiz 1

A  a legal entity created by a state, separate and distinct from its owners and managers

B  an unincorporated business owned by one individual

C  often established easily and inexpensively

D  a hybrid between a partnership and a corporation

E  a legal arrangement between two or more people who decide to do business together

A  Accounting

B  Management

C  None of these answers is correct.

D  Marketing

E  Human Resources

A  Awarding managers stock options on a monthly basis instead of yearly keeps stock prices high.

B  High salaries motivate managers to increase stockholders’ wealth.

C  Basing managers’ compensation on intrinsic value, not market price, will lead to constant increases in stock price.

D  Yearly changes in compensation policies keep managers alert to differences in stock prices.

E  Rewarding managers for stock performance over the long run gives them an incentive to keep the stock price high over time.

A  not say anything because she’s not in charge of development.

B  disobey and include the test results anyhow.

C  anonymously tip off the local news team.

D  obey the order but talk to other members of her team about the issue.

E  There is no clear answer but staying quiet may be the worst choice.

A  to prioritize the broader needs of society .

B  in terms of financial consequences and how they affect society at large.

C  for transparency and corporate governance.

D  consistent with management goals.

E  based on how they affect the stock price.

A  All of these answer choices are correct.

B  there are more than two bondholders.

C  covenants are included in the bond agreements.

D  the amount of common stock in a firm exceeds the amount of bonds.

E  they believe that a company will pursue risky projects.

A  allows managers to persuade stockholders that the firm is socially responsible.

B  causes the stock price to remain close to the intrinsic value over time.

C  avoids shareholder activism.

D  ensures that underperforming firms will be able to change course and recover.

E  makes it less likely that corporate raiders will undervalue a firm’s stock.

A  Stockholders do better when the company does better because the stock price is higher.

B  Stockholders protect themselves with covenants.

C  Additional debt gives stockholders an advantage in the market.

D  Stockholders get paid first.

E  When the market is bad, stockholders don’t lose as much.

A  C corporations

B  Partnerships

C  S corporations

D  LLCs and LLPs

E  Proprietorships

A  decision-making skills improve over time .

B  most employees are not willing to take financial risks.

C  employees decide how individual retirement funds are invested and how much risk they are willing to assume.

D  employers make investment decisions in “defined contribution” pension plans.

E  all jobs require some level of financial knowledge .

A  the actual stock price exceeds the intrinsic value of the stock.

B  investors are pessimistic about a stock.

C  the intrinsic value of the stock exceeds the market price.

D  there is an R&D breakthrough.

E  the firm’s intrinsic value is maximized.

A  Holding managers accountable for poor performance

B  Rules and practices to ensure that managers balance the needs of customers, employees, and affected citizens with shareholder interests

C  Focus on short-run profits that add up in the long run

D  Having a strong, independent board of directors

E  Use of stock-based compensation for key employees

A  All of these answer choices are correct.

B  still focus on making a profit.

C  are a fairly small but rapidly growing number of companies.

D  are committed to putting other stakeholders on an equal footing with shareholders.

E  undergo an annual audit to review practices regarding social responsibility, corporate governance, and transparency.

A  Economics developed from accounting and finance.

B  The COO is in charge of accounting and finance in most businesses.

C  Accounting developed from finance and economics.

D  Finance, economics, and accounting are not related.

E  Finance developed from economics and accounting.

A  All of these answer choices are correct.

B  avoid damage to the company’s culture and long-term performance.

C  take proactive steps to ensure the situation is dealt with.

D  investigate the situation.

E  ensure that the company’s reputation is not damaged.

A  Capital markets

B  Financial management

C  Accounting

D  Investments

E  All of these are considered areas of a finance discipline