Quiz 1

A  often established easily and inexpensively

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

C  a hybrid between a partnership and a corporation

D  an unincorporated business owned by one individual

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

A  Marketing

B  Accounting

C  Human Resources

D  Management

E  None of these answers is correct.

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

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

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  High salaries motivate managers to increase stockholders’ wealth.

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

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

C  anonymously tip off the local news team.

D  disobey and include the test results anyhow.

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

A  based on how they affect the stock price.

B  consistent with management goals.

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

D  for transparency and corporate governance.

E  to prioritize the broader needs of society .

A  All of these answer choices are correct.

B  they believe that a company will pursue risky projects.

C  covenants are included in the bond agreements.

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

E  there are more than two bondholders.

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

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

C  avoids shareholder activism.

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

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

A  Stockholders get paid first.

B  Additional debt gives stockholders an advantage in the market.

C  Stockholders protect themselves with covenants.

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

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

A  Proprietorships

B  C corporations

C  S corporations

D  LLCs and LLPs

E  Partnerships

A  decision-making skills improve over time .

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

C  most employees are not willing to take financial risks.

D  all jobs require some level of financial knowledge .

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

A  the firm’s intrinsic value is maximized.

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

C  investors are pessimistic about a stock.

D  there is an R&D breakthrough.

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

A  Having a strong, independent board of directors

B  Use of stock-based compensation for key employees

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

D  Holding managers accountable for poor performance

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

A  still focus on making a profit.

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

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

D  All of these answer choices are correct.

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

A  Finance developed from economics and accounting.

B  Accounting developed from finance and economics.

C  Economics developed from accounting and finance.

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

E  Finance, economics, and accounting are not related.

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

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

C  investigate the situation.

D  All of these answer choices are correct.

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

A  Financial management

B  Capital markets

C  Investments

D  Accounting

E  All of these are considered areas of a finance discipline