Quiz 1

A  an unincorporated business owned by one individual

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

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

D  often established easily and inexpensively

E  a hybrid between a partnership and a corporation

A  Accounting

B  Human Resources

C  None of these answers is correct.

D  Management

E  Marketing

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

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

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

B  anonymously tip off the local news team.

C  disobey and include the test results anyhow.

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  for transparency and corporate governance.

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

C  based on how they affect the stock price.

D  consistent with management goals.

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  there are more than two bondholders.

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

E  covenants are included in the bond agreements.

A  avoids shareholder activism.

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

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

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

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

A  Stockholders get paid first.

B  Additional debt gives stockholders an advantage in the market.

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

D  Stockholders protect themselves with covenants.

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

A  C corporations

B  LLCs and LLPs

C  Proprietorships

D  S corporations

E  Partnerships

A  decision-making skills improve over time .

B  all jobs require some level of financial knowledge .

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

D  most employees are not willing to take financial risks.

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

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

B  investors are pessimistic about a stock.

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

D  the firm’s intrinsic value is maximized.

E  there is an R&D breakthrough.

A  Having a strong, independent board of directors

B  Use of stock-based compensation for key employees

C  Holding managers accountable for poor performance

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

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

A  still focus on making a profit.

B  All of these answer choices are correct.

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

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

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

A  Accounting developed from finance and economics.

B  Finance, economics, and accounting are not related.

C  Finance developed from economics and accounting.

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

E  Economics developed from accounting and finance.

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

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

C  investigate the situation.

D  All of these answer choices are correct.

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

A  Capital markets

B  Accounting

C  Financial management

D  Investments

E  All of these are considered areas of a finance discipline