Quiz 1

A  a hybrid between a partnership and a corporation

B  often established easily and inexpensively

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

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

E  an unincorporated business owned by one individual

A  Management

B  Human Resources

C  Marketing

D  Accounting

E  None of these answers is correct.

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

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

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

A  disobey and include the test results anyhow.

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

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

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

E  anonymously tip off the local news team.

A  based on how they affect the stock price.

B  for transparency and corporate governance.

C  to prioritize the broader needs of society .

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

E  consistent with management goals.

A  there are more than two bondholders.

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

C  they believe that a company will pursue risky projects.

D  All of these answer choices are correct.

E  covenants are included in the bond agreements.

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

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

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

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

E  avoids shareholder activism.

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

B  Stockholders get paid first.

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

D  Additional debt gives stockholders an advantage in the market.

E  Stockholders protect themselves with covenants.

A  Proprietorships

B  LLCs and LLPs

C  S corporations

D  C corporations

E  Partnerships

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

B  most employees are not willing to take financial risks.

C  all jobs require some level of financial knowledge .

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

E  decision-making skills improve over time .

A  investors are pessimistic about a stock.

B  the firm’s intrinsic value is maximized.

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

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

E  there is an R&D breakthrough.

A  Use of stock-based compensation for key employees

B  Holding managers accountable for poor performance

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

D  Having a strong, independent board of directors

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

A  All of these answer choices are correct.

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

C  still focus on making a profit.

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

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

A  Finance developed from economics and accounting.

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

C  Accounting developed from finance and economics.

D  Economics developed from accounting and finance.

E  Finance, economics, and accounting are not related.

A  All of these answer choices are correct.

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

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

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

E  investigate the situation.

A  Investments

B  Financial management

C  Accounting

D  All of these are considered areas of a finance discipline

E  Capital markets