business exam 2
The document filed with a state government to establish the existence of a new corporation.
Articles of incorporation
Marcus is a venture capitalist who invests in start-ups and small businesses. He is interested in investing in an online start-up company that has been in business for a year. Before making a decision, Marcus does some research on the value of the company's assets and liabilities. In this scenario, Marcus is most likely analyzing the company's:
Balance sheet
A textile corporation has two hundred odd stockholders. As it is inconvenient for so many stockholders to manage the company, the stockholders elect a group of individuals to oversee the company's operation and to represent their interests. In this scenario, the stockholders elect a _____.
Board of directors
When people use the term "corporation" without specifying which type, they are generally referring to a(n) _____.
C Corporation
An index that tracks stock prices of 30 large, well-known U.S. corporations.
DOW JONES INDUSTRIAL AVERAGE (DJIA)
A law enacted in the aftermath of the financial crisis of 2008-2009 that strengthened government oversight of financial markets and placed limitations on risky financial strategies such as heavy reliance on leverage.
Dodd-Frank Act
The _____ of 2010 expanded the Fed's regulatory authority over nondepository financial institutions, such as hedge funds and mortgage brokers that had previously operated with little regulatory oversight or accountability.
Dodd-Frank Act
A _____ refers to a partnership in which all partners can take an active role in managing the business and have unlimited liability for any claims against the firm.
General partnership
Richard is a wealthy and successful businessman who is well known for financing many successful start-ups. He has earned a sizable amount of profit by providing capital to start-ups in return for a share of their profits. In the given scenario, which of the following statements is true of Richard?
He is an angel investor
A firm considers _____ to increase size and market power within the industry.
Horizontal mergers
An individual retirement account that provides tax benefits to individuals who are investing for their retirement.
IRA
In the accounting equation, assets are equal to:
In the accounting equation, assets are equal to:
Which of the following statements is true of a socially responsible firm?
It has an obligation to respect the needs of all stakeholders.
Which of the following features of a sole proprietorship proves that it is a risky endeavor?
It's unlimited liability
In the context of financial statements, which of the following statements is true of large corporations?
Large corporations with publicly traded stock must provide an annual report containing financial statements to all stockholders.
A(n) _____ is a form of business ownership that offers both restricted responsibility to its owners and flexible tax treatment.
Limited liability company
Which of the following categories of people is most likely to step into entrepreneurship?
People who have trouble being subordinates because of their personalities
A stock index based on prices of 500 major U.S. corporations in a variety of industries and market sectors.
STANDARD & POOR'S 500
An owner of a C corporation is called a _____.
Stockholder
Which of the following is an appealing benefit that entrepreneurs enjoy?
The ability to set their own hours
Which of the following statements is true of entrepreneurs who possess tolerance of failure?
They tend to view nonsuccess as a chance to learn.
Assets = Liabilities + Owners' Equity
accounting equation
Institutional investors:
amass huge pools of financial capital from various sources.
Individuals who invest in start-up companies with high growth potential in exchange for a share of ownership.
angel investors
In the event that a large company has to downsize, the middle-aged workers who are laid off find it difficult to find new jobs. When such workers decide to start their own businesses, they:
are called necessity entrepreneurs
In the context of opportunities and threats, overhead costs for small businesses:
are often lower than bigger companies
Financial ratios that measure how effectively a firm is using its assets to generate revenues or cash.
asset management ratios
_____ measure how effectively an organization uses its resources to generate net income.
asset management ratios
In the context of balance sheets, resources owned by a firm are known as _____.
assets
Resources owned by a firm.
assets
A financial statement that reports the financial position of a firm by identifying and reporting the value of the firm's assets, liabilities, and owners' equity.
balance sheet
The three kinds of basic financial statements that are prepared in financial accounting are:
balance sheet, income statement, and statement of cash flows.
Scoopjoe, an ice cream brand in Wisconsin, has ten other outlets in Illinois, Michigan, and Ohio. As part of the agreement between Scoopjoe's main outlet and the other outlets, the former not only supplies raw materials to the latter but also provides help with site selection, training of staff, and finance. The given scenario exemplifies a:
business format franchise
Damien buys stocks worth $2800 in a cosmetic products manufacturing company. His investment turns out to be a sound decision as the prices of his stocks go up by $900. In this scenario, Damien earns a _____.
capital gain
The extent to which a firm relies on various forms of debt and equity to satisfy its financing needs is called that firm's _____.
capital structure
The mix of equity and debt financing a firm uses to meet its permanent financing needs.
capital structure
A _____ is the most common depository institution.
commercial bank
A(n) _____ is a combination of two firms that are in unrelated industries.
conglomerate merger
In a sole proprietorship, any debts the company incurs are:
considered to be the owner's personal liabilities.
The basic rules governing how a corporation is organized and how it conducts its business are known as _____.
corporate bylaws
A _____ is a form of business ownership in which the business is considered a legal entity that is separate and distinct from its owners.
corporation
The government of Brunasia issues bonds with a guarantee to make periodic interest payments on the par value. The government offers a 6.5% interest on its bonds. In this case, the percentage of interest offered by the government of Brunasia is called the _____.
coupon rate
Lina, along with ten of her colleagues, starts a financial cooperative to financially assist each other. The members pool their savings in the cooperative, and they can also take loans from it on a low interest rate. Members of the cooperative benefit from higher returns on savings and lower rates on loans. In this scenario, the cooperative started by Lina and her colleagues exemplifies a(n) _____.
credit union
_____ is the process of funding ventures by raising money from a large number of investors via the Internet.
crowdfunding
In the context of liquidity ratios, a firm's _____ are the debts that must be repaid in the following year.
current liabilities
Funds provided by lenders (creditors).
debit financing
When a company takes out a bank loan, or issues and sells corporate bonds, it is relying on _____.
debt financing
Funds provided by the owners of a company.
equity
When a company issues and sells new stock or uses retained earnings to meet its financial needs, it is using _____.
equity financing
Resources that are used up as the result of business operations.
expenses
_____ indicate the cash a firm spends, or other assets it uses up, to carry out the business activities necessary to generate its revenue.
expenses
A deep-seated sense that forces other than the individual are responsible for what happens in his or her life.
external locus of control
To give the company's stockholders, creditors, and other external stakeholders an accurate idea of the company's overall performance, Rowensport Corporation, a multinational company, releases statements that contain details of the company's profits and losses over the past five years. In this scenario, the company is most likely involved in _____.
financial accounting
The funds a firm uses to acquire its assets and finance its operations.
financial capital
The use of debt in a firm's capital structure.
financial leverage
Dora works for PowTran Corp. Her primary responsibilities include managing the firm's working capital and analyzing long-term investment opportunities for the firm. Dora is most likely a part of the firm's _____ team.
financial management
Markets that transfer funds from savers to borrowers are referred to as _____.
financial markets
A partnership in which all partners can take an active role in managing the business and have unlimited liability for any claims against the firm.
general partnership
Firms that rely on a lot of debt in their capital structure are said to be _____.
highly leveraged
A firm considers _____ to increase size and market power within the industry.
horizontal merger
The _____ summarizes the financial results of a firm's operations over a given period of time.
income statement
The financial statement that reports the revenues, expenses, and net income that resulted from a firm's operations over an accounting period.
income statement
A(n) _____ is the first time a company issues stock that may be bought by the general public.
initial public offering
In the context of balance sheets, patents, trademarks, and copyrights are examples of _____.
intangible assets
A deep-seated sense that the individual is personally responsible for what happens in his or her life.
internal locus of control
The _____ measures how many times a firm's stock is sold and replaced each year.
inventory turnover ratio
A(n) _____ is a financial intermediary that specializes in helping firms raise financial capital by issuing securities in primary markets.
investment bank
A financial intermediary that specializes in helping firms raise financial capital by issuing securities in primary markets.
investment banks
In addition to contributions from owners, firms can also raise long-term funds by:
issuing bonds
Ratios that measure the extent to which a firm relies on debt financing in its capital structure.
leverage ratios
_____ are ratios that measure the extent to which a firm relies on debt financing in its capital structure.
leverage ratios
Garret wants to buy shares of an iron manufacturing company, but he does not want to pay a high price for them. He asks his securities broker to only buy shares that come within the price of $300 and $400. In this scenario, Garret places a _____ with his broker.
limit order
When owners are not personally liable for claims against their firm. Owners with limited liability may lose their investment in the company, but their other personal assets are protected.
limited liability
A form of business ownership that offers both limited liability to its owners and flexible tax treatment.
limited liability company
A form of partnership in which all partners have the right to participate in management and have limited liability for company debts.
limited liability partnership
A partnership that includes at least one general partner who actively manages the company and accepts unlimited liability and one limited partner who gives up the right to actively manage the company in exchange for limited liability.
limited partnership
An asset that can quickly be converted into cash with little risk of loss.
liquid asset
In finance, a _____ is one that can be quickly converted into cash with little risk of loss.
liquid asset
_____ measure the ability of an organization to convert assets into the cash it needs to pay off liabilities that come due in the following year.
liquidity ratio
Financial ratios that measure the ability of a firm to obtain the cash it needs to pay its short-term debt obligations as they come due.
liquidity ratios
_____ provide analysis and prepare reports and financial statements for their organization.
management accountants
_____ is found by multiplying the price per share times the number of shares of common stock outstanding.
market cap
An institutional investor that raises funds by selling shares to investors and uses the accumulated funds to buy a portfolio of many different securities.
mutual funds
The difference between the revenue a firm earns and the expenses it incurs in a given time period.
net income
_____ is the profit or loss a firm earns in the time period covered by the financial statement that reports the revenues and expenses.
net income
In the context of balance sheets, retained earnings are a major component of the _____ section.
owners equity
The claims a firm's owners have against their company's assets.
owners equity
A(n) _____ is a voluntary agreement under which two or more people act as co-owners of a business for profit.
partnereship
Julian wants to open a bakery. He uses his savings and borrows some funds from his family to start his business. In the given scenario, Julian uses _____ to fund his business.
personal resources
A(n) _____ is a type of stock that gives its holder priority over common stockholders in terms of dividends and claims on assets.
preferred stock
Ratios that measure the rate of return a firm is earning on various measures of investment.
profitability ratios
_____ are ratios that measure the extent to which a firm relies on debt financing in its capital structure.
profitability ratios
Which of the following is an advantage associated with a sole proprietorship?
retention of control
Increases in a firm's assets that result from the sale of goods, provision of services, or other activities intended to earn income.
revenue
The degree of uncertainty regarding the outcome of a decision.
risk
The observation that financial opportunities that offer high rates of return are generally riskier than opportunities that offer lower rates of return.
risk-return trade-off
Mr. Troy wants to buy stocks of a local retail company. He needs help with market research and requires some investing advice, as well as someone to do the trading for him. Mr. Troy should contact a(n) _____.
securities broker
Which of the following is an advantage of a C corporation?
shareholders have limited liability in the firm
form of business ownership with a single owner who usually actively manages the company.
sole proprietorship
The difference between the prices at which securities dealers buy and sell a security
spread
The financial statement that identifies a firm's sources and uses of cash in a given accounting period.
statement of cash flow
A _____ tracks the prices of a large group of stocks that meet certain defined criteria.
stock index
As the recession of 2007-2008 loomed over both large and small businesses, many firms looked for ways to deleverage. The term deleveraging implies that:
the firms replaced much of the debt in their capital structure with equity.
Reese buys securities in a pharmaceutical company for $3300. After a period of eight months, when the prices of the securities go up in the market, she sells her securities for $3700. In this case, the difference of $400 in the prices of the securities is called:
the spread
The Securities and Exchange Commission (SEC) has the authority to go after individuals who engage in illegal insider trading, which is the practice of:
using inside information to profit unfairly from trading in a company's securities.
Which of the following funding options provides advice and guidance to start-up businesses along with the funds?
venture capital
Companies that invest in start-up businesses with high growth potential in exchange for a share of ownership.
venture capital firms
