ws midterm #1

what are the earnings per share (EPS) for a company that earned $100,000 last year in after-tax profits, has 200,000 common shares outstanding and $1.2 million in retained earnings at the year end?

c. $0.50

the purpose of financial markets is to ...

c. allocate savings efficiently

who was Enron's CFO ? a. ken lay b. jeff schilling c. andrew fastow d. rebecca mark-jusbasche

c. andrew fastow

limited liability is an important feature of : a. sole proprietorships b. partnerships c. corporations d. all of the above

c. corporations

the main disadvantage of organizing a business as a corporation in the united states is : a. limited liability b. seperation of ownership and management c. double taxation d. none fo the above

c. double taxation

the following are examples of foreign-based corporations except : a. british petroleum b. volkswagen c. general electric d. sony

c. general electric

corporations, potentially, have infinite life because : a. of limited liability b. of separation of ownership and management c. it is a legal entity d. none of the above

c. it is a legal entity

the financial goal of a corporation is to : a. maximize sales b. maximize profits c. maximize the value of the firm for the shareholders d. maximize managers' benefits

c. maximize the value of the firm for the shareholders

the following are examples of financial assets except : a. common stocks b. bonds c. patents d. preferred stocks

c. patents

benefits from trade would NOT include...

c. reduced competition

generally, a corporation is owned by the : a. managers b. board of directors c. shareholders d. all of the above

c. shareholders

the focal point of financial management in a firm is ...

c. the creation of value for shareholders

agency costs are incurred by a corporation because : a. managers may not attempt to maximize the value of the firm to shareholders b. shareholders incur monitoring cost c. separation of ownership and management d. all of the above

d. all of the above

businesses can be organized as : a. sole proprietorships b. partnerships c. corporations d. all of the above

d. all of the above

finance, generally, deals with :

d. all of the above

the following cities are also important financial centers of the world : a. london b. new york c. tokyo d. all of the above

d. all of the above

the following are advantages of separation of ownership and management of corporation except : a. corporations can exist forever b. facilitate transfer of ownership without affecting the operations of the firm c. hire professional managers d. incur agency costs

d. incur agency costs

the market price of a share of common stock is determined by...

d. individuals buying and selling the stock

a corporation in which you are a shareholder has just gone bankrupt. its liabilities are far in excess of its assets. you will be call on to pay :

d. nothing

in a market economy, economic activity is guided by...

d. prices as incentives to both buyers and sellers

a 30-year bond issued by Gary's Plaid Pants Warehouse, Inc., in 1997 would now trade in the ...

d. secondary capital market

shareholder wealth in a firm is represented by ..

d. the market price per share of the firm's common stock

the following are examples of intangible assets except : a. machinery b. trade marks c. patents d. technical expertise

d. trade marks

the following are examples of the united states - based corporations except : a. general motors b. microsoft c. bank of america d. unilever

d. unilever

scarcity arises because of...

a. a finite amount of resources

sarbanes-oxley act of 2002 (SOX) was largely in response to..

a. a series of corporate scandals involving Enron, WorldCom, Global Crossing, Tyco, and numerous others

trade between two countries..

a. can make both countries better off

the decision function of financial management can be broken down into the decisions..

a. financing and investment

which of the following is NOT an example of a financial intermediary?

a. international business machines inc. (IBM)

the long-run objective of financial management is to....

a. maximize the value of the firm's common stock

A .... would be an example of a principle, while a .... would be an example of an agent :

a. shareholder ; manager

A market economy allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services.

a. true

In economics, efficiency refers to the property of society getting the most it can from its scarce resources. ---- true/false

a. true

inflation is an increase in the overall level of prices in the economy and is usually cause by growth in the quantity of money.

a. true

Costs associated with the conflicts of interest between the bondholders and a shareholders of a corporation is called : a. legal costs b. agency costs c. administrative costs d. bankruptcy costs

b. agency costs

the value or cost of a good or service that is given up by choosing one alternative over another is called...

b. an opportunity cost

a companys...is potentially the most effective instrument of good corporate governance...

b. board of directors

the following are examples of real assets except : a. machinery b. common stock c. office buildings d. inventory

b. common stock

Adam Smith argues that when the government prevents prices from adjusting naturally to supply and demand, it aids the invisible hand's ability to coordinate the millions of households and firms that make up the economy.

b. false

how are funds allocated efficiently in a market economy? a. the most powerful economic unit receives the funds b. the economic unit that is willing to pay the highest expected return receives funds c. the economic

b. the economic unit that is willing to pay the highest expected return receives the fund