ECON 5311 - chapter 8 quiz

Although only ____ percent of all firms are​ corporations, corporations account for _________ of revenue and profits earned by all firms.

20 the majority

How does the owner of a sole proprietorship relate to the​ business? A. The owner and the business are separate legal entities. B. The owner and the business are not separate legal entities. C. The assets of the owner are considered separate from the assets of the business. D. None of these describe the legal relationship of the owner to the business.

B. The owner and the business are not separate legal entities.

Subtracting the value of a​ firm's liabilities from the value of its assets leaves its A. gross income. B. net worth. C. net income. D. total worth.

B. net worth.

Jeremy is thinking of starting up a small business selling NASCAR memorabilia. He is considering setting up his business as a corporation. What is one advantage to Jeremy of setting up his business as a​ corporation? A. By setting up the business as a​ corporation, Jeremy would not face double taxation. B. By setting up the business as a​ corporation, Jeremy would have both ownership and control over the business. C. By setting up the business as a​ corporation, Jeremy would have the ability to share risk with shareholders. D. All of the above would be advantages of setting up his business as a corporation.

C. By setting up the business as a​ corporation, Jeremy would have the ability to share risk with shareholders.

What is different about buying stocks and buying​ bonds? A. The future growth of a stock is more uncertain than the payments of a bond. B. A stock can possibly pay dividends​ forever, but bonds have a fixed number of payments. C. Differences of opinion about a​ stock's future may vary considerably but there is less difference about a​ bond's future. D. All of these are differences between stocks and bonds.

D. All of these are differences between stocks and bonds.

Absent government regulations to guard against​ fraud, why might top managers deceive investors about the true financial condition of their​ firms? Top managers might want to deceive investors about the true financial condition of their firms​ _____ A. to inflate profits to keep the firm's stock price high. B. to hide liabilities that should be listed on balance sheets to increase the funds the firm can generate when it sells stock C. to reduce the cost of expensive external audits. D. Both a and b. E. All of the above.

D. Both a and b.

Which of the following must a firm in a market economy do today to​ succeed? A. Have access to sufficient funds. B. Produce the goods and services that consumers want at a lower cost than consumers themselves can produce. C. Organize the factors of production into a​ functioning, efficient unit. D. Market firms today must do all of these things.

D. Market firms today must do all of these things.

Owners of a corporation share in the profits of the firm A. by raising the interest rate on bonds. B. by selling any bonds or stocks owned and realizing a capital gain. C. through coupon payments on that​ firm's bonds. D. through dividend payments on shares of that​ firm's stock.

D. through dividend payments on shares of that​ firm's stock.

Which of the following is true of the management structure of corporations in the United​ States? A. Members of the board of directors who are outside directors do not have a direct management role in the firm B. Large corporations are legally owned by shareholders who do usually not directly manage the firm. C. The chief executive officer runs the​ day-to-day operations of the corporation but does not sit on the board of directors. D. Large corporations are legally owned by shareholders who directly manage the firm. E. Both a and b.

E. Both a and b.

A flow of funds from savers to borrowers through financial intermediaries such as banks is ________ finance, while a flow of funds from savers to firms through financial​ markets, such as the New York Stock Exchange is _______ finance.

indirect direct