Question 1

By the percentage of each type of business organization in the United States,rank sole proprietorships,partnerships,and corporations in terms of the number of firms,revenue,and profits.

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Question 2

If Walmart issues $250 million in new stock to finance the renovation of their retail stores,this is an example of

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Question 3

Which of the following takes place in the direct finance market?

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The direct finance market involves the direct sale of securities by borrowers, such as corporations, to lenders, such as investors. In this scenario, loans to corporations are made through the sale of corporate bonds, which is a form of direct financing. Choices A and D both involve indirect finance, where intermediaries such as banks or financial institutions are involved in the lending process. Choice B is also incorrect as it describes bank loans, which are a form of indirect finance.

Question 4

Describe the three main categories of firms.

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Question 5

Shontae wants to start a pet hotel and is thinking of setting it up as a partnership with her sister Victoria.What are the advantages and disadvantages she will face by setting up the business as a partnership as opposed to a sole proprietorship or a corporation?

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Question 6

In a public corporation,asymmetric information often results in a principal-agent problem between top management and ownership.What information would help to prevent this principal-agent problem?

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Question 7

In the eyes of the law,a corporation is a legal "person," separate from its owners.Explain what this means.

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Question 8

Walmart wants to raise $250 million to finance the renovation of their retail stores,and the company wishes to raise the funds through indirect finance.Which of the following methods could it use?

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Question 9

Pietro is a manager at a carwash.He has hired 10 workers to wash and detail cars for him and is considering what type of payment scheme he should set up for his workers.He can pay each of his workers $9 per hour to wash and detail cars,or he can pay his workers $12 for each car a worker washes and details.(It takes 75 minutes,on average,for an employee to wash and detail a car. )If Pietro wants to maximize the number of cars his workers wash and detail in one day,which payment scheme should he use? Explain.

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Question 10

Angelica wants to open a restaurant and is thinking of setting it up as a corporation.What are the advantages and disadvantages she will face by setting up the business as a corporation as opposed to a sole proprietorship or a partnership?

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Question 11

It is the role of ________ to transfer funds from savers to borrowers.

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The financial system within an economy is responsible for transferring funds from savers to borrowers. This includes banks, credit unions, and other financial institutions. The Federal Reserve and federal government are involved in regulating and overseeing the financial system, but they are not directly responsible for transferring funds. Corporate governance is a practice of managing a company and has no direct involvement in transferring funds from savers to borrowers.

Question 12

How is the separation of ownership from control related to the principal-agent problem?

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Question 13

Javier wants to start a microbrewery business and is thinking of setting it up as a sole proprietorship.What are the advantages and disadvantages he will face by setting up the business as a sole proprietorship as opposed to a partnership or a corporation?

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Question 14

With respect to business types,what does the term 'limited liability' mean?

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Question 15

What does it mean to say there is a separation of ownership from control in large corporations?

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Question 16

Bonds ________ and stocks ________.

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Bonds have a fixed number of interest payments, while stocks may pay dividends forever.

Question 17

Explain the difference between a sole proprietorship and a partnership.

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Question 18

Profits that are reinvested in a firm rather than paid to the firm's owners are called

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Retained earnings are profits that are kept by the firm rather than distributed to owners as dividends.

Question 19

A bond is a financial security that represents a promise to repay

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A bond typically represents a promise to make yearly interest payments and repay the principal (or face value) at the maturity date.

Question 20

If a firm raises funds by recruiting additional owners to invest in the firm,

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When a firm recruits additional owners to invest in the firm, it is issuing new shares of stock, which increases the firm's financial capital. The new owners would contribute additional funds to the firm, increasing its total capital. Therefore, the correct choice is A. The other options are incorrect as they do not reflect the outcome of recruiting new owners to invest in the firm.

Quiz 6: Firms, the Stock Market, and Corporate Governance