hw 5 - leExercisel (J) Exercise Score: 1. OF 1. pt...

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Unformatted text preview: leExercisel (J) Exercise Score: 1. OF 1. pt Assignment Score: 95% (1.9 of 20 p13] ll) of 2|} complete In a May 10, 20-03, opinion piece in the New York firms, Sociologist Dalton Conley proposed the elimination of limited liab1lity to corporate shareholders. If a corporation has limited liability you would probably be more wining to buy which type of asset from the company? Bonds V Stocks d@@@@@@@@@@om Exercise Score: 1 “f ‘ "'4' Assignment Scare: SSE-1: (1.5! of El] pts) 1e Exercise 1.4 Which of the followmg sets of Ems are likely to be a partnership”? V Law and accomfing firms Public utilities and other natural monopolies Auto and steel manufacturers All of the above. H H H H H H H H H H «weeeeeeeeomp mm Exercise Score: 1. OF 1 pt Assignment Score: 55% (1.9 of 20 p13] 20 of 20 complete In which of me following cases is there a legal distinction between the personal assets of the owners of the firm and the assets ofthe firm? Sole proprietorships Partnerships Sole proprietorships and partnerships V Corporations o@@@@@@@@@@bm Exercise Score: 1 of 1. pt Assignment Score: 95% {19 of ED FIE] When a corporation fails, which of the following is Hue? The owners will always lose less than the amount they had invested in the firm. V The owners can never lose more than the amount they had invested in the firm. The owners will always lose more than the amount they invested in the firm. What the owners lose is unrelated to liability laws. leExercise. {JD Exercise Score: 1. of 1. pt Assignment Score: 95% (1.5! oF 20 pts] 20 of 20 complete E Suppose you originally inyested in a firm when it was small and unprofitable. Now the firm has grown considerably and islarge and profitable. Would you be better off now if you had bought the firm's stock or the firm's bonds? Bonds V Stock ‘3 ix fin yx yx ‘3 ‘3 ,3 fin yx leExercise Exercise Score: 1. of 1. pt Assignment Score: 95% (19 of 20 p13] 20 of 20 complete If you deposit $20,000 in a savings account at a banlg you might earn 3 percent interest per year. Someone who borrows $20,000 from a bank to buy a new car might haye to pay an interest rate of 8 percent per year on the loan. This is an example of how a bank earns a profit on what type of finance? Direct finance V Indirect finance leExerciSEE: Exercise Score: l. of 1 pt Assignment Score: 95% [19 oF 2D ptsj 20 of 20 complete [Related to the C impa‘er Opener] When Google's owners wanted to raise funds for expansion in 2004. they decided to sell stock in their company rather than to borrow the money. Firms choose between selling stock or borrowmg money depending on which form of financing has the lower what? V Cost Interest rate Dividends Coupon payments d@@@@@@@@@@bm mmm IZxZI Exercise Score: CI of 1. pt Assignment Score: SSE-E (1.9 of 20 pts] 20 of 20 complete Loans fi'om banks are the most important external source of fiinds to businesses because most businesses are too small to borrow in financial markets by issuing stocks or bonds. Most irwestors are rehlctant to buy the stocks or bonds of small businesses because of the difficulty of gathering accurate information on the financial strength and profitability of the businesses. Nevertheless, news about the stock market is included in nearly every network news program and is often the lead story in the business section of most newspapers. Is there a contradiction here? *No I Yes leExercis-BJ [9‘] Exercise Score: 1. 0F 1. pt Assignment Score: 95% (1.9 0F 20 pts] 20 of ID complete '3] Dane decides to give up a job earning $1 10,000 per year as a corporate lawyer and converts the duplex that he owns into a UFO museum. (He had been renting out the duplex for $19,000 a year.) His direct expenses include $45,000 per year paid to his assistants and $20,000 per year for utilities. IFans flock to the museum to see his collection of extraterrestrial paraphernalia, which he easily could sell on eBay for $950,000. Over the course of the year the museum brings in revenues of $105,000. a. How much is Dane's accounting profit for the year? $ 4-0000 (enter your armmr as an integer). b. is he earning an economic profit? Yes V No x “x w a ‘1. w “x w a ‘1. [>00 tees-aroma Exercise Score: 1. oF 1 pt Assignment Score: 95% [19 of 20 pts] 20 of ID complete Dane decides to give up a job earning $110,000 per year as a corporate lawyer and converts the duplex that he owns into a LTD museum. (He had been renting out the duplex for $21,000 a year.) His direct expenses include $55,000 per year paid to his assistants and $21,000 per year for utilities. Fans flock to the museum to see his collection of extraterrestrial paraphernalia, which he easily could sell on eBay for $1,050,000. Over the course of the year the museum brings in revenues of $105,000. a. How much is Dane's economic profit for the year? $102,000- interest forgone on the $1,050,000 extraterrestrial gear $68,000- interest forgone on the $1,050,000 extraterrestrial gear V - $102,000- interest forgone on the $1,050,000 extraterrestrial gear — $68,000- interest forgone on the $1,050,000 extraterrestrial gear b. is he earning an accounting profit? No, he is not earning an accounting profit. V Yes, he is earning an accounting profit. 4M@@@@@@@@@@D mm (‘2':- Exercise Score: 1 0F 1 pt Assignment Score: sass (19 of an pts) 20 of zo complete An income statement starts with the firm's revenue and subtracts its operating expenses and taxes paid. TWhat is the remainder called? V Net income, which is the accounting profit of the firm. IGross income, which is die economic profit of the firm. implicit cost Explicit cost leExercise Exercise Score: 1. OF 1 pt Assignment Score: 95% (1.9 0F 20 pts] 20 cf 20 complete ‘ [Related to Soiree? Prairie»! #2] In 2002, Business Week listed Apple IComputer as having one of the worst boards of directors. "Founder Steve I obs owns just two shares in the company. . . . The CEO of Micro Warehouse, which accounted for nearlv 2.9% oprple's net sales in 2001, sits on the compensation committee. . . . There is an interlocking directorship—with Gap CEO Mickev Drexler and J obs sitting on each other's boards." Source: "The Best Boards and the WorstBoards," Business Fl’eek, October 7, 2002,13. 10?. Of the three points mentioned in me article, which one[s) would be of concern to investors? That There is an Interlocking directorship. That a top manager like Steve I obs owns onlv two shares in the firm. That a member of the board of directors also has a business relationship with the firm. V All of the above. leExereiseS {J} Exercise Score: 1. OF 1. pt Assignment Score: 95% (1.9 of 20 pts] 20 of 20 complete The following is from a Business Week editorial. "‘Welcome to the revolution. After years of paving lip service to reform, Enron Corp. and the ensuing wave of business scandal has finallv produced a dramatic change in corporate governance. . . . [nvestors are rewarding companies with good governance and punishing those without it.” Source: "Boardrooms Ase Starting to Wake Up," Business Week, October 3", 2002, p. IDS". investors are able to punish firms by seliing their stocks and bonds. W W W W W W W W W W 1eExew Exercise Score: 1 OF 1. pt Assignment Score: 95% (19 0F 20 pts) 20 of 20 EDl'l'lplE Top managers who are determined to cheat and hide the flue financial condition of their firms can do what? Easilv deceive investors but never outside auditors. Dec eive outside auditors but never investors. Dec eive other managers, but never the companv's investors or its outside auditors. V Deceive investors and sometimes also deceive outside auditors. leExercise-i {JD Exercise Score: 1. oF 1 pt Assignment Score: 95% (1.9 oF 20 pts] 20 of 20 complete Publicly owned firms report their performance in financial statements prepared using standard accounting methods. What are these methods called”? The Securities and Exchange Commission Guidelines V Generally accepted accounting principles Standard & Poor's Corporate Accotmting Principles Dun and Bradstreet Methods H H H H H H H H H H 1eExercis Exercise Score: 1 0F 1. pt Assignment Score: 95% (1.9 oF 20 pts) 20 of 20 complete To answer me three basic questions: what to produce how to produce it and what price to charge, what does a firm's management need to know? The firm's revenues and costs. The value of the property and other assets the firm owns. The firm's debts. or other liabilities, that it owes to another person or business. V All of file above. dm@@@@@@@@@@o {J} Exercise Score: 1 oF 1 pt Assignment Score: 95% (1.9 oF 2|] pts) 1iC-‘i-‘hich of the following summarizes a firm's revenues costs, and profit over a period of time? The balance sheet The firm's accounting profit The firm's economic profit V The income statement leExereiseE {JD Exercise Score: 1. oF 1. pt Assignment Score: 95% (1.9 oF 20 pts) 20 of 20 complete E The landmark Sarbanes-Oxley Act of 2002 required that corporate directors have a certain level of expertise with financial information and mandated what? That financial analysts and auditors shall disclose whether any conflicts of interest might exist that would limit their independence in evaluating a firm's financial condition. That managers shall be held accountable and face stiff penalties (including long jail sentences) for not meeting their responsibilities. That chief executive officers personally the accuracy of financial statements. V All ofthe above. 1eExerciseS Exercise Score: 1 of 1 pt Assignment Scare: 955-1: (1.9 of 20 FIE] 20 of 20‘ complete The creation of the Public Compan}-'Accom1ting Oversight Board is the most noticeable corporate governance reform under the Sarbanes—Oxley Act. What is the mission of this special national board? V To oversee the auditing of public companies' financial reports. To oversee the behavior of corporate officers. To oversee the writing of financial reports. All of the above. '\ “x “x “x “x “x “x “x “x “x 1eExercise Exercise Score: 1 0F 1. pt Assignment Score: 95% (1.9 of 20 pts] ID of 20 complete I What does the term "insiders" refer to in the realm of corporate management? An insider is anyone who is not part of a public corporation but who knows something that the public at large does not know. Insiders are managers who have connections with people on independent auditing boards. Insiders are auditors who have access to the corporation's financial statements. V Insiders are members of top management who also serve on the board of directors. ...
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hw 5 - leExercisel (J) Exercise Score: 1. OF 1. pt...

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