Contracts can avoid transaction costs. Indicate whether the statement is true or false ANSWER F Contracts lead to transaction costs because every possible eventuality cannot be anticipated by parties to the contract and protected against.
Date: September 9th, 2020
The best contract a principal can make with an agent gives the agent all profit after paying the principal a fixed fee. Indicate whether the statement is true or false ANSWER F This contract is good for motivating the agent but it also forces the agent to bear risk, something the agent may not […]
Date: September 9th, 2020
The current value of a business firm is the present value of all its future profits. Indicate whether the statement is true or false ANSWER T This is a reasonable way to characterize the value of a firm, though it is not easy to know the future in order to apply it.
Date: September 9th, 2020
By raising capital at lower cost, bonds lower risk for shareholders. Indicate whether the statement is true or false ANSWER F Bondholders have first claim on earnings, which means that shareholders will bear more risk when bonds are outstanding.
Date: September 9th, 2020
Most agree that ______________ is the degree to which the overall quality of one’s life is judged as favorable. The General Social Surveys (GSS) of the United States asks questions about this. a. Happiness b. Fortitude c. Effectiveness d. Decision making ANSWER A
Date: September 9th, 2020
___________ is the act of selecting among alternatives. a. Choice b. Risk c. Opportunity d. Fatalism ANSWER A
Date: September 9th, 2020
In a takeover, shareholders in the acquiring firm benefit more than shareholders in the acquired firm. Indicate whether the statement is true or false ANSWER F The acquired firm is like a price that is being auctioned, with acquiring firm as bidder, and shareholders of the acquired firm usually benefit more.
Date: September 9th, 2020
Management is the process of: a. Controlling others’ lives b. Using resources to achieve goals c. Changing one’s perspective for the better d. Acting in a habitual or repetitive pattern ANSWER B
Date: September 9th, 2020
Stock options make managers who receive them have exactly the same goals as shareholders. Indicate whether the statement is true or false ANSWER F Option holders share in gains (without making shareholders’ investments) but do not share in losses.
Date: September 9th, 2020
Efficiency is an important motive for merger. Indicate whether the statement is true or false ANSWER T
Date: September 9th, 2020
