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16 Cards in this Set
- Front
- Back
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A disadvantage of the corporate form of organization is that corporate stock holders are more exposed to personal liabilities in the event of bankruptcy than are investors in a typical partnership. T/F |
False |
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It is generally harder to transfer one's ownership interest in a partnership than in a corporation. T/F |
True |
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In order to maximize it's shareholders' value, a firm's management must attempt to maximize the stock price in the long run, or the stock's "intrinsic value". T/F |
True
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Which of the following could explain why a business might choose to operate as a corporation rather than as a sole proprietorship or a partnership? |
Corporations generally find it easier to raise large amounts of capital. |
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The primary operating goal of a publicly-owned firm interested in serving its stockholders should be to: |
Maximize the stock price per share over the long run, which is the stock's intrinsic value. |
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Primary markets are large and important, while secondary markets are smaller and less important. T/F |
False |
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A share of common stock is not a derivative, but an option to buy the stock is a derivative because the value of the option is derived from the value of the stock. T/F |
True
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A publicly owned corporation is a company whose shares are held by the investing public, which may include other corporations as well as institutional investors. T/F |
True |
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You recently sold 200 shares of Disney stock, and the transfer was made through a broker. This is an example of: |
A secondary Market transaction |
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Which of the following is a primary market transaction. |
IBM issues 2,000,000 shares of new stock and sells them to the public through an investment banker. |
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The "opportunity cost" is the rate of interest one could earn on an alternative investment with a risk equal to the risk of the investment in question. T/F |
True |
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The future value of a lump sum will be larger if compounded more often, assume the stated interest rate (nominal rate) will remain constant. T/F |
True |
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The ethical dilemma in corporate governance presented by the problem of conflicting interests between management and shareholders is known as: |
The agency problem |
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In order to maximize its shareholder's value, a firm's management must attempt to maximize the expected EPS (earnings per share) T/F |
False |
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If a stock's market price is above it's intrinsic value, then the stock be thought as being undervalued, and it would be a good buy. T/F |
False |
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If a stock's intrinsic value is greater than its market price, then the stock is overvalued and should be sold. T/F |
False |
