BUS 330b

Fall 2016

Quiz 1

Instructions: Select the ONE BEST answer to each question. Record your choice on both the quiz and the cover sheet. I will collect ONLY the coversheet.

1.Some forms of business organization “die” when their owner(s) pass away. Those that die along with their owners include:

(i)sole proprietorship

(ii)partnership

(iii)corporation

a.only (i) is true.

b.only (ii) is true.

c.only (iii) is true.

d.both (i) and (ii) are true.

e.both (ii) and (iii) are true.

2.The stock value that is based upon the perceived (but perhaps incorrect) information as seen by the marginal investor is the stock’s:

a.market price

b.intrinsic value

c.marginal value

d.book value

e.assessed value

3.A market in which the participants agree today to buy or sell some asset for immediate delivery is called:

a.a spot market.

b.a secondary market.

c.a primary market.

d.an over-the-counter market.

e.a futures market.

4.The evidence against the idea that all markets are always efficient includes:

(i)the dramatic rise and collapse of housing prices in the USA prior to 2008.

(ii)The wide swings in stock market prices that sometimes occur within a single day when there is no especially important news revealed that would be relevant to stock prices.

(iii)There are thousands of full-time analysts and traders seeking to purchase stocks below intrinsic value or sell those trading above intrinsic value, and prices are strongly influenced by these traders.

  1. Only (i) is true.
  2. Only (ii) is true.
  3. Only (iii) is true.
  4. Both (i) and (ii) are true.
  5. Both (ii) and (iii) are true.

5.Knowledge of finance is important even to a chief executive officer (CEO) of a company. For example, the Sarbanes-Oxley Act requires that the CEO of a publicly-traded company:

  1. to pass a test on the knowledge of accounting and financial regulation.
  2. To certify that the firm’s financial reports and statements are accurate, under threat of criminal penalties.
  3. Be rewarded with stock options only if the company’s share price has gone up during the year.
  4. To be personally liable for the corporation’s debts if the corporation becomes bankrupt.
  5. To be able to identify who Sarbanes and Oxley are.

6.A person who attempts to purchase shares in a company in order to acquire the ability to replace the existing managers and change the company’s strategy is called:

  1. A white knight.
  2. A guardian angel.
  3. A corporate raider.
  4. A blood-sucking vampire.
  5. A Don Juan.

EXTRA CREDIT:

7. Below are photos of Senator Paul Sarbanes, Congressman Michael Oxley, corporate raiders T. Boone Pickens and Carl Icahn, and my dog. Which is which?

  1. (1) Sarbanes, (2) Icahn, (3) dog, (4) Oxley, (5) Pickens.
  2. (1) Icahn, (2) dog, (3) Oxley, (4) Pickens,(5) Sarbanes.
  3. (1) dog, (2) Oxley, (3) Pickens,(4) Sarbanes,(5) Icahn.
  4. (1) Oxley, (2) Pickens,(3) Sarbanes,(4) Icahn,(5) dog.
  5. (1) Pickens,(2) Sarbanes,(3) Icahn,(4) dog, (5) Oxley.