MBA 601 EXAM 1: quizzes Questions
and Answers Graded A+
A share of stock entitles you to: - Correct answer-C. A percentage of the earnings
of the company
The cost of providing goods and services to customers is called - Correct answer-
Expenses
Benefits (i.e. money) that a company receives from its customers is called - Correct
answer-Revenue
Revenue - expenses = - Correct answer-Net Income
(T/F): A company must pay out the profits that it earns to the stockholders -
Correct answer-False.
An ordinary dividend is - Correct answer-distribution of earnings to shareholders
(T/F): Companies that are growing quickly usually issue dividends. - Correct
answer-False.
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,You can make money investing in stocks by.... - Correct answer-1. Collecting
dividends
2. Stock Price Appreciation (buy low, sell high)
The advantage of a sole proprietorship is - Correct answer-Complete control.
(Owners = managers)
The primary reason for starting a corporation is - Correct answer-To raise a lot of
capital.
(T/F): A corporation is its own legal entity. - Correct answer-True.
(T/F): In a corporation, the owner is also the manager. - Correct answer-False.
If you are an investor in a corporation, limited liability means - Correct answer-
You are only liable for your investment in the company.
What are the disadvantages of a corporate entity - Correct answer-Double taxation
Increased regulation
Less control
If a corporation had pre-tax earnings of $40,000 and paid all of this out as a
dividend, how much tax would the federal government collect? Assume a 20%
federal income tax rate and a 15% dividend tax rate. - Correct answer-12,800
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,(40,000 x .20 = 8,000)
(32,000 x .15 = 4,800)
The primary advantages of investing in stock are - Correct answer-unlimited
upside
voting rights
The primary advantages of investing in bonds are - Correct answer-Easier to value
than stock
Known payment amount
Know when you are going to get paid
Less risk than investing in stock.
Priority over stockholders in bankruptcy
When companies issue stock they give up - Correct answer-Control
Ownership and the right to future earnings
The advantages of issuing bonds are - Correct answer-limited upside
financial leverage
Is it riskier for a company to issue stocks or bonds? - Correct answer-Bonds.
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, Companies raise money by issuing stocks and bonds on the - Correct answer-
primary market
The first time a company issues stock to the public it is called a - Correct answer-
initial public offering (IPO)
What type of banks help corporations raise money by issuing stocks and bonds? -
Correct answer-investment banks.
Which of the following are secondary markets?
S & P 500
NASDAQ
Dow Jones Industrial Average
American Stock Exchange (AMEX)
New York Stock Exchange (NYSE) - Correct answer-NASDAQ
NYSE
AMEX
(T/F): You should believe anything you read from sell-side analytics. - Correct
answer-False!!
©COPYRIGHT 2025, ALL RIGHTS RESERVED 4
and Answers Graded A+
A share of stock entitles you to: - Correct answer-C. A percentage of the earnings
of the company
The cost of providing goods and services to customers is called - Correct answer-
Expenses
Benefits (i.e. money) that a company receives from its customers is called - Correct
answer-Revenue
Revenue - expenses = - Correct answer-Net Income
(T/F): A company must pay out the profits that it earns to the stockholders -
Correct answer-False.
An ordinary dividend is - Correct answer-distribution of earnings to shareholders
(T/F): Companies that are growing quickly usually issue dividends. - Correct
answer-False.
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
,You can make money investing in stocks by.... - Correct answer-1. Collecting
dividends
2. Stock Price Appreciation (buy low, sell high)
The advantage of a sole proprietorship is - Correct answer-Complete control.
(Owners = managers)
The primary reason for starting a corporation is - Correct answer-To raise a lot of
capital.
(T/F): A corporation is its own legal entity. - Correct answer-True.
(T/F): In a corporation, the owner is also the manager. - Correct answer-False.
If you are an investor in a corporation, limited liability means - Correct answer-
You are only liable for your investment in the company.
What are the disadvantages of a corporate entity - Correct answer-Double taxation
Increased regulation
Less control
If a corporation had pre-tax earnings of $40,000 and paid all of this out as a
dividend, how much tax would the federal government collect? Assume a 20%
federal income tax rate and a 15% dividend tax rate. - Correct answer-12,800
©COPYRIGHT 2025, ALL RIGHTS RESERVED 2
,(40,000 x .20 = 8,000)
(32,000 x .15 = 4,800)
The primary advantages of investing in stock are - Correct answer-unlimited
upside
voting rights
The primary advantages of investing in bonds are - Correct answer-Easier to value
than stock
Known payment amount
Know when you are going to get paid
Less risk than investing in stock.
Priority over stockholders in bankruptcy
When companies issue stock they give up - Correct answer-Control
Ownership and the right to future earnings
The advantages of issuing bonds are - Correct answer-limited upside
financial leverage
Is it riskier for a company to issue stocks or bonds? - Correct answer-Bonds.
©COPYRIGHT 2025, ALL RIGHTS RESERVED 3
, Companies raise money by issuing stocks and bonds on the - Correct answer-
primary market
The first time a company issues stock to the public it is called a - Correct answer-
initial public offering (IPO)
What type of banks help corporations raise money by issuing stocks and bonds? -
Correct answer-investment banks.
Which of the following are secondary markets?
S & P 500
NASDAQ
Dow Jones Industrial Average
American Stock Exchange (AMEX)
New York Stock Exchange (NYSE) - Correct answer-NASDAQ
NYSE
AMEX
(T/F): You should believe anything you read from sell-side analytics. - Correct
answer-False!!
©COPYRIGHT 2025, ALL RIGHTS RESERVED 4
