91Ó°ÊÓ

What is the difference between a firm's assets and its liabilities? Give an example of an asset and an example of a liability.

What is the difference between direct finance and indirect finance? If you borrow money from a bank to buy a new car, are you using direct finance or indirect finance?

What are the three major types of firms in the United States? Briefly discuss the most important characteristics of each type.

What is limited liability? Why does the government grant limited liability to the owners of corporations? Why is limited liability more important for firms trying to raise funds from a large number of investors than for firms trying to raise funds from a small number of investors?

Why is a bond considered to be a loan but a share of stock is not? Why do corporations issue both bonds and shares of stock?

What is the difference between a firm's balance sheet and its income statement?

Distinguish between a firm's explicit costs and its implicit costs and between a firm's accounting profit and its economic profit.

How do the stock and bond markets provide information to businesses? Why do stock and bond prices change over time?

What does it mean to describe large corporations as having a separation of ownership from control? How is the separation of ownership from control related to the principal-agent problem?

Suppose that shortly after graduating from college, you decide to start your own business. Will you be likely to organize the business as a sole proprietorship, a partnership, or a corporation? Explain your reasoning.