1. As mergers, acquisitions, and restructuring have increased in importance, agency theory has become more important in assessing whether
a. a stock repurchase should be undertaken.
b. shareholder goals are truly being achieved by managers in the long run.
c. managers are actually agents or only employees of the firm.
d. managers and owners are actually the same people with the same interests.

2. Insider trading occurs when
a. someone has information not available to the public which they use to profit from trading in stocks.
b. corporate officers buy stock in their company.
c. lawyers, investment bankers, and others buy common stock in companies represented by their firms.
d. any stock transactions occur in violation of the Federal Trade Commissions restrictions on monopolies.

3. The major difficulty in most insider-trading cases has been
a. that lenient judges have simply released the guilty individuals.
b. that insider trading, even though illegal, actually serves a beneficial economic and financial purpose.
c. that inside trades have not been legally well defined.
d. inside trades actually have a beneficial effect on the wealth of all stockholders.

5. The residual income of the firm belongs to
a. creditors.
b. preferred stockholders.
c. common stockholders.
d. bondholders.

6. The best indication of the operational efficiency of management is
a. net income.
b. earnings per share.
c. earnings before interest and taxes (EBIT).
d. gross profit.

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7. Which account represents the cumulative earnings of the firm since its formation, minus dividends paid?
a. Paid-in capital
b. Common stock
c. Retained earnings
d. Accumulated depreciation

7. C

What do you think the answers are to the other questions, and why?\

Basically what Scott said.