MAN 4720 FINAL QUESTIONS AND
ANSWERS 100% CORRECT
69. Corporate governance is all of the following EXCEPT
a. mechanisms used to determine and control the strategic direction and performance of
organizations.
B. a means to establish and maintain harmony between owners and top managers
whose interests may conflict.
c. ensuring that top managers' interests are aligned with the interests of stockholders.
d. resolve conflicts among corporate employees. - ANSWER-d. resolve conflicts among
corporate employees.
70. In the United States, the fundamental goal of business is to
a. ensure customer satisfaction.
b. maximize shareholder wealth.
c. provide job security.
d. generate profits. - ANSWER-b. maximize shareholder wealth.
71. In the United States, a firm's key stakeholder(s) is(are) the
a. government.
b. executives.
c. shareholders.
d. customers. - ANSWER-c. shareholders.
Which of the following is NOT an internal governance mechanism?
a. the board of directors
b. ownership concentration
c. executive compensation
d. the market for corporate control - ANSWER-d. the market for corporate control
Corporate governance revolves around the relationship between which two parties?
a. shareholders and the board of directors
b. shareholders and managers
c. the board of directors and managers
d. None of the these options are correct. - ANSWER-b. shareholders and managers
Corporate governance is important to nations because
a. shareholders want large stock returns.
b. firms seek to invest in nations with national governance standards that are
acceptable to them.
c. company boards have lobbied for strong governance.
,d. the United States requires that other nations adopt its governance practices. -
ANSWER-b. firms seek to invest in nations with national governance standards that are
acceptable to them.
Amos Ball, Inc., is a printing company in Iowa that has been family owned and managed
for three generations.Which of the following statements is most likely to be TRUE?
a. Agency costs at Amos Ball are high.
b. If research findings are valid, Amos Ball, Inc., will perform better if a family member is
CEO than if an outsider is CEO.
c. At Amos Ball, the opportunity for managerial opportunism is high.
d. The functions of risk-bearing and decision making are separate at Amos Ball. -
ANSWER-b. If research findings are valid, Amos Ball, Inc., will perform better if a family
member is CEO than if an outsider is CEO.
76. Complete the following: In small firms, managers often own a ______separation
between ownership and managerial control.
a. small; small
b. small; large
c. large; small
d. large; large - ANSWER-c. large; small
77. The separation between firm ownership and management creates a(n) relationship.
a. governance
b. control
c. agency
d. dependent - ANSWER-c. agency
An agency relationship exists when one party delegates
a. decision-making responsibility to a second party.
b. financial responsibility to employees.
c. strategy implementation actions to functional managers.
d. ownership of a company to a second party. - ANSWER-a. decision-making
responsibility to a second party.
Managerial employment risk is the
a. risk that managers will behave opportunistically.
b. risk undertaken by managers to earn stock options.
c. managers' risk of job loss, loss of compensation, and/or loss of reputation.
d. risk managers will not find a new top management position if they should be
dismissed. - ANSWER-c. managers' risk of job loss, loss of compensation, and/or loss
of reputation.
Managers may decide to invest in products that are not associated with the firm's
current lines of business to increase the firm's level of diversification and decrease their
employment risk.
a. unsubstantial profits
, b. free cash flows
c. marginal profits
d. frozen assets - ANSWER-b. free cash flows
Product diversification provides two benefits to managers that do not accrue to
shareholders: and .
a. greater experience in a wider range of industries; lessening of managerial
employment risk
b. the manager frequently invests in the acquired firm, which allows him or her
extensive profits; the manager can frequently buy excess assets divested by the
acquired firm
c. the manager's supervisory needs are lowered; the manager is allowed greater time to
oversee a wider range of activities
d. the opportunity for higher compensation through firm growth; a reduction in
managerial employment risk - ANSWER-d. the opportunity for higher compensation
through firm growth; a reduction in managerial employment risk
82. The top management team at Sierra Infusion is concerned about the declining
performance of firms in their industry. The team members are becoming concerned
about the security of their jobs at Sierra Infusion. At a meeting over dinner, the top
management team agrees to go to the board of directors with a proposal for
a. increased diversification of Sierra Infusion.
b. the addition of outside directors to the board.
c. increased shareholder participation in decision making.
d. greater concentration on Sierra's core industry. - ANSWER-a. increased
diversification of Sierra Infusion.
In contrast to managers' desires, shareholders usually prefer that free cash flows be
a. used to diversify the firm.
b. returned to them as dividends.
c. used to reduce corporate debt.
d. re-invested in additional corporate assets. - ANSWER-b. returned to them as
dividends.
A major conflict of interest between top executives and owners, is that top executives
wish to diversify the firm in order to , whereas owners wish to diversify the firm to.
a. generate free cash flows; reduce the risk of total firm failure
b. increase the price of the firm's stock; increase the dividends paid out from free cash
flows
c. reduce the risk of total firm failure; reduce their total portfolio risk
d. reduce their employment risk; increase the company's value - ANSWER-d. reduce
their employment risk; increase the company's value
Compared to managers, shareholders prefer
a. safer strategies with greater diversification for the firm.
ANSWERS 100% CORRECT
69. Corporate governance is all of the following EXCEPT
a. mechanisms used to determine and control the strategic direction and performance of
organizations.
B. a means to establish and maintain harmony between owners and top managers
whose interests may conflict.
c. ensuring that top managers' interests are aligned with the interests of stockholders.
d. resolve conflicts among corporate employees. - ANSWER-d. resolve conflicts among
corporate employees.
70. In the United States, the fundamental goal of business is to
a. ensure customer satisfaction.
b. maximize shareholder wealth.
c. provide job security.
d. generate profits. - ANSWER-b. maximize shareholder wealth.
71. In the United States, a firm's key stakeholder(s) is(are) the
a. government.
b. executives.
c. shareholders.
d. customers. - ANSWER-c. shareholders.
Which of the following is NOT an internal governance mechanism?
a. the board of directors
b. ownership concentration
c. executive compensation
d. the market for corporate control - ANSWER-d. the market for corporate control
Corporate governance revolves around the relationship between which two parties?
a. shareholders and the board of directors
b. shareholders and managers
c. the board of directors and managers
d. None of the these options are correct. - ANSWER-b. shareholders and managers
Corporate governance is important to nations because
a. shareholders want large stock returns.
b. firms seek to invest in nations with national governance standards that are
acceptable to them.
c. company boards have lobbied for strong governance.
,d. the United States requires that other nations adopt its governance practices. -
ANSWER-b. firms seek to invest in nations with national governance standards that are
acceptable to them.
Amos Ball, Inc., is a printing company in Iowa that has been family owned and managed
for three generations.Which of the following statements is most likely to be TRUE?
a. Agency costs at Amos Ball are high.
b. If research findings are valid, Amos Ball, Inc., will perform better if a family member is
CEO than if an outsider is CEO.
c. At Amos Ball, the opportunity for managerial opportunism is high.
d. The functions of risk-bearing and decision making are separate at Amos Ball. -
ANSWER-b. If research findings are valid, Amos Ball, Inc., will perform better if a family
member is CEO than if an outsider is CEO.
76. Complete the following: In small firms, managers often own a ______separation
between ownership and managerial control.
a. small; small
b. small; large
c. large; small
d. large; large - ANSWER-c. large; small
77. The separation between firm ownership and management creates a(n) relationship.
a. governance
b. control
c. agency
d. dependent - ANSWER-c. agency
An agency relationship exists when one party delegates
a. decision-making responsibility to a second party.
b. financial responsibility to employees.
c. strategy implementation actions to functional managers.
d. ownership of a company to a second party. - ANSWER-a. decision-making
responsibility to a second party.
Managerial employment risk is the
a. risk that managers will behave opportunistically.
b. risk undertaken by managers to earn stock options.
c. managers' risk of job loss, loss of compensation, and/or loss of reputation.
d. risk managers will not find a new top management position if they should be
dismissed. - ANSWER-c. managers' risk of job loss, loss of compensation, and/or loss
of reputation.
Managers may decide to invest in products that are not associated with the firm's
current lines of business to increase the firm's level of diversification and decrease their
employment risk.
a. unsubstantial profits
, b. free cash flows
c. marginal profits
d. frozen assets - ANSWER-b. free cash flows
Product diversification provides two benefits to managers that do not accrue to
shareholders: and .
a. greater experience in a wider range of industries; lessening of managerial
employment risk
b. the manager frequently invests in the acquired firm, which allows him or her
extensive profits; the manager can frequently buy excess assets divested by the
acquired firm
c. the manager's supervisory needs are lowered; the manager is allowed greater time to
oversee a wider range of activities
d. the opportunity for higher compensation through firm growth; a reduction in
managerial employment risk - ANSWER-d. the opportunity for higher compensation
through firm growth; a reduction in managerial employment risk
82. The top management team at Sierra Infusion is concerned about the declining
performance of firms in their industry. The team members are becoming concerned
about the security of their jobs at Sierra Infusion. At a meeting over dinner, the top
management team agrees to go to the board of directors with a proposal for
a. increased diversification of Sierra Infusion.
b. the addition of outside directors to the board.
c. increased shareholder participation in decision making.
d. greater concentration on Sierra's core industry. - ANSWER-a. increased
diversification of Sierra Infusion.
In contrast to managers' desires, shareholders usually prefer that free cash flows be
a. used to diversify the firm.
b. returned to them as dividends.
c. used to reduce corporate debt.
d. re-invested in additional corporate assets. - ANSWER-b. returned to them as
dividends.
A major conflict of interest between top executives and owners, is that top executives
wish to diversify the firm in order to , whereas owners wish to diversify the firm to.
a. generate free cash flows; reduce the risk of total firm failure
b. increase the price of the firm's stock; increase the dividends paid out from free cash
flows
c. reduce the risk of total firm failure; reduce their total portfolio risk
d. reduce their employment risk; increase the company's value - ANSWER-d. reduce
their employment risk; increase the company's value
Compared to managers, shareholders prefer
a. safer strategies with greater diversification for the firm.
