MAN 4720 EXAM 4 QUESTIONS AND
ANSWERS 100% CORRECT
Corporate governance is all of the following EXCEPT: - ANSWER-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.
In the United States, the fundamental goal of business is to: - ANSWER-a. ensure
customer satisfaction.
*b. maximize shareholder wealth.
c. provide job security.
d. generate profits.
In the United States, a firm's key stakeholder(s) is(are) the: - ANSWER-a. government.
b. executives.
*c. shareholders.
d. customers.
Which of the following is NOT an internal governance mechanism? - ANSWER-a. The
board of directors
b. Ownership concentration
c. Executive compensation
*d. The market for corporate control
Corporate governance revolves around the relationship between which two parties? -
ANSWER-a. Shareholders and the Board of Directors
*b. Shareholders and managers
c. The Board of Directors and managers
d. None of the the above
Corporate governance is important to nations because: - ANSWER-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.
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? -
ANSWER-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.
Complete the following: In small firms, managers often own a ____ percentage of the
firm, which means there is ____ separation between ownership and managerial control.
- ANSWER-a. small; small
b. small; large
*c. large; small
d. large; large
The separation between firm ownership and management creates a(n) ____
relationship. - ANSWER-a. governance
b. control
*c. agency
d. dependent
An agency relationship exists when one party delegates: - ANSWER-*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.
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
____. - ANSWER-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
Compared to managers, shareholders prefer: - ANSWER-a. safer strategies with
greater diversification for the firm.
*b. riskier strategies with more focused diversification for the firm.
c. safer strategies with more focused diversification for the firm.
d. riskier strategies with greater diversification for the firm.
Agency costs reflect all of the following EXCEPT ____ costs. - ANSWER-a. monitoring
b. enforcement
*c. opportunity
d. incentive
All of the following are consequences of the Sarbanes-Oxley Act EXCEPT: - ANSWER-
a. a decrease in foreign firms listing on U.S. stock exchanges.
b. internal auditing scrutiny has improved and there is greater trust in financial reporting.
ANSWERS 100% CORRECT
Corporate governance is all of the following EXCEPT: - ANSWER-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.
In the United States, the fundamental goal of business is to: - ANSWER-a. ensure
customer satisfaction.
*b. maximize shareholder wealth.
c. provide job security.
d. generate profits.
In the United States, a firm's key stakeholder(s) is(are) the: - ANSWER-a. government.
b. executives.
*c. shareholders.
d. customers.
Which of the following is NOT an internal governance mechanism? - ANSWER-a. The
board of directors
b. Ownership concentration
c. Executive compensation
*d. The market for corporate control
Corporate governance revolves around the relationship between which two parties? -
ANSWER-a. Shareholders and the Board of Directors
*b. Shareholders and managers
c. The Board of Directors and managers
d. None of the the above
Corporate governance is important to nations because: - ANSWER-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.
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? -
ANSWER-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.
Complete the following: In small firms, managers often own a ____ percentage of the
firm, which means there is ____ separation between ownership and managerial control.
- ANSWER-a. small; small
b. small; large
*c. large; small
d. large; large
The separation between firm ownership and management creates a(n) ____
relationship. - ANSWER-a. governance
b. control
*c. agency
d. dependent
An agency relationship exists when one party delegates: - ANSWER-*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.
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
____. - ANSWER-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
Compared to managers, shareholders prefer: - ANSWER-a. safer strategies with
greater diversification for the firm.
*b. riskier strategies with more focused diversification for the firm.
c. safer strategies with more focused diversification for the firm.
d. riskier strategies with greater diversification for the firm.
Agency costs reflect all of the following EXCEPT ____ costs. - ANSWER-a. monitoring
b. enforcement
*c. opportunity
d. incentive
All of the following are consequences of the Sarbanes-Oxley Act EXCEPT: - ANSWER-
a. a decrease in foreign firms listing on U.S. stock exchanges.
b. internal auditing scrutiny has improved and there is greater trust in financial reporting.
