SDSU BA323
SDSU BA323 Brincks Exam 1 Questions
with Verified Answers 2025
What is the main goal of the corporation? -Correct Answer ✔Maximize shareholder
value.
Who ultimately owns the corporation? What is the relationship between shareholders,
the board of directors, and management? -Correct Answer ✔Shareholders ultimately
own the corporation. Shareholders vote in the board of directors.
What are the 3 most important management positions? -Correct Answer ✔Chief
Executive Officer, Chief Financial Officer, and Chief Operations Officer
What is the Sarbanes-Oxley legislation? Why was it passed? -Correct Answer ✔The
Sarbanes-Oxley legislation holds CEOs and CFOs accountable for their financial reports.
Can be jailed if fraud occurs.
What is the major disadvantages and advantages of corporations compared to other
forms of business organizations? -Correct Answer ✔Advantages:
Unlimited Life
Easy Transfer of ownership
Limited liability
Ease of raising capital
Disadvantages:
Double taxation
Cost of setup and report filing
SDSU BA323
, SDSU BA323
What is a stock's intrinsic value? In an efficient market, will a stock's price equal the
stock's intrinsic value? -Correct Answer ✔A stock's intrinsic value is its "true" value in
equilibrium. In theory, if the market is efficient the stock's price should equal its intrinsic
value.
Why do shareholders have a conflict of interest with managers? -Correct Answer
✔Managers tend to conflict with shareholders since they tend to act within self-interest
(Compensation packages, interventions by shareholders, threat of firing, and threat of
takeover)
•What is corporate governance?
•What are various strategies for aligning the interests of shareholders and
management?
•Change in CEO Compensation starting in the 1980s
•Why is it a good idea for CEO compensation to track an overall market index like the
S&P 500? -Correct Answer ✔Corporate governance is the act of holding managers
accountable for poor performance.
Strategies to align interests of shareholders and management include:
Using stock as a form of compensation.
Vesting periods.
Stronger oversight by board or outside investors.
CEO compensation is tracked with an overall market index because it correlates with the
corporations performance.
SDSU BA323
SDSU BA323 Brincks Exam 1 Questions
with Verified Answers 2025
What is the main goal of the corporation? -Correct Answer ✔Maximize shareholder
value.
Who ultimately owns the corporation? What is the relationship between shareholders,
the board of directors, and management? -Correct Answer ✔Shareholders ultimately
own the corporation. Shareholders vote in the board of directors.
What are the 3 most important management positions? -Correct Answer ✔Chief
Executive Officer, Chief Financial Officer, and Chief Operations Officer
What is the Sarbanes-Oxley legislation? Why was it passed? -Correct Answer ✔The
Sarbanes-Oxley legislation holds CEOs and CFOs accountable for their financial reports.
Can be jailed if fraud occurs.
What is the major disadvantages and advantages of corporations compared to other
forms of business organizations? -Correct Answer ✔Advantages:
Unlimited Life
Easy Transfer of ownership
Limited liability
Ease of raising capital
Disadvantages:
Double taxation
Cost of setup and report filing
SDSU BA323
, SDSU BA323
What is a stock's intrinsic value? In an efficient market, will a stock's price equal the
stock's intrinsic value? -Correct Answer ✔A stock's intrinsic value is its "true" value in
equilibrium. In theory, if the market is efficient the stock's price should equal its intrinsic
value.
Why do shareholders have a conflict of interest with managers? -Correct Answer
✔Managers tend to conflict with shareholders since they tend to act within self-interest
(Compensation packages, interventions by shareholders, threat of firing, and threat of
takeover)
•What is corporate governance?
•What are various strategies for aligning the interests of shareholders and
management?
•Change in CEO Compensation starting in the 1980s
•Why is it a good idea for CEO compensation to track an overall market index like the
S&P 500? -Correct Answer ✔Corporate governance is the act of holding managers
accountable for poor performance.
Strategies to align interests of shareholders and management include:
Using stock as a form of compensation.
Vesting periods.
Stronger oversight by board or outside investors.
CEO compensation is tracked with an overall market index because it correlates with the
corporations performance.
SDSU BA323
