MGT 499 Chapter 11 Exam UPDATED
QUESTIONS AND CORRECT ANSWERS
Which of the following are an example of an external stakeholder in a company?
a. Stockholders
b. Managers
c. Employees
d. Customers
e. Board members - CORRECT ANSWER Customers
Which of the following are an example of an internal stakeholder in a company?
a. Customers
b. Government regulators
c. Board members
d. Suppliers
e. Creditors - CORRECT ANSWER . Board members
Arnold is a CEO at Gamma LLC. He has control over the corporate funds of the company.
Arnold has often used fundsfrom the company to pay for his travel and hotel expenses. The
funds could otherwise have increased stockholder returns.
Which of the following concepts is illustrated in this scenario?
a. Corporate governance
b. On-the-job consumption
c. Greenmail
d. Information asymmetry
e. Information manipulation - CORRECT ANSWER On-the-job consumption
Matthew is a divisional manager at Venus Inc. and reports to the CEO of the company. The
CEO delegates resources
,and authority to Matthew so that he can ensure good performance from the division. Matthew
has more employees
working for him than required and he has not told the CEO about this, even though there are
other departments that need
more employees. Which of the following concepts is illustrated here?
a. Information asymmetry
b. On-the-job consumption
c. Greenmail
d. Glass-ceiling effect
e. Takeover constraint - CORRECT ANSWER Information asymmetry
Which of the following statements concerning profitability and profit growth is NOT true?
a. Attaining future profit growth may require investments that reduce the current rate of
profitability.
b. Managers must find the right balance between profitability and profit growth.
c. Too much emphasis on current profitability at the expense of profit growth can make an
enterprise less attractive to shareholders.
d. Satisfying the claims of other key stakeholder groups happens at the risk of decreased
profitability and profit
growth.
e. Too much emphasis on profit growth can reduce profitability and make an enterprise less
attractive to
shareholders. - CORRECT ANSWER d. Satisfying the claims of other key stakeholder
groups happens at the risk of decreased profitability and profit
growth.
Which of the following is true of stakeholders?
a. Creditors are examples of internal stakeholders.
b. Stakeholders do not engage in an exchange relationship with their company.
c. Stockholders are internal stakeholders that provide an enterprise with risk capital.
, d. The goals of different stakeholder groups within a company are the same and, therefore, do
not lead to any
conflicts.
e. It is mandatory for a company to satisfy the claims of all stakeholders. - CORRECT
ANSWER Stockholders are internal stakeholders that provide an enterprise with risk
capital.
Which of the following statements is true in the context of principal-agent relationships?
a. The agency relationship is confined to the top management and does not continue down the
hierarchy within
the company.
b. Agents almost always have more information about the resources they are managing than
the principals do.
c. Information asymmetry can make it easier for principals to measure how well an agent is
performing.
d. In a principal-agent relationship, the decision-making power rests entirely with the
principals.
e. The relationship between the company and the suppliers is an example of a principal-agent
relationship. - CORRECT ANSWER Agents almost always have more information
about the resources they are managing than the principals do.
Which of the following is NOT an example of ways to monitor agents, evaluate their
performance, and take corrective
action?
a. Board of directors
b. Mandatory filing of detailed financial statements
c. Internal control systems
d. Reduction of information asymmetry
e. On-the-job consumption - CORRECT ANSWER Reduction of information
asymmetry
Gamma Corp. recently bought stocks in an underperforming company that has failed to
maximize stockholder wealth.
QUESTIONS AND CORRECT ANSWERS
Which of the following are an example of an external stakeholder in a company?
a. Stockholders
b. Managers
c. Employees
d. Customers
e. Board members - CORRECT ANSWER Customers
Which of the following are an example of an internal stakeholder in a company?
a. Customers
b. Government regulators
c. Board members
d. Suppliers
e. Creditors - CORRECT ANSWER . Board members
Arnold is a CEO at Gamma LLC. He has control over the corporate funds of the company.
Arnold has often used fundsfrom the company to pay for his travel and hotel expenses. The
funds could otherwise have increased stockholder returns.
Which of the following concepts is illustrated in this scenario?
a. Corporate governance
b. On-the-job consumption
c. Greenmail
d. Information asymmetry
e. Information manipulation - CORRECT ANSWER On-the-job consumption
Matthew is a divisional manager at Venus Inc. and reports to the CEO of the company. The
CEO delegates resources
,and authority to Matthew so that he can ensure good performance from the division. Matthew
has more employees
working for him than required and he has not told the CEO about this, even though there are
other departments that need
more employees. Which of the following concepts is illustrated here?
a. Information asymmetry
b. On-the-job consumption
c. Greenmail
d. Glass-ceiling effect
e. Takeover constraint - CORRECT ANSWER Information asymmetry
Which of the following statements concerning profitability and profit growth is NOT true?
a. Attaining future profit growth may require investments that reduce the current rate of
profitability.
b. Managers must find the right balance between profitability and profit growth.
c. Too much emphasis on current profitability at the expense of profit growth can make an
enterprise less attractive to shareholders.
d. Satisfying the claims of other key stakeholder groups happens at the risk of decreased
profitability and profit
growth.
e. Too much emphasis on profit growth can reduce profitability and make an enterprise less
attractive to
shareholders. - CORRECT ANSWER d. Satisfying the claims of other key stakeholder
groups happens at the risk of decreased profitability and profit
growth.
Which of the following is true of stakeholders?
a. Creditors are examples of internal stakeholders.
b. Stakeholders do not engage in an exchange relationship with their company.
c. Stockholders are internal stakeholders that provide an enterprise with risk capital.
, d. The goals of different stakeholder groups within a company are the same and, therefore, do
not lead to any
conflicts.
e. It is mandatory for a company to satisfy the claims of all stakeholders. - CORRECT
ANSWER Stockholders are internal stakeholders that provide an enterprise with risk
capital.
Which of the following statements is true in the context of principal-agent relationships?
a. The agency relationship is confined to the top management and does not continue down the
hierarchy within
the company.
b. Agents almost always have more information about the resources they are managing than
the principals do.
c. Information asymmetry can make it easier for principals to measure how well an agent is
performing.
d. In a principal-agent relationship, the decision-making power rests entirely with the
principals.
e. The relationship between the company and the suppliers is an example of a principal-agent
relationship. - CORRECT ANSWER Agents almost always have more information
about the resources they are managing than the principals do.
Which of the following is NOT an example of ways to monitor agents, evaluate their
performance, and take corrective
action?
a. Board of directors
b. Mandatory filing of detailed financial statements
c. Internal control systems
d. Reduction of information asymmetry
e. On-the-job consumption - CORRECT ANSWER Reduction of information
asymmetry
Gamma Corp. recently bought stocks in an underperforming company that has failed to
maximize stockholder wealth.
