MQM 385 Actual Questions and Correct Answers
Q1
Arnold is a CEO at Gamma LLC. He has control over the corporate funds of the company. Arnold
has often taken funds from 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?
Answer: b. On-the-job consumption
Q2
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 under him than required and he has not told
the CEO about this, even though there are other departments that are in need of more
employees. Which of the following concepts is illustrated here?
Answer: a. Information asymmetry
Q3
Which of the following statements is true about the board of directors?
Answer: e. Divisional and functional managers usually form the board.
Q4
Which of the following statements concerning profitability and profit growth is NOT true?
Answer: d. Satisfying the claims of other key stakeholder groups happens at the risk
of decreased profitability and profit growth.
Q5
Which of the following statements is true in the context of stock-based compensation?
Answer: b. Stock-based compensation schemes for executives can align management
and stockholder interests.
Q6
Which of the following statements is true in the context of financial statements and auditors?
Answer: a. The information contained in the financial statements can enable a
stockholder to calculate the ROIC of a company in which he or she invests.
, Q7
Which of the following is true of stakeholders?
Answer: c. Stockholders are internal stakeholders that provide an enterprise with risk
capital.
Q8
Which of the following statements is true in the context of principal-agent relationships?
Answer: b. Agents almost always have more information about the resources they are
managing than the principal does.
Q9
Which of the following is NOT an accurate statement about current levels of pay for CEOs
ofU.S.-based firms?
Answer: c. CEO compensation is closely tied to corporate performance in most firms.
Q10
When corporate CEOs and top managers use their power and control over funds to satisfy their
personal desires for wealth or status, it is called:
Answer: a. on-the-job consumption
Q11
Which of the following statements is true about strategic control systems?
Answer: c. Their purpose is to ensure that the wealth of stockholders is maximized.
Q12
Which of the following statements is true about takeover constraint?
Answer: e. It is the governance mechanism of last resort invoked only when the others
have failed.
Q1
Arnold is a CEO at Gamma LLC. He has control over the corporate funds of the company. Arnold
has often taken funds from 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?
Answer: b. On-the-job consumption
Q2
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 under him than required and he has not told
the CEO about this, even though there are other departments that are in need of more
employees. Which of the following concepts is illustrated here?
Answer: a. Information asymmetry
Q3
Which of the following statements is true about the board of directors?
Answer: e. Divisional and functional managers usually form the board.
Q4
Which of the following statements concerning profitability and profit growth is NOT true?
Answer: d. Satisfying the claims of other key stakeholder groups happens at the risk
of decreased profitability and profit growth.
Q5
Which of the following statements is true in the context of stock-based compensation?
Answer: b. Stock-based compensation schemes for executives can align management
and stockholder interests.
Q6
Which of the following statements is true in the context of financial statements and auditors?
Answer: a. The information contained in the financial statements can enable a
stockholder to calculate the ROIC of a company in which he or she invests.
, Q7
Which of the following is true of stakeholders?
Answer: c. Stockholders are internal stakeholders that provide an enterprise with risk
capital.
Q8
Which of the following statements is true in the context of principal-agent relationships?
Answer: b. Agents almost always have more information about the resources they are
managing than the principal does.
Q9
Which of the following is NOT an accurate statement about current levels of pay for CEOs
ofU.S.-based firms?
Answer: c. CEO compensation is closely tied to corporate performance in most firms.
Q10
When corporate CEOs and top managers use their power and control over funds to satisfy their
personal desires for wealth or status, it is called:
Answer: a. on-the-job consumption
Q11
Which of the following statements is true about strategic control systems?
Answer: c. Their purpose is to ensure that the wealth of stockholders is maximized.
Q12
Which of the following statements is true about takeover constraint?
Answer: e. It is the governance mechanism of last resort invoked only when the others
have failed.
