Question 1

Which of the following best describes a pyramid structure?

Accepted Answer

A) an investor owns less than 50% of a company,and this company owns less than 50% of another company 
B) an investor owns more than 50% of a company,and this company owns less than 50% of another company 
C) an investor owns more than 50% of a company,and this company owns more than 50% of another company 
D) an investor owns less than 50% of a company,and this company owns more than 50% of another company 
E) an investor owns less than 50% of a company,and this company owns 100% of another company 
A) an investor owns less than 50% of a company,and this company owns less than 50% of another company 
B) an investor owns more than 50% of a company,and this company owns less than 50% of another company 
C) an investor owns more than 50% of a company,and this company owns more than 50% of another company 
D) an investor owns less than 50% of a company,and this company owns more than 50% of another company 
E) an investor owns less than 50% of a company,and this company owns 100% of another company

Question 2

Directors who are NOT as directly connected to the firm but who have existing or potential business relationships with the firm are called:

Accepted Answer

A) grey directors. 
B) independent directors. 
C) advising directors. 
D) inside directors. 
E) unelected directors. 
A) grey directors. 
B) independent directors. 
C) advising directors. 
D) inside directors. 
E) unelected directors.

Question 3

What is a proxy contest?

Accepted Answer

A proxy contest takes place when shareho

Question 4

What is corporate governance?

Accepted Answer

Corporate governance is the sy

Question 5

What is the drawback of having more independent directors on the board?

Accepted Answer

In addition to monitoring management,the

Question 6

The least costly solution to the conflict of interest problem is simply to monitor the firm's managers closely.

Accepted Answer

A) True 
 B)False

Question 7

How does a pyramid structure work?

Accepted Answer

In a pyramid structure,a family first cr

Question 8

Directors who are employees,former employees,or family members of employees are called:

Accepted Answer

A) managing directors. 
B) independent directors. 
C) inside directors. 
D) grey directors. 
E) unelected directors. 
A) managing directors. 
B) independent directors. 
C) inside directors. 
D) grey directors. 
E) unelected directors.

Question 9

What is the difference among inside,grey,and outside directors?

Accepted Answer

Inside directors are employees,former em

Question 10

The Smith family has a 62% stake in A company and A company has a 34% stake in B company.Finally,B company has a 29% stake in C company.What percentage ownership does the Smith family have in C company?

Accepted Answer

A) 21% 
B) 18% 
C) 10% 
D) 29% 
E) 6% 
A) 21% 
B) 18% 
C) 10% 
D) 29% 
E) 6%

Question 11

One of the most critical inputs to the monitoring process is accurate information.

Accepted Answer

A) True 
 B)False

Question 12

When a board's monitoring duties have been compromised by connections or perceived loyalties to management,it is said to be:

Accepted Answer

A) a dysfunctional board. 
B) an institutional board. 
C) a failed board. 
D) a divided board. 
E) a captured board. 
A) a dysfunctional board. 
B) an institutional board. 
C) a failed board. 
D) a divided board. 
E) a captured board.

Question 13

What is the cost of aligning managers' interests with those of shareholders?

Accepted Answer

Aligning the interests of shar

Question 14

Directors who are NOT employees,former employees,or family members of employees and who do not have existing or potential business relationships with the firm are called:

Accepted Answer

A) monitoring directors. 
B) independent directors. 
C) grey directors. 
D) inside directors. 
E) unelected directors. 
A) monitoring directors. 
B) independent directors. 
C) grey directors. 
D) inside directors. 
E) unelected directors.

Question 15

The conflict of interest that arises when a shareholder who has a controlling interest in multiple firms moves profits away from companies in which he has relatively less cash flow rights toward firms in which he has relatively more cash flow rights is called:

Accepted Answer

A) expropriation. 
B) earnings management. 
C) tunnelling. 
D) profit mining. 
E) cash extraction. 
A) expropriation. 
B) earnings management. 
C) tunnelling. 
D) profit mining. 
E) cash extraction.

Question 16

Which of the following countries has employees appoint some board members?

Accepted Answer

A) Canada 
B) the United States 
C) Turkey 
D) Germany 
E) Australia 
A) Canada 
B) the United States 
C) Turkey 
D) Germany 
E) Australia

Question 17

Which monitors of a firm,other than the board of directors,are most likely to detect outright fraud?

Accepted Answer

A) securities analysts 
B) lenders 
C) employees 
D) regulators 
E) shareholders 
A) securities analysts 
B) lenders 
C) employees 
D) regulators 
E) shareholders

Question 18

What is tunnelling?

Accepted Answer

Tunnelling is a conflict of interest tha

Question 19

Why is insider trading problematic?

Accepted Answer

A) If insiders trade on their information,they cause unnecessary share price fluctuations that drive away outside investors. 
B) If insiders trade on their information,the firm is automatically fined and there will be a net loss in firm value. 
C) If insiders trade on their information,outside investors will benefit from the increase in the share price and thus there is a free rider problem. 
D) If insiders trade on their information,it increases the conflicts between shareholders and managers. 
E) If insiders trade on their information,their profits come at the expense of outside investors,making outside investors less willing to invest in corporations. 
A) If insiders trade on their information,they cause unnecessary share price fluctuations that drive away outside investors. 
B) If insiders trade on their information,the firm is automatically fined and there will be a net loss in firm value. 
C) If insiders trade on their information,outside investors will benefit from the increase in the share price and thus there is a free rider problem. 
D) If insiders trade on their information,it increases the conflicts between shareholders and managers. 
E) If insiders trade on their information,their profits come at the expense of outside investors,making outside investors less willing to invest in corporations.

Question 20

How does shareholder voice serve to discipline poorly performing managers?

Accepted Answer

Shareholders can submit resolutions that

Exam 25: Corporate Governance

Which of the following best describes a pyramid structure?

Directors who are NOT as directly connected to the firm but who have existing or potential business relationships with the firm are called:

What is a proxy contest?

What is corporate governance?

What is the drawback of having more independent directors on the board?

The least costly solution to the conflict of interest problem is simply to monitor the firm's managers closely.

How does a pyramid structure work?

Directors who are employees,former employees,or family members of employees are called:

What is the difference among inside,grey,and outside directors?

The Smith family has a 62% stake in A company and A company has a 34% stake in B company.Finally,B company has a 29% stake in C company.What percentage ownership does the Smith family have in C company?

One of the most critical inputs to the monitoring process is accurate information.

When a board's monitoring duties have been compromised by connections or perceived loyalties to management,it is said to be:

What is the cost of aligning managers' interests with those of shareholders?

Directors who are NOT employees,former employees,or family members of employees and who do not have existing or potential business relationships with the firm are called:

The conflict of interest that arises when a shareholder who has a controlling interest in multiple firms moves profits away from companies in which he has relatively less cash flow rights toward firms in which he has relatively more cash flow rights is called:

Which of the following countries has employees appoint some board members?

Which monitors of a firm,other than the board of directors,are most likely to detect outright fraud?

What is tunnelling?

Why is insider trading problematic?

How does shareholder voice serve to discipline poorly performing managers?

Corporate Finance and the Financial Manager

Introduction to Financial Statement Analysis

The Valuation Principle: the Foundation of Financial Decision Making

The Time Value of Money

Interest Rates

Bonds

Valuing Stocks

Investment Decision Rules

Fundamentals of Capital Budgeting

Risk and Return in Capital Markets

Systematic Risk and the Equity Risk Premium

Determining the Cost of Capital

Risk and the Pricing of Options

Raising Equity Capital

Debt Financing

Capital Structure

Payout Policy

Financial Modelling and Pro Forma Analysis

Working Capital Management

Short-Term Financial Planning

Risk Management

International Corporate Finance

Leasing

Mergers and Acquisitions

Filters