Question 1

Governance mechanisms help align the incentives between principals and agents, and help monitor and control agents.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following statements is true in the context of financial statements and auditors?

Accepted Answer

A) The information contained in the fmancial statements can enable a stockholder to calculate the ROIC of a company in which he or she invests. 
B) Publicly traded companies in the United States are not required to file quarterly or annual reports with the SEC. 
C) So far, there have been no cases in which the auditors were found complying with the companies to misrepresent fmancial information. 
D) The SEC requires that the accounts be audited by a committee formed by the board members and senior employees of the company. 
E) Sarbanes-Oxley Act in 2002 barred CEOs and CFOs from endorsing their company's fmancial statements.

Question 3

Which of the following statements is true about takeover constraint?

Accepted Answer

A) It encourages managers to put their own interests above those of stockholders. 
B) It usually occurs when the management has maximized the wealth of the stockholders. 
C) It often gives senior managers more independence when it comes to granting stock options. 
D) It has ceased to exist in companies since the late 1990s. 
E) It is the governance mechanism of last resort invoked only when the others have failed.

Question 4

According to an SEC investigation, Computer Associates, one of the world's largest software companies, backdated contracts to boost the company's reported revenues.This is not prescribed as an ethical business practice.

Accepted Answer

A) True 
 B)False

Question 5

A criticism of stock-based compensation plans is that:

Accepted Answer

A) they discourage empire building. 
B) they reduce motivation among agents. 
C) they do not aligu management and stockholder interests 
D) they dilute stockholders' equity. 
E) they adversely affect the earnings of principals.

Question 6

Which of the following statements concerning profitability and profit growth is NOT true?

Accepted Answer

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.

Question 7

When managers pay bribes to gain access to lucrative business contracts, they are engaging in:

Accepted Answer

A) information asymmetry 
B) utilitarianism. 
C) self-dealing. 
D) greenmail. 
E) corruption.

Question 8

is a source of gaining wealth by corporate raiders who benefit by pushing companies to either change their corporate strategy to one that will benefit stockholders, or by charging a premium for these stocks when the company wants to buy them back.

Accepted Answer

A) Stock option 
B) Greenmail 
C) Self dealing 
D) On-the-job consumption 
E) Risk capital

Question 9

An effective governance arrangement exists when the CEO is also the chairman of the board of directors.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is true of stakeholders?

Accepted Answer

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.

Question 11

Jacob is a senior manager at Aries LLC.Jacob has been earning a lot of money in addition to his salary.He often misrepresents the fmancial information about the operations he handles; he acquires more fmancial resources than he actually needs to run operations.Which of the following concepts is illustrated in this scenario?

Accepted Answer

A) Glass-ceiling effect 
B) Self-dealing 
C) Agency strategy 
D) Takeover constraints 
E) Stock options

Question 12

Which of the following statements is true in the context of unethical behavior?

Accepted Answer

A) Business ethics significantly differ from personal ethics. 
B) An individual with a strong sense of personal ethics is more likely to engage in self-dealing. 
C) A personal ethical code will exert a profound influence on the way individuals behave as businesspeople. 
D) Focusing only on applying straightforward business calculus can completely eliminate ethical concerns. 
E) An organizational culture that fosters decision making on purely economic terms eliminates unethical practices.

Question 13

Stockholders receive a return on their investment in a company's stock from dividend payments and capital appreciation.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is NOT an accurate statement about current levels of pay for CEOs ofU.S.-based firms?

Accepted Answer

A) CEOs also earn from the stock options that they grant to managers. 
B) Empire building helps CEOs increase their earnings. 
C) CEO compensation is closely tied to corporate performance in most fmns. 
D) CEO pay is rising more rapidly than pay for other workers. 
E) The level of CEO compensation is determined by the corporate board of directors.

Question 15

Business ethics are concerned with accepted principles of right or wrong governing the conduct of businesspeople.
Identify and discuss the common examples of unethical decisions that businesspeople have made.

Accepted Answer

The answer of Business ethics are concerned with accepted principles...

Question 16

There is a certain amount of performance ambiguity inherent in the relationship between a principal and agent.

Accepted Answer

A) True 
 B)False

Question 17

Members of the board of directors are supposed to be agents for:

Accepted Answer

A) stockholders. 
B) employees. 
C) executive officers. 
D) customers. 
E) suppliers.

Question 18

All stakeholders have an exchange relationship with the company.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following statements concerning stock-based compensation schemes for executives is NOT true?

Accepted Answer

A) Under accounting regulations that were enforced until2005, stock options, like wages and salaries, were expensed. 
B) Huge stock-option grants can align the interests of management and stockholders. 
C) Stock-based compensation schemes can dilute the equity of stockholders. 
D) Huge stock-option grants increase the outstanding number of shares in a company. 
E) Top managers can earn huge bonuses from stock options that were granted several years prior.

Question 20

Venus LLC.is a large monopolistic electronic finn.The firm has been putting a lot of pressure on some of the complementor companies, asking them to bundle their products along with the products made by Venus LLC, which will make it mandatory for customers to buy Venus LLC.products along with the complementary products, even if they are unrelated.In this scenario, Which of the following does Venus LLC's actions demonstrate?

Accepted Answer

A) Agency strategy 
B) Dumping strategy 
C) Price limiting 
D) Anticompetitive behavior 
E) On-the-job consumption

Exam 11: Corporate Performance, Governance, and Business Ethics

Governance mechanisms help align the incentives between principals and agents, and help monitor and control agents.

Which of the following statements is true in the context of financial statements and auditors?

Which of the following statements is true about takeover constraint?

According to an SEC investigation, Computer Associates, one of the world's largest software companies, backdated contracts to boost the company's reported revenues.This is not prescribed as an ethical business practice.

A criticism of stock-based compensation plans is that:

Which of the following statements concerning profitability and profit growth is NOT true?

When managers pay bribes to gain access to lucrative business contracts, they are engaging in:

is a source of gaining wealth by corporate raiders who benefit by pushing companies to either change their corporate strategy to one that will benefit stockholders, or by charging a premium for these stocks when the company wants to buy them back.

An effective governance arrangement exists when the CEO is also the chairman of the board of directors.

Which of the following is true of stakeholders?

Which of the following statements is true in the context of unethical behavior?

Stockholders receive a return on their investment in a company's stock from dividend payments and capital appreciation.

Which of the following is NOT an accurate statement about current levels of pay for CEOs ofU.S.-based firms?

Business ethics are concerned with accepted principles of right or wrong governing the conduct of businesspeople. Identify and discuss the common examples of unethical decisions that businesspeople have made.

There is a certain amount of performance ambiguity inherent in the relationship between a principal and agent.

Members of the board of directors are supposed to be agents for:

All stakeholders have an exchange relationship with the company.

Which of the following statements concerning stock-based compensation schemes for executives is NOT true?