A common suggestion to align the goals of managers with those of the stockholder
ID: 350833 • Letter: A
Question
A common suggestion to align the goals of managers with those of the stockholders is to pursue
stock options.
liberal vacation leave.
lower salaries.
None of the above.
1 points
QUESTION 2
A purchase of a controlling quantity of shares of a firm by an individual, a group of investors, or another organization is known as a
leveraged buyout.
takeover.
stock option.
None of the above.
1 points
QUESTION 3
A situation in which a firm’s managers fail to act in the best interest of the shareholders is known as the stakeholder dilemma.
True
False
1 points
QUESTION 4
A situation in which a firm’s managers fail to act in the best interest of the shareholders is known as
management ineffectiveness.
the agency problem.
managerial goal incongruity.
None of the above.
1 points
QUESTION 5
Adverse selection exists when the parties in an arrangement do not share equally in the risks and benefits.
True
False
1 points
QUESTION 6
Any purchase of a controlling quantity of shares of a firm by an individual, a group of investors, or another organization is known as a leveraged buyout (LBO).
True
False
1 points
QUESTION 7
Contracting out a firm’s non-core, non-revenue-producing activities to other organizations primarily to reduce costs is known as
outsourcing.
offshoring.
mass customization.
commoditization.
1 points
QUESTION 8
Corporate takeovers have been promoted as a system of checks and balances for firm management.
True
False
1 points
QUESTION 9
Creditors and suppliers typically share the same goals for the organization.
True
False
1 points
QUESTION 10
Discuss the two opposing perspectives on firm social responsibility.
QUESTION 11
Do boards of directors serve the interest of the shareholders? Explain.
QUESTION 12
Goals are verifiable and specific, and are developed so that management can measure performance.
True
False
1 points
QUESTION 13
Identify six common perspectives on managerial ethics. What is your perspective, and why?
QUESTION 14
Identify the two perspectives on the agency problem. Should this be a major concern in most U.S. firms? Why or why not.
QUESTION 15
Individuals or groups who are affected by or can influence an organization’s operations are called
shareholders.
stakeholders.
organizational constituencies.
None of the above.
1 points
QUESTION 16
Many companies limit the number of board memberships their own board members may hold.
True
False
1 points
QUESTION 17
Objectives are specific, often quantified, versions of goals.
True
False
1 points
QUESTION 18
Offshoring refers to relocating some or all of a firm’s manufacturing or other business processes to another country to reduce costs.
True
False
1 points
QUESTION 19
Outsourcing efforts can fail because
of hidden costs.
of loss of control of the outsourced activity.
a firm might outsource an activity that should not be outsourced.
All of the above.
1 points
QUESTION 20
Outsourcing refers to contracting out a firm’s non-core, non-revenue-producing activities to other organizations primarily to reduce costs.
True
False
1 points
QUESTION 21
Over the past several decades, the composition of the typical board has shifted from one controlled by insiders to one controlled by outsiders.
True
False
1 points
QUESTION 22
Relocating some or all of a firm’s manufacturing or other business processes to another country to reduce costs is known as
outsourcing.
offshoring.
mass customization.
commoditization.
1 points
QUESTION 23
Social responsibility and managerial ethics
are synonymous.
are related, but different concepts.
are relative easy to assess.
None of the above.
1 points
QUESTION 24
Social responsibility refers to an individual’s responsibility to make business decisions that are legal, honest, moral, and fair.
True
False
1 points
QUESTION 25
The CEO also serving as chair of the board is known as
rubber stamp mentality.
corporate governance.
CEO duality.
executive leadership.
1 points
QUESTION 26
The attractiveness of diversification is consistent with which agency perspective?
Management serves its own interests.
Management and stockholders share the same interests.
Management pursues the interests of the stakeholders.
None of the above.
1 points
QUESTION 27
The attractiveness of downsizing is consistent with which agency perspective?
Management serves its own interests.
Management and stockholders share the same interests.
Management pursues the interests of the stakeholders.
None of the above.
1 points
QUESTION 28
The competing priorities of an organization’s stakeholders are known as
the organization’s goals.
the mission.
the organization’s objectives.
None of the above.
1 points
QUESTION 29
The desired ends toward which efforts are directed comprise
the organization’s goals.
the mission.
the organization’s objectives.
None of the above.
1 points
QUESTION 30
The idea that business firms should serve both society and the financial interests of the shareholders is known as
the corporate charter.
the corporate dilemma.
managerial ethics.
None of the above.
1 points
QUESTION 31
The preoccupation with firm growth is consistent with which agency perspective?
Management serves its own interests.
Management and stockholders share the same interests.
Management pursues the interests of the stakeholders.
None of the above.
1 points
QUESTION 32
The triple bottom line refers to the notion that firms must maintain and improve social and ecological performance in addition to economic performance.
True
False
1 points
QUESTION 33
The utilitarian view of ethics suggests that anticipated outcomes and consequences should be the primary considerations when evaluating an ethical dilemma.
True
False
QUESTION 34
What is the difference between takeovers and leveraged buyouts? Are either good for U.S. firms or the economy?
QUESTION 35
When additional insiders are added to outsider-dominated boards, CEO dismissal is more likely when corporate performance declines.
True
False
1 points
QUESTION 36
When implemented properly, outsourcing can
cut costs.
refocus the core business.
improve firm performance.
All of the above.
1 points
QUESTION 37
When outsiders are added to insider-dominated boards,
CEO dismissal is less likely when performance is poor.
insiders are more likely to press for corporate restructuring.
insiders are likely to retain their relative influence on the management of the firm.
None of the above.
1 points
QUESTION 38
Which of the following might represent the goals of customers?
The company should provide high quality products and services at the most reasonable prices possible.
The company should maintain a healthy financial posture and a policy of on-time payment of debt
The company should produce a higher-than-average return on equity.
The company should provide goods and services with minimum environmental costs, increase employment opportunities, and contributing to social and charitable causes.
1 points
QUESTION 39
Which of the following might represent the goals of shareholders?
The company should provide high quality products and services at the most reasonable prices possible.
The company should maintain a healthy financial posture and a policy of on-time payment of debt.
The company should produce a higher-than-average return on equity.
The company should provide goods and services with minimum environmental costs, increase employment opportunities, and contributing to social and charitable causes.
1 points
QUESTION 40
Which view of ethics suggests that decisions should be based on existing norms of behavior, including cultural, community, or industry factors?
rights view
cultural view
religious view
None of the above.
stock options.
liberal vacation leave.
lower salaries.
None of the above.
Explanation / Answer
Please find below answers to first four questions :
ANSWER TO QUESTION 1 :
By granting stock options to employees often at attractive price, it motivates the employees to do everything within his/her capability which would increase the value of shares progressively in future. The sole objective of stockholders is to maximize values of its shareholding . Therefore granting stock option to employees is one way of aligning goals of managers with stockholders . Therefore , correct answer would be “ stock options”
A COMMON SUGGESTION TO ALIGN THE GOALS O MANAGERS WITH THOSE OF THE STOCKHOLDERS IS TO PURSUE : STOCK OPTIONS
ANSWER TO QUESTION 2 :
A leveraged buyout (LBO) is the acquisition of another company using a significant amount of borrowed money to meet the cost of acquisition. The assets of the company being acquired are often used as collateral for the loans, along with the assets of the acquiring company. The purpose of leveraged buyouts is to allow companies to make large acquisitions without having to commit a lot of capital.
A stock option is a privilege, sold by one party to another, that gives the buyer the right, but not the obligation, to buy or sell a stock at an agreed-upon price within a certain period of time. American options, which make up most of the public exchange-traded stock options, can be exercised any time between the date of purchase and the expiration date of the option. On the other hand, European options, also known as "share options" in the United Kingdom, are slightly less common and can only be redeemed at the expiration date.
A takeover occurs when an acquiring company makes a bid in an effort to assume control of a target company, often by purchasing a majority stake. If the takeover goes through, the acquiring company becomes responsible for all of the target company’s operations, holdings and debt..
Based on above explanations, the correct answer to the question is “STOCK OPTION “
A PURCHASEOF CONTROLLING QUANTITY OF SHARES OF A FIRM BY AN INDIVIDUAL , A GROUP OF INVESTORS , OR ANOTHER ORGANIZATION IS KNOWN AS A : STOCK OPTION
ANSWER TO QUESTION 3 :
A situation in which a firm’s manager fails to act in the best interest of the shareholder is known as AGENCY PROBLEM. Therefore answer to this question is “FALSE”
ANSWER : FALSE
ANSWER TO QUESTION 4 :
The agency problem is a conflict of interest inherent in any relationship where one party is expected to act in another's best interests. In corporate finance, the agency problem usually refers to a conflict of interest between a company's management and the company's stockholders. The manager, acting as the agent for the shareholders, or principals, is supposed to make decisions that will maximize shareholder wealth even though it is in the manager’s best interest to maximize his own wealth.
While it is not possible to eliminate the agency problem completely, the manager can be motivated to act in the shareholders' best interests through incentives such as performance-based compensation, direct influence by shareholders, the threat of firing and the threat of takeovers.
A SITUATION IN WHICH A FIRM’S MANAGER FAILS TO ACT IN THE BEST INTEREST OF THE SHAREHOLDERS IS KNOWN AS : AGENCY PROBLEM
A COMMON SUGGESTION TO ALIGN THE GOALS O MANAGERS WITH THOSE OF THE STOCKHOLDERS IS TO PURSUE : STOCK OPTIONS
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