Maximizing Shareholder Wealth and Fiduciary Duties Quiz
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Questions and Answers

What is the primary source of funding for a company, according to the text?

  • Issuing bonds
  • Government subsidies
  • Sales of the company's goods (correct)
  • Raising capital through a public offering

    • Which concept is described as the collection of procedures, customs, rules, laws, and institutions regulating how a corporation is managed?

  • Corporate Governance (correct)
  • Weighted Average Cost of Capital (WACC)
  • Free Cash Flow (FCF)
  • Risk Management

    • What does a financial manager primarily track on a daily basis, according to the text?

  • Interest rate changes
  • Employee salaries
  • Stock price movements
  • Cash collections and disbursements (correct)

    • Which role involves recommending the best way to fund a project and overseeing its implementation?

    <p>Project Manager</p> Signup and view all the answers

    What is the central theme in all conceptions of good governance, according to the text?

    <p>Risk Management and Mitigation</p> Signup and view all the answers

    What is the primary responsibility of an accountant according to the text?

    <p>Presenting financial data</p> Signup and view all the answers

    What is a reason management might prefer to reinvest profits instead of paying out dividends?

    <p>To secure job stability and future earnings for themselves</p> Signup and view all the answers

    Why might executive directors and senior managers be considered risk averse in decision-making?

    <p>They are paid annual bonuses based on short-term results</p> Signup and view all the answers

    What is a direct cost associated with corporate governance?

    <p>Remuneration and audit fees</p> Signup and view all the answers

    Why might managers be more concerned with short-term results compared to shareholders?

    <p>Due to their annual bonus structure</p> Signup and view all the answers

    What is a reason for retaining earnings instead of paying dividends?

    <p>To grow the business and reinvest profits</p> Signup and view all the answers

    What is an indirect cost related to agency problems in corporate governance?

    <p>The cost of lost opportunities</p> Signup and view all the answers

    What is the fiduciary duty for most corporations according to the text?

    <p>To maximize shareholder wealth at all costs</p> Signup and view all the answers

    What is a Benefit corporation (B-Corp)?

    <p>A corporate form that expands directors' fiduciary responsibilities to include interests other than shareholders' interests</p> Signup and view all the answers

    How do companies maximize their stock price according to the text?

    <p>By generating growth in sales through value creation for customers</p> Signup and view all the answers

    What happens when companies successfully increase stock prices according to the text?

    <p>They grow and add more employees, benefiting society</p> Signup and view all the answers

    What is the main focus for companies that aim to maximize their stock price according to the text?

    <p>Generating growth by creating value for customers</p> Signup and view all the answers

    How do newly privatized companies tend to grow according to the text?

    <p>By focusing on stock price maximization</p> Signup and view all the answers

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