Maximizing Shareholder Wealth and Fiduciary Duties Quiz

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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?

Project Manager Signup and view all the answers

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

Risk Management and Mitigation Signup and view all the answers

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

Presenting financial data Signup and view all the answers

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

To secure job stability and future earnings for themselves Signup and view all the answers

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

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

What is a direct cost associated with corporate governance?

Remuneration and audit fees Signup and view all the answers

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

Due to their annual bonus structure Signup and view all the answers

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

To grow the business and reinvest profits Signup and view all the answers

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

The cost of lost opportunities Signup and view all the answers

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

To maximize shareholder wealth at all costs Signup and view all the answers

What is a Benefit corporation (B-Corp)?

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

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

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

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

They grow and add more employees, benefiting society Signup and view all the answers

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

Generating growth by creating value for customers Signup and view all the answers

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

By focusing on stock price maximization Signup and view all the answers