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 (A)</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 (D)</p> Signup and view all the answers

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

<p>Presenting financial data (A)</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 (C)</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 (D)</p> Signup and view all the answers

What is a direct cost associated with corporate governance?

<p>Remuneration and audit fees (A)</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 (D)</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 (B)</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 (C)</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 (A)</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 (B)</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 (A)</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 (C)</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 (D)</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 (C)</p> Signup and view all the answers

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