Question 1

Autumn Inc.is a company that functions on its own.It has the right to enter into contracts, hire employees, and also pay taxes.The shareholders of the company are entitled to its profits.Autumn Inc.is an example of a _____.

Accepted Answer

Autumn Inc. is a corporation, which is a legal entity that operates separately from its owners/shareholders. It has the ability to enter into contracts, hire employees, and pay taxes on its own, and the shareholders are entitled to its profits.

Question 2

Raj, a student of business management, claims that the shareholder primacy model is not a good model of business management.Which of the following statements should he use in order to best support his claim?

Accepted Answer

Managing solely for shareholder value can result in negative consequences for firms, such as neglecting long-term investments or ignoring the concerns of other stakeholders such as employees, customers, and the community. This can harm the overall sustainability and success of the business.

Question 3

Tinos Inc.is a company that manufactures toys.Which of the following would be its primary stakeholder?

Accepted Answer

The primary stakeholder of Tinos Inc. would be the people who purchase its toys, as they provide the main source of revenue for the company. While other local or foreign toy manufacturers may be considered competitors, they are not the primary stakeholders of Tinos Inc. and people who purchase toys in foreign countries are not the company's immediate target market.

Question 4

TinyToys Inc.is a company that manufactures toys.Which of the following would be its secondary stakeholder?

Accepted Answer

Secondary stakeholders are those who influence or are influenced by the company but are not engaged in its direct economic transactions. Other local toy manufacturers fall into this category as they are affected by TinyToys Inc.'s business decisions but do not directly engage in transactions with it.

Question 5

Chang, the founder of a multinational corporation, believes that his business should mainly focus on the benefit of those people who own its stock.In this scenario, he most likely follows _____, a model of business management.

Accepted Answer

Shareholder primacy is a model of business management that emphasizes the maximization of shareholder value as the main goal of the business. This means that the primary focus of the business is to make profits and increase the value of the firm's stock for its shareholders. Other stakeholders, such as employees, customers, and the community, may be considered but only insofar as they contribute to the company's ability to create value for shareholders.

Question 6

Salma owns stocks of an e-commerce business.In exchange for the money she has invested, she has received two property rights from the business.Which of the following is most likely to be one of the property rights given to her?

Accepted Answer

The most likely property right given to Salma as a stockholder is the right to receive a share of the residual earnings of the business. This means that after the business has paid all of its expenses and debts, any remaining earnings (or profits) will be distributed among the shareholders in the form of dividends. This is a common property right of stockholders in a corporation. Options B and C are not property rights typically granted to shareholders in a corporation, while option D suggests a higher percentage of profits, which is not necessarily a property right but may be a result of a shareholder agreement.

Question 7

Jiao, a student of business management, claims that the shareholder primacy model is better than the stakeholder model of business management.Which of the following statements best supports her claim?

Accepted Answer

The shareholder primacy model prioritizes the interests of shareholders, often focusing on maximizing wealth and returns on investments, which aligns with the statement that wealth is the most important input for business success.

Question 8

A(n) _____ is a legal structure for organizing a business where the organization is a distinct and separate entity from its owners.

Accepted Answer

A corporation is a legal entity that is separate and distinct from its owners. This means that the owners are not personally responsible for the corporation's debts or liabilities, and the corporation can enter into contracts, buy and sell property, and sue and be sued in its own name. On the other hand, a general partnership and a proprietorship do not have this legal separation, which means the owners are personally liable for the business's debts and liabilities. A limited partnership is a type of partnership where there is at least one general partner who is personally liable for the partnership's debts and at least one limited partner who has limited liability for the partnership's debts. However, a limited partnership is not a separate legal entity from its owners. Therefore, the best choice for the legal structure that provides a distinct and separate entity from its owners is a corporation.

Question 9

Kate, a business owner, is a proponent of the stakeholder model of business management.Which of the following is a reason she supports this model?

Accepted Answer

Kate supports the stakeholder model because it recognizes that managers need to interact with and manage the demands and needs of different stakeholder groups, such as customers, employees, suppliers, shareholders, and communities. This model emphasizes the importance of balancing the interests of these stakeholders, rather than solely focusing on the interests of shareholders, as in the shareholder model. Option A is incorrect because stakeholders are not necessarily legal owners of the corporation's assets. Option C is incorrect because the ability to trade stock does not necessarily align with the stakeholder model. Option D is incorrect because the stakeholder model provides guidance for managers to balance competing claims and make decisions that benefit all stakeholders.

Question 10

_____ is a model of the corporation suggesting that a firm is the sum total of its contracts with different stakeholders.

Accepted Answer

The model described in the question is the Nexus of contracts model. It suggests that a firm is not just controlled by its shareholders but is a result of various contracts between different stakeholders such as employees, suppliers, customers, and so on.

Question 11

Anastasia, a student of business management, claims that since most businesses are primarily concerned with acquiring more assets, the shareholder primacy model is better than the stakeholder model of business management.Which of the following facts strengthens her claims?

Accepted Answer

Shareholders are the legal owners of all the material possessions of the corporation, which aligns with the idea that businesses are concerned with acquiring more assets. This strengthens the claim that the shareholder primacy model is better than the stakeholder model, which considers the interests of all stakeholders including employees, customers, and the broader community. Choices A and B are irrelevant to the argument, and choice C contradicts the claim by suggesting a negative consequence of prioritizing shareholder value.

Question 12

How did the general-purpose corporations formed in the twentieth century grow?

Accepted Answer

General-purpose corporations in the twentieth century grew by offering investors a share of ownership in the company, or stock. This allowed the corporations to raise capital and expand their operations. The investors could then receive dividends and potentially sell their shares for a profit, which also encouraged more investment in the company.

Question 13

Javier is the shareholder of a cellphone manufacturing company.Which of the following statements about him is true?

Accepted Answer

As a shareholder, Javier has oversight rights, which means he has the right to monitor the actions of the company's management team. This protects him from being taken advantage of by the management team. Option A is incorrect because as a shareholder, Javier does have a claim to the residual earnings of the company. Option B is incorrect because while he may be entitled to receive profits, he is not the only person entitled to receive them - other shareholders are entitled to them as well. Option D is incorrect because shareholders can exchange money with the corporation, but it must be done through a specified payment, such as buying shares or receiving dividends.

Question 14

Fatima wants to start a small business.She does not want to share the profits of her business with anyone else.In this scenario, Fatima should most likely opt for which of the following types of business ownership?

Accepted Answer

An individual proprietorship is a type of business ownership where a single individual owns and operates the business. The owner has complete control over the business and does not have to share profits with anyone else. This type of ownership is suitable for Fatima's requirements.

Question 15

Which of the following statements is true of the intrinsic stakeholder model of business management?

Accepted Answer

The intrinsic stakeholder model of business management is based on the belief that stakeholder groups have the right to be considered in decisions that will impact them. This includes not only shareholders but also employees, customers, suppliers, and the wider community. This approach recognizes that stakeholders have legitimate interests that need to be taken into account, and that failing to consider these interests can have negative consequences for the business in the long run.

Question 16

Veltek Development Solutions was a company that existed in the nineteenth century.It was formed after obtaining a charter from the state legislature for the purpose of building a small bridge over a river.In this scenario, Veltek Development Solutions can be considered a _____.

Accepted Answer

Veltek Development Solutions can be considered a corporation because it obtained a charter from the state legislature, which is a legal document that grants corporate status to a business entity.

Question 17

_____ is best described as the processes and structures that provide the ultimate decision making authority for a firm.

Accepted Answer

Corporate governance refers to the system and processes in place that guide the decision-making and accountability of a company's management and board of directors. It is this system that provides the ultimate decision-making authority for a firm, ensuring that decisions are made in the best interests of stakeholders and the company as a whole. Strategic management refers to the process of formulating and implementing a company's strategy, while corporate responsibility refers to a company's obligation to act ethically and contribute to society. Corporate management is a broad term that encompasses all aspects of managing a company.

Question 18

Ria and Maria start an investment firm together that is not a separate legal entity.They have an equal share of the profits and the liabilities of the business.This type of business ownership can be best categorized as a(n) _____.

Accepted Answer

Ria and Maria have formed a partnership, as they have started a business together and are sharing the profits and liabilities equally.

Question 19

Antonia owns and runs a bakery in her neighborhood.She is the only person responsible for the liabilities of her bakery.Her bakery is an example of a(n) _____.

Accepted Answer

Antonia's bakery is owned and operated by a single individual, and she is personally responsible for any liabilities or debts incurred by the business. This is a characteristic of an individual proprietorship, which is a type of business structure where one person owns and manages the business.

Question 20

Which of the following statements is true of an individual proprietorship?

Accepted Answer

An individual proprietorship is a form of business ownership in which the business is owned and run by one individual. It is not owned by two or more partners (A) and is not considered a distinct and separate entity from its owners (C) as is the case with corporations. While not as common as corporations or partnerships, individual proprietorships are still a relatively common form of business ownership in the United States, making choice (D) incorrect.

Quiz 13: Corporate Governance and Ethics