Question 1

In 1970,institutions owned ________ percent of the equity traded in the United States and by 2005 they owned ________ percent of the equity traded in the United States.
A)32; 59
B)62; 32
C)48; 62
D)32; 38

Accepted Answer

In 1970, institutions owned 32 percent of the equity traded in the United States, and by 2005, this number had increased to 59 percent, reflecting a significant shift towards institutional ownership of equities over the 35-year period.

Question 2

Supervision of the board of directors in its monitoring role is the responsibility of
A)the CEO.
B)the chairman of the board.
C)the chief operating officer.
D)the president.

Accepted Answer

The chairman of the board is responsible for oversight and supervision of the board of directors in its monitoring role. It is the chairman's duty to ensure that the board is fulfilling its obligations and that the company is being managed properly. The other options are not typically responsible for this task.

Question 3

The most common organizational structure for implementing a corporate diversification strategy is the ________ structure.
A)matrix
B)U-form
C)M-form
D)functional

Accepted Answer

The M-form, or multidivisional form, is the most common organizational structure for implementing a corporate diversification strategy. This structure allows a corporation to manage a portfolio of different businesses independently, each operating as a separate division.

Question 4

The ________ is the subcommittee of the board of directors that is responsible for ensuring the accuracy of accounting and financial statements.
A)audit committee
B)finance committee
C)nominating committee
D)personnel and compensation committee

Accepted Answer

The audit committee is specifically responsible for overseeing the financial reporting process and ensuring the accuracy and completeness of the company's financial statements, so it is the best choice among the options given. The finance committee is more focused on financial planning and budgeting, while the nominating and personnel/compensation committees deal with other aspects of corporate governance such as board membership and executive compensation.

Question 5

Which component of the M-form structure evaluates the firm's decision making to ensure that it is consistent with the interests of equity holders?
A)senior executives
B)corporate staff
C)board of directors
D)division general managers

Accepted Answer

The board of directors is responsible for overseeing the senior executives and division general managers to ensure that the firm's decision making is consistent with the interests of equity holders. Corporate staff may provide support and guidance, but the ultimate responsibility lies with the board of directors.

Question 6

The primary responsibility of the ________ is to provide information about the firm's external and internal environments to the firm's senior executive.
A)corporate staff
B)board of directors
C)division general managers
D)shared activity managers

Accepted Answer

The corporate staff is responsible for providing information about the external and internal environments to the firm's senior executive. This includes monitoring market trends, analyzing the competitive landscape, assessing internal strengths and weaknesses, and identifying potential risks and opportunities. The board of directors provides oversight and strategic guidance, while division general managers are responsible for the day-to-day operations of their respective divisions. Shared activity managers typically oversee specific functional areas, such as finance or human resources.

Question 7

In an agency relationship,the party that delegates decision-making authority to another individual is known as the
A)stakeholder.
B)principal.
C)agent.
D)stockholder.

Accepted Answer

In an agency relationship, the party that delegates decision-making authority to another individual is known as the principal. The agent is the party that is given the authority to act on behalf of the principal, while the stakeholder and stockholder are not directly involved in the agency relationship.

Question 8

Which role in the office of the president is responsible for strategy implementation?
A)chairman of the board
B)chief executive officer
C)chief operating officer
D)chief strategist

Accepted Answer

The chief operating officer (COO) is responsible for implementing the president's strategies and plans. The chairman of the board is responsible for overseeing the overall direction of the company, but is not directly involved in strategy implementation. The chief executive officer (CEO) is responsible for the overall management of the company, but may delegate strategy implementation to the COO. The role of chief strategist may exist in some companies, but it is not a common or standard role in the office of the president.

Question 9

Which of the following statements regarding outside members of boards of directors is accurate?
A)Outside directors,as compared to insiders,tend to focus less on monitoring a firm's economic performance than on other measures of firm performance and are more likely than insider members to dismiss CEOs following poor performance.
B)Outside directors,as compared to insiders,tend to focus less on monitoring a firm's economic performance than on other measures of firm performance and are less likely than insider members to dismiss CEOs following poor performance.
C)Outside directors,as compared to insiders,tend to focus more on monitoring a firm's economic performance than on other measures of firm performance and are less likely than insider members to dismiss CEOs following poor performance.
D)Outside directors,as compared to insiders,tend to focus more on monitoring a firm's economic performance than on other measures of firm performance and are more likely than insider members to dismiss CEOs following poor performance.

Accepted Answer

Outside directors, who are not involved in the day-to-day operations of a company, tend to focus more on monitoring a firm's economic performance, such as financial metrics and strategic goals, than on other measures of firm performance. They are also more likely than insider members to dismiss CEOs following poor performance as they are not as connected to the CEO and have less personal or emotional investment in the success of the company.

Question 10

Two common agency problems include
A)managers investing some of a firm's capital in managerial perquisites that do not add economic value to a firm and managerial risk aversion.
B)managers not investing enough of a firm's capital in managerial perquisites and managerial risk aversion.
C)managers investing some of a firm's capital in managerial perquisites that do not add economic value to a firm and managerial risk seeking.
D)managers not investing enough of a firm's capital in managerial perquisites and managerial risk seeking.

Accepted Answer

The two common agency problems are managers investing some of a firm's capital in managerial perquisites that do not add economic value to a firm (such as private jets, expensive office decorations, etc.) and managerial risk aversion (managers avoiding investments or projects that may have potential risks or uncertainties). Option B and D are incorrect as they suggest managers not investing enough in managerial perquisites and being risk-seeking, which are not common agency problems. Option C is incorrect as it suggests managers investing in non-economic value-added perquisites but being risk-seeking, which is less likely to be an agency problem.

Question 11

In examining the question of whether the roles of CEO and chairman should be combined,empirical research on this question suggests
A)that combining these roles is always positively related with firm performance.
B)that separating these roles is always positively related with firm performance.
C)that combining these roles is positively correlated with firm performance when the firm operates in slow-growth and simple competitive environments.
D)that separating these roles is positively correlated with firm performance when the firm operates in slow-growth and simple competitive environments.

Accepted Answer

Empirical research indicates that combining the roles of CEO and chairman can be positively correlated with firm performance specifically in contexts where the firm is operating in slow-growth and simple competitive environments. This suggests that the effectiveness of combining these roles may depend on the specific circumstances of the firm's operating environment.

Question 12

The ________ is a subcommittee of the board of directors that maintains the relationship between the firm and external capital markets.
A)nominating committee
B)audit committee
C)personnel and compensation committee
D)finance committee

Accepted Answer

The finance committee is responsible for overseeing financial policies and practices, including maintaining relationships with external capital markets. The other committees listed focus on nominating new board members, overseeing audits, and managing personnel and compensation.

Question 13

The divided loyalties that divisional staff managers have between corporate staff managers and functional managers are potentially the most problematic in ________ staff functions.
A)marketing
B)accounting
C)logistics
D)production

Accepted Answer

The answer of The divided loyalties that divisional staff managers...

Question 14

In a multidivisional structure,each business that the firm engages in is managed through a
A)product line.
B)division.
C)geographic unit.
D)function.

Accepted Answer

In a multidivisional structure, each business that the firm engages in is managed through a division. Each division is responsible for a separate product line or service, and has its own set of goals, resources, and performance expectations. Divisions are often organized by product type, customer type, or geographic location, and are typically led by a divisional manager who reports to a top-level corporate executive.

Question 15

Which of the following statements regarding institutional investors is accurate?
A)Institutional investors tend to be more interested in maximizing the short-term value of their portfolios than in the long-term performance of firms in those portfolios.
B)High levels of institutional ownership are negatively related to the level of R&D in a firm.
C)High levels of institutional ownership have a strong,positive relationship with the level of R&D in a firm.
D)High levels of institutional ownership lead firms to sell strategically unrelated businesses.

Accepted Answer

The answer of Which of the following statements regarding institutional...

Question 16

The M-form structure is designed to create checks and balances for managers that increase the probability that a diversified firm will be managed in ways consistent with
A)the interests of all of its stakeholders.
B)an exclusively short-term perspective.
C)an exclusively long-term perspective.
D)the interests of its equity holders.

Accepted Answer

The M-form structure is designed to create checks and balances for managers that increase the probability that a diversified firm will be managed in ways consistent with the interests of its equity holders.

Question 17

The divisions of an M-form organization are true
A)profit-and-loss centers.
B)functional units.
C)matrix teams.
D)organic structures.

Accepted Answer

The M-form organizational structure is a multi-divisional structure where each division is a profit-and-loss center. Therefore, option A is the best choice. Options B, C, and D are not applicable because they do not accurately describe the divisions of an M-form organization.

Question 18

A board of directors typically consists of
A)10 to 15 individuals drawn from a firm's top management group and from individuals outside the firm.
B)10 to 15 individuals drawn exclusively from a firm's top management group.
C)10 to 15 individuals drawn exclusively from individuals outside the firm.
D)10 to 15 individuals drawn from all stakeholder groups associated with the firm.

Accepted Answer

A board of directors typically consists of 10 to 15 individuals drawn from a firm's top management group and individuals outside the firm. This allows for a diverse range of perspectives and expertise to be represented on the board. Including individuals from outside the firm also brings in fresh ideas and oversight to ensure the board is acting in the best interest of all stakeholders.

Question 19

The senior executive (the president or CEO)in an M-form organization has two responsibilities:
A)budgeting and accounting.
B)budgeting and mission setting.
C)strategy formulation and strategy implementation.
D)strategy formulation and budgeting.

Accepted Answer

In an M-form (Multidivisional form) organization, the senior executive, such as the president or CEO, is primarily responsible for strategy formulation and strategy implementation. This involves setting the overall strategic direction of the company and ensuring that strategies are effectively executed across its various divisions.

Question 20

In 2005,what percentage of the equity traded in the United States was owned by institutional investors?
A)20%
B)38%
C)59%
D)69%

Accepted Answer

According to data from the Federal Reserve, in 2005 institutional investors owned approximately 59% of the equity traded in the United States. Therefore, the correct choice is C).

Quiz 10: Organizing to Implement Corporate Diversification

In 1970,institutions owned percent of the equity traded in the United States and by 2005 they owned percent of the equity traded in the United States.

Supervision of the board of directors in its monitoring role is the responsibility of

The most common organizational structure for implementing a corporate diversification strategy is the ________ structure.

The ________ is the subcommittee of the board of directors that is responsible for ensuring the accuracy of accounting and financial statements.

Which component of the M-form structure evaluates the firm's decision making to ensure that it is consistent with the interests of equity holders?

The primary responsibility of the ________ is to provide information about the firm's external and internal environments to the firm's senior executive.

In an agency relationship,the party that delegates decision-making authority to another individual is known as the

Which role in the office of the president is responsible for strategy implementation?

Which of the following statements regarding outside members of boards of directors is accurate?

Two common agency problems include

In examining the question of whether the roles of CEO and chairman should be combined,empirical research on this question suggests

The ________ is a subcommittee of the board of directors that maintains the relationship between the firm and external capital markets.

The divided loyalties that divisional staff managers have between corporate staff managers and functional managers are potentially the most problematic in ________ staff functions.

In a multidivisional structure,each business that the firm engages in is managed through a

Which of the following statements regarding institutional investors is accurate?

The M-form structure is designed to create checks and balances for managers that increase the probability that a diversified firm will be managed in ways consistent with

The divisions of an M-form organization are true

A board of directors typically consists of

The senior executive (the president or CEO) in an M-form organization has two responsibilities:

In 2005,what percentage of the equity traded in the United States was owned by institutional investors?