Question 1

Which of the following is NOT typically associated with the private ownership of business organizations?

Accepted Answer

The government is not typically associated with the private ownership of business organizations, as private ownership implies ownership by non-governmental entities such as individuals, families, or publicly traded companies.

Question 2

Privatization is a term used to describe:

Accepted Answer

Privatization refers to the transfer of ownership and control of government operations or assets to private individuals or organizations. Therefore, option B is the best choice as it accurately describes this process. Option A is incorrect as it describes nationalization rather than privatization. Option C and D are also incorrect as they do not relate to the concept of privatization.

Question 3

Foreign stock markets are frequently characterized by controlling shareholders for the individual publicly traded firms.Which of the following is NOT identified by the authors as typical controlling shareholders?

Accepted Answer

The authors identified all of the options (A, B, and C) as typical controlling shareholders in foreign stock markets.

Question 4

The Stakeholder Capitalism Model (SCM):

Accepted Answer

The Stakeholder Capitalism Model combines the interests and inputs of multiple stakeholders including shareholders, creditors, management, employees, and society. It prioritizes the long-term well-being of the various stakeholders over short-term financial profit. It is not the Anglo-American model of corporate governance which typically prioritizes shareholders above other stakeholders.

Question 5

State Owned Enterprises (SOEs)by their very name cannot be traded on stock exchanges because they are government owned.

Accepted Answer

State Owned Enterprises (SOEs) can be partially privatized and have their shares traded on stock exchanges, while the government retains a controlling interest.

Question 6

The problems that may arise due to the separation of ownership and management in large business organizations is know as:

Accepted Answer

The separation of ownership and management in large business organizations can lead to conflicts of interest between shareholders and managers, since managers may prioritize their own interests over those of the shareholders. This is known as the agency problem.

Question 7

In the U.S.and U.K.stock markets are characterized by ownership of firms concentrated in the hands of a few controlling shareholders.In contrast,the rest of the world tends to have more widespread ownership of shares.

Accepted Answer

In the U.S. and U.K., stock markets are characterized by more widespread ownership of shares, with a large number of institutional and retail investors. In contrast, many other countries tend to have ownership concentrated in the hands of a few controlling shareholders or families.

Question 8

In finance,an efficient market is one in which:

Accepted Answer

An efficient market is characterized by all of the given options: prices are assumed to reflect all available information and thus are considered correct (A), they adjust quickly to new information (B), and they are seen as effective in allocating capital within the economy (C).

Question 9

According to recent research,family-owned firms in some highly-developed economies typically outperform publicly-owned firms.

Accepted Answer

Recent research has found that family-owned firms in some highly-developed economies tend to outperform publicly-owned firms. This may be due to factors such as a long-term focus on the business, strong commitment to the company's success, and a closer alignment of interests between owners and management. However, it is important to note that this is not always the case and there are many examples of successful publicly-owned firms as well.

Question 10

Unsystematic risk can be defined as:

Accepted Answer

Unsystematic risk, also known as company-specific risk, is the risk that is unique to a particular company or industry. It is not related to the overall market or economy and can be diversified away by holding a portfolio of different securities. This risk is specific to the individual security and not the total risk of the firm (A), added risk of a firm's shares to a diversified portfolio (C), or the risk of the market in general (D).

Question 11

The Shareholder Wealth Maximization Model (SWM):

Accepted Answer

The Shareholder Wealth Maximization Model (SWM) clearly places shareholders as the primary stakeholder.

Question 12

Which of the following is NOT typically associated with the public ownership of business organizations?

Accepted Answer

Public ownership typically refers to ownership by the state or government, as well as sometimes civil society organizations. It is not typically associated with ownership by families.

Question 13

State Owned Enterprises (SOEs):

Accepted Answer

State Owned Enterprises (SOEs) are a form of public ownership created for commercial activities rather than civil or social activities. They are the dominant form of business organization in some countries, and therefore, all of the above choices are correct.

Question 14

In the Anglo-American model of corporate governance,the primary goal of management is to:

Accepted Answer

In the Anglo-American model of corporate governance, the primary goal of management is to maximize shareholder wealth. This means that decisions are made with the aim of increasing the value of the company's shares and paying out dividends to shareholders. Other stakeholders, such as employees, customers, suppliers, and the broader community, are considered secondary to the interests of shareholders. This approach is often criticized for being short-term oriented and ignoring the long-term sustainability of the company.

Question 15

Systematic risk can be defined as:

Accepted Answer

Systematic risk refers to the risk that affects the overall market, such as changes in interest rates, inflation, and geopolitical events. It cannot be diversified away because it affects the entire market, not just a particular security. Therefore, option C is the best choice as it describes the general risk of the market. Option A is incorrect because it refers to total risk, which includes both systematic and unsystematic risk. Option B is incorrect because it refers only to the risk of an individual security, which may also be affected by unsystematic risk that is specific to the particular security. Option D is incorrect because systematic risk cannot be diversified away.

Question 16

One of the most challenging issues in the financial management of the enterprise is the possible separation of ownership from management resulting in the so-called principal agent problem.Define the agency problem,explain possible ways to alleviate the agency problem and discuss differences in across global markets.

Accepted Answer

The answer of One of the most challenging issues in...

Question 17

The study of how shareholders can motivate management to accept the prescriptions of the shareholder wealth maximization model is called:

Accepted Answer

The study of how shareholders can motivate management to accept the prescriptions of the shareholder wealth maximization model is called agency theory. This theory examines the relationship between principals (shareholders) and agents (management) and how to align their interests to promote the maximization of shareholder wealth.

Question 18

According to recent research,family-owned firms in some highly-developed economies typically outperform publicly-owned firms.

Accepted Answer

Recent research has found that family-owned firms in some highly-developed economies, such as Germany and Japan, typically outperform publicly-owned firms in terms of profitability and longevity.

Question 19

According to the authors,dual classes of voting stock are the norm in non-Anglo-American markets.

Accepted Answer

The authors state that "dual classes of voting stock are the norm in non-Anglo-American markets, such as those in continental Europe, Latin America, and Asia."

Question 20

"Maximize corporate wealth":

Accepted Answer

Option A is incorrect because the non-Anglo-American model of management emphasizes the importance of other stakeholders, such as employees and society, along with maximizing corporate wealth. 
Option B is correct because maximizing corporate wealth as a management objective places equal importance on the interests of shareholders and other stakeholders. 
Option C is correct because maximizing corporate wealth includes not just financial wealth but also considers other factors such as social responsibility, environmental impact, and ethical considerations. Therefore, the correct answer is D, all of the above.

Quiz 4: Financial Goals and Corporate Governance

Which of the following is NOT typically associated with the private ownership of business organizations?

Privatization is a term used to describe:

Foreign stock markets are frequently characterized by controlling shareholders for the individual publicly traded firms.Which of the following is NOT identified by the authors as typical controlling shareholders?

The Stakeholder Capitalism Model (SCM) :

State Owned Enterprises (SOEs)by their very name cannot be traded on stock exchanges because they are government owned.

The problems that may arise due to the separation of ownership and management in large business organizations is know as:

In the U.S.and U.K.stock markets are characterized by ownership of firms concentrated in the hands of a few controlling shareholders.In contrast,the rest of the world tends to have more widespread ownership of shares.

In finance,an efficient market is one in which:

According to recent research,family-owned firms in some highly-developed economies typically outperform publicly-owned firms.

Unsystematic risk can be defined as:

The Shareholder Wealth Maximization Model (SWM) :

Which of the following is NOT typically associated with the public ownership of business organizations?

State Owned Enterprises (SOEs) :

In the Anglo-American model of corporate governance,the primary goal of management is to:

Systematic risk can be defined as:

The study of how shareholders can motivate management to accept the prescriptions of the shareholder wealth maximization model is called:

According to recent research,family-owned firms in some highly-developed economies typically outperform publicly-owned firms.

According to the authors,dual classes of voting stock are the norm in non-Anglo-American markets.

"Maximize corporate wealth":