SOLVED

31) Directors dealing in shares of a business on the basis of information that is not available to shareholders is called A) Limited disclosure B) Restrictive practice C) Insider-trading D) Restricted exchange E) Illegal transfer 32) A disadvantage to further strengthening the framework of rules against fraud is that A) Unscrupulous directors may continue to find ways to commit fraud B) The entrepreneurial spirit of talented directors could be stifled C) Shareholders will become overprotective and passive D) Enforcement officials are more likely to become corrupt E) Information to shareholders will become greatly restricted 33) The four main tasks of the financial function are to manage and plan A) Finances, capital market operations, financial control, and investment appraisal B) Accounting, marketing, human resources, operations management departments C) Annual budgeting, cash flow management, purchasing timing, and payments timing D) The balance sheet, income statement, and statements of retained earnings and cash flow E) The accounting records for receivables, payables, outstanding loans and notes. 34) Shareholder activism can be most often seen at work by A) Shareholders voting by proxy for annual meeting resolutions B) Shareholders attending annual meeting and voting on resolutions C) Insurance companies voting on resolutions at annual meetings D) Executive directors voting for a pay raise at annual meetings E) Head office protests and sit-ins by anti-poverty groups 35) Bonuses paid to banking executives whose corporate share prices declined significantly during the Great Recession of 2008 were an example of A) Greed by bankers B) The agency problem C) The failure of capitalism D) Poor government oversight E) Stock market risk 36) TRW Corp. hired a new CEO and agreed to pay her $20,000 plus stock options for 1 million shares annually, hoping this would provide a huge incentive for the CEO to turn the company’s fortunes around. Which of the following events might act as a disincentive for the new CEO? A) the personal marginal tax rate decreased slightly B) interest rates increased by 3% during the year C) inflation rates fell a bit during the year D) sales opportunities arose in a foreign country E) a new company started to compete against TRW 37) According to a Robert Half International Inc. survey, the most likely impact of increased corporate governance will be A) increased staff turnover B) better ethical environment C) more deadline pressure D) better opportunities E) accounting/IT collaboration 38) Orbit Ltd. has 30,000 shares outstanding and earned $30,000 on capital invested of $90,000 last year. What is the likely impact of an investment opportunity to issue 10,000 more shares for $30,000 to earn an additional $14,000? A) EPS will decrease and the stock price will fall B) the new investment is relatively less profitable C) the new investment is relatively more profitable D) total profits will increase slightly but by not enough E) the new capital invested will earn less per dollar 39) Orbit Ltd. has 30,000 shares outstanded and earned $30,000 on capital invested of $90,000 last year. What is the new EPS after the investment succeeds? A) 0.80 B) 1.00 C) 1.10 D) 1.47 E) 4.40 40) Profit maximization as a corporate objective does not take into account A) debt B) risk C) shares D) cash E) EPS 41) Diversification of investments refer to A) buying several investments B) saving up for a rainy day C) buying shares in a company D) buying government backed bonds E) keeping your money in the bank 42) An example of putting the short term considerations ahead of the long term planning is A) locking in a higher interest rate on debt when rates are expected to rise B) using more expensive but higher quality parts to manufacture a product C) reducing the warranty period from 1 year to six months to save money D) manufacturing large vehicles when gas prices are expected to rise