Which of the following is/are true?1: The board of directors has the power to act on behalf of the shareholders to hire and fire theoperating management of the firm. In a legal sense, the directors are "principals" and theshareholders are "agents".II: The goal of financial managers does not imply that illegal or unethical actions should betaken in the hope of increasing the value of the the firm.III: IBEC Inc. of Toronto spends approximately $2 million annually to hire auditors to go overthe firm's financial statements. This is an example of an indirect agency cost.IV: The triple bottom line is defined as a company's commitment to operate in aneconomically, socially and environmentally sustainable mannera.b. II, III and IVc. I, II and IVd. III and IVI, II, III and IVe.II and IV

I. True: In most corporations, the board of directors is elected by the shareholders and holds the…

Answered: Which of the following is / are true?…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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The Agency Problem arises because of the separation of ownership from control of publiclylisted corporate organizations.I. Discuss this statement bringing out what the Agency Problem is and managementactions or behaviours that may be considered as giving rise to the Agency Problem.II. Explain five ways in which you believe could be used to minimize the occurrence ofthe Agency Problem in a Ghanaian listed company of your choice.
A corporation whose managers are separate from its owners will face zero agency costs when it uses stock options as part of its compensation package for upper managers True False
Imagine that you are the new department manager of a corporation within your chosen field: you discover that your predecessor had been using cash basis of accounting, which has resulted in many errors and misinformation. What measures would you take to remediate the issue? Propose a high-level plan to implement a proper accounting system for your department using specific principles. For example, which financial statements would you investigate first? What sort of internal controls would you implement?
Providing safeguards against corruption and incompetence, removing conflict of interest, and improving perceptions of legitimacy are the arguments for: A. combining the roles of CEO and chairman of the board of directors B. separating the roles of CEO and chairman of the board of directors C. implementing outsourcing and offshoring to enter a foreign market D. implementing joint ventures and subsidiaries to enter a foreign market.
Which of the following is a remedy for the Agency Problem in the U.S.? Shareholders have the right to elect the board of directors, which can serve as an effective check if the board remains independent of management. Shareholders have the right to overrule any managerial decisions. The U.S. government directly intervenes in company decisions to ensure shareholder interests are protected. The board of directors should always take management roles in the company.
1. How is hiring the “next generation” of Chinese elites different from practices here in North America. Is it the same as Clinton’s daughter securing a job at a hedge fund company? 2. What are some of the moral principles involves here and what are some of the consequences of this practice? How does any company stay competitive if others choose to conduct unethical business practices?
1. Many businesses are set up as limited companies. These are owned by shareholders and run by the board of directors. Which of the following are disadvantages of limited company status? a) The impression of a soundly based business organisation (though incorporation does not guarantee reliability or respectability) b) Easier to raise capital c) Must comply with legal and regulatory requirements d) Shareholders’ liability for any losses is limited to the amount of their investment in the company 1.1 A loan repayment to a bank would be recorded in the nominal ledger as: a) Dr Bank Cr Capital b) Dr Loan Cr Bank c) Dr Loan Cr Bank d) Dr Bank Cr Reserves
Which of the following characteristics is an advantage of the corporate form of business? a. Separation of ownership and management b. Higher degree of government regulation c. The potential to raise large amounts of capital d. Double taxation
Which of the following factors would weaken corporate governance? A.Ensuring that the rotation of directors is such that the average incumbency ensures that all diretors are appointed for a long period so as to enhance their familiarity with the company's policies and procedures B.Stipulating the maximum number of directorship a director can commit to C.Ensuring the CEO is not the chairman of the board of directors D.The appointment of independent directors to the audit committee
Company A pays its managers a fixed cash salary. Company B adds ‘Short Term Incentives’ which involve extra cash payments linked to profits. Company C pays part of the compensation in company shares. Which Company’s compensation is most likely to mitigate conflicts of interest between managers and shareholders?
Identify the term being referred to: A theory that states that shareholders will encourage the board of directors to declare as much dividends as possible so that only the minimum amount of cash is available to the entity. This is to prevent excessive spending by managers. *
Which of the following statements are correct regarding Sarbanes- Oxley (SOX) and Dodd-Frank (DF)? I. DF requires that public firms offer an advisory vote to shareholders on top executive compensation. II. SOX imposes criminal penalties on the CEO and CFO for fraud or for retaliation on whistle blowers. III. The compliance costs for SOX can be substantial and have encouraged some firms to "go dark." IV. DF requires companies to disclose whether directors and officers are permitted to hold put options which protect their ownership position in the firm. O I and II only O I and III only O II and III only O I, II, and III only O I, II, III, and IV

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