MGMT 423 Test 2

Which of the following options characterizes corporations today? A.) outsourcing jobs B.) owners dealing directly with customers

A.) outsourcing jobs

According to the film and articles on corporations, what was the primary meansby which corporations managed to achieve greater rights and fewer regulations than those governing the early corporations? Choose the option below that best describes how the changes occurred. A.) By statute- Congress passed a law granting corporations 'personhood' rights. B.) By adding 'corporations' to the 1st Amendment to the Constitution C.) By attorneys achieving gains through the lower courts and the Supreme Court

By attorneys achieving gains through the lower courts and the Supreme Court

When putting the Principal-Agent Theory into practice, which of the following is most likely to benefit? A.) creditors B.) employees C.) communities D.) CEOs/top managers

CEO/top managers

The Principal-Agent Theory is the rationale for the Maximization Theory (Maximize Shareholder Returns). Under this theory, which of the following stakeholders are most likely to benefit? (choose one) A.) small shareholders B.) customers C.) corporate board members

Corporate board members

Korten's view of stock market increases and GDP growth is that our leaders can reasonably predict that most people will benefit from these gains.

False

It was stated in the GDP article that GDP would be a better measurement if it were calculated on the median income rather than on the average income per capita? (Choose the reason for this that was discussed in the article). A.) It would be a better use of statistical methodology B.) It would correct for the distortion caused by high-income earners

It would correct for the distortion caused by high-income earners

Which of the following statements factually describes the current US tax rates for gains made from trading shares or financial instruments? A.) Most are taxed as long term capital gains at 20%. B.) Most of the gains are taxed the same as income taxes - approximately 32-38%.

Most are taxed as long term capital gains at 20%.

After the IPO, the larger publicly traded corporations primarily raise operating capital by selling shares of stock.

Mostly False

CEOs of companies traded on the Dow tend to give as much attention to Research & Development as they do to meeting quarterly earnings expectations

Mostly False

Financial market share-trading is by far the most important factor in increasing a company's profits. It therefore makes sense that such trading should be taxed at a lower rate (20-23%) than taxes paid by the company's employees (up to 39.6%).

Mostly False

Higher stock prices assure the creation of new jobs and increased wages

Mostly False

Wall Street expectations create motivation for top managers to pursue strategies aimed at steady slow growth and long-term corporate health.

Mostly False

Changes in a stock's share price are largely based on expectations about the stock's future performance (it is a bet) and such changes may or may not include rational considerations like corporate profits and dividends.

Mostly True

Initial capital for start-up companies is derived from entrepreneurs, angel investors, and venture capitalists; not from stock market trading

Mostly True

The pressure of Wall Street expectations frequently leads top managers to downsize and outsource aspects of the business, often off-shore.

Mostly True

When a company's stock price is rising, it usually results in higher credit ratings which usually results in more favorable interest rates for that company's borrowing

Mostly True

In practice, stock-options gave CEOs a greater incentive to increase which of the following shareholder benefits, even if doing so took away from the other potential benefits? A.) long term stability B.) dividends C.) share price D.) profits E.) steady growth

Share Price

The movie "Inside Job," illustrated an ongoing problem for the objectivity and accuracy of the ratings given to various securities and derivatives traded on the financial markets. (Choose the most accurate description of that problem). A.) The rating agencies are using flawed algorithms in determining those ratings. B.) The rating agencies are paid by the companies offering the products they are rating

The rating agencies are paid by the companies offering the products they are rating

Which of the following statements factually describes the current US tax rates for gains made from trading shares or financial instruments? A.) The taxes are lower due to the jobs created by such share trading. B.) They are taxed at a rate about 40% lower than earned income.

They are taxed at a rate about 40% lower than earned income.

Choose the phrase below that best describes "financial capitalism." A.) Trading in financial securities and other instruments that allow you to realize gains when the value of the underlying asset either increases or decreases. B.) Selling goods or services at a profit C.) Investing in buildings, machinery, and technology, then profiting from rental or sales. D.) Investing in a property and profiting through rent and appreciation.

Trading in financial securities and other instruments that allow you to realize gains when the value of the underlying asset either increases or decreases.

According to the Rise & Fall of GDP article, increases in GDP may mean that the rich are getting richer and the poor are getting poorer.

True

Advocates for the privatization of all public resources argue that the private owners would make more responsible use of the resource.

True

Bogle wrote that most financial market trading today only results in the exchange of pieces of paper, not in capital for making things the world will buy.

True

Bogle wrote that the Wall Street banking and investment industries "Subtract" from the value created by our productive businesses.

True

One of the arguments for privatization of government services is that with private ownership someone would be accountable for any damages that occur.

True

The Malaysian Forest Minister proposed to increase Malaysia's wealth by cutting down all the trees, selling the wood, and putting the proceeds in banks to draw interest.

True

Under the Principal-Agent Theory, which explanation below best describes the reason a CEO would be motivated to act in the best interest of shareholders? A.) When a CEO receives stock-options, she becomes a principal and acts in her own self-interest. B.) When investors purchase large blocks of stock, a CEO is more inclined to favor their interests.

When a CEO receives stock-options, she becomes a principal and acts in her own self-interest.

Korten suggested that a positive alternative to a global capitalist economy dominated by Finance Capitalism would be (pick one). A.) socialism B.) a market economy

a market economy

One way to understand Korten's concept of wealth, is that wealth is (complete the sentence) A.) an available resource that can be used to benefit the human community B.) the difference between assets and liabilities.

an available resource that can be used to benefit the human community

Which of the following tactics, sometimes used by firms to manipulate the value of stock-options, are clearly legal? A.) failing to report liabilities B.) announcing a major downsizing to boost stock prices

announcing a major downsizing to boost stock prices

The corporate practice of 'externalizing costs' allows corporations to- (choose one) A.) depreciate certain capital expenses in three years to get them off the books. B.) cause certain operational or production costs to be borne by others. C.) reduce costs by using lean manufacturing practices.

cause certain operational or production costs to be borne by others.

In the movie, Inequality for All, the Seattle pillow manufacturer, Nick Hanauer, stated that (Choose one) A.) customers are the main job creators B.) financial market investors are the main job creators.

customers are the main job creators

Which of the following options is an example of corporations externalizing costs? A.) cutting pension costs using bankruptcy laws B.) just-in-time procurement

cutting pension costs using bankruptcy laws

The Fourteenth Amendment was originally intended to assure due process to newly freed slaves, but it has often been used to (choose one) A.) extend the Bill of Rights to corporations B.) assure affirmative action

extend the Bill of Rights to corporations

Which of the following options characterizes corporations today? A.) customers are neighbors B.) externalizing costs

externalizing costs

Increases in share prices are more often the result of (Choose the most common cause). A.) global market considerations and emotional reactions to market movements. B.) the issuance of new shares of stock C.) careful analysis of each company's short and long-term prospects

global market considerations and emotional reactions to market movements.

Which of the following tactics, sometimes used by firms to manipulate the value of stock-options, are clearly legal? A.) granting stock options just before releasing quarterly reports showing good earnings B.) recording bogus revenues

granting stock options just before releasing quarterly reports showing good earnings

In the Rise & Fall article, why is GDP seen as a problematic way to measure the long term sustainability of the economy? (Choose best answer) A.) it does not measure depletion of a resource B.) it counts money spent on gambling

it does not measure depletion of a resource

Which of the following was not permitted in the charters for early American corporations? A.) making a profit B.) limited liability for shareholders

limited liability for shareholders

According to the team report on the Distribution of Wealth and to the graphs in the Davis lecture, tax cuts for the wealthy do not lead to proportionally higher GDP and job growth. Are tax rates on the wealthy in the US lower or higher today than they were in 1980? A.) lower B.) higher

lower

Which of the following options characterizes corporations today? A.) moving plants to low wage countries B.) public service

moving plants to low wage countries

Which of the following options characterizes corporations today? A.) loyalty to employees B.) owners without liability

owners without liability

Which of the following tactics, sometimes used by firms to manipulate the value of stock-options, are clearly legal? A.) packaging and selling derivatives B.) selling shares before disclosing patent failures

packaging and selling derivatives

What is the name of the economic theory that justified the CEO stock-option practices described in the Greed article? A.) pricipal-agent B.) free-market C.) leveraged buyout

principal-agent

Which of the following options is an example of corporations externalizing costs? A.) releasing liquid waste into rivers B.) inventory reduction

releasing liquid waste into rivers

In the film, Michael Walker (Executive Director of the Fraser Institute) discussed the implications of the "privatization" of everything. He thought that this was a good idea because, in his view, the owners would (choose one to complete the sentence) A.) serve as stewards for the resource B.) deplete the resource

serve as stewards for the resource

Since 1980, has middle class income in the US increased or slightly decreased? A.) increased B.) slightly decreased

slightly decreased

Which of the following options characterizes corporations today? A.) stock-options B.) loyalty to the local community

stock-options

What is the primary goal of corporate CEOs in taking actions intended to boost the share prices of publicly traded corporations? (choose best answer). A.) to increase shareholder wealth and their own wealth (from stock options) B.) to earn capital needed for expansion or increased research and development. C.) to attract investors looking for stable, long-term growth

to increase shareholder wealth and their own wealth (from stock options)

Which of the following options is an example of a corporation externalizing costs? A.) unmetered rice fields irrigation B.) outsourcing payroll processing

unmetered rice fields irrigation