Bus 100 Ch 13

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Which of the following is not an instance of "insider trading"?

A. An auditor using nonpublic information about the company to invest in its stock. B. A marketing executive briefing stock analysts on the company's sales performance.*** C. A stock broker passing an "inside tip" to a client, but not trading for his or her own account. D. The CEO's cousin buying stock after the CEO mentioned a pending offer to buy the company.

The board committee that administers and approves salaries and benefits of high-level managers in a company is called the:

A. Human resources committee. B. Executive committee. C. Nominating committee. D. Compensation committee.***

Which of the following arguments supports the concept of high executive compensation?

A. Inflated executive pay helps U.S. firms compete with foreign rivals. B. High executive pay drives away talented middle managers who feel unfairly compensated. C. There is currently a surplus of qualified executive candidates. D. High salaries provide an incentive for innovation and risk-taking.***

Investors may receive an economic benefit from the ownership of stock by receiving:

A. Interest. B. Dividends. C. Capital gains. D. Both B and C, but not A.****

Social investors seek to eliminate from their investment portfolios companies that:

A. Make dangerous products like tobacco or weapons. B. Pollute the environment. C. Discriminate against employees. D. All of the above.****

The mission of the Securities and Exchange Commission (SEC) is to:

A. Protect companies from hostile takeovers. B. Ensure that institutional investors do not take control of company management. C. Ensure that the federal treasury receives its share of the revenues from stock trading. D. Protect shareholders' rights by making sure that stock markets are run fairly.****

The "agency problem" arises when:

A. Shareholders act in their own interest, rather than in the interest of the board. B. There is no separation of ownership and control in a company. C. Owners manage the company on their own behalf. D. Managers act in their own interest, rather than in the interest of shareholders.****

How are directors (members of corporate boards) selected?

A. The company's CEO appoints the directors. B. The nominating committee elects the directors. C. Shareholders elect the directors from a list of candidates.***** D. Shareholders with the greatest proportional ownership in the company become directors.

Which of the following statements is not true about shareholders?

A. They own equal shares of company assets.*** B. They are investors in the company. C. They are the legal owners of business corporations. D. Managers pay close attention to their needs and interests.

Which of the following is not a legal right of shareholders?

A. To vote on members for the board of directors. B. To vote on who will become chief executive officer (CEO).**** C. To vote on major mergers and acquisitions. D. To vote on changes in the corporate charter and proposals.


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