QUESTION 82Joe owns shares in a company called Viacom Communications Inc. The company’s financial pe

QUESTION 82Joe owns shares in a company called Viacom Communications Inc. The company’s financial performance has been declining over the past few months, and the value of its stock has been decreasing. Warren wants to proactively cut his losses and therefore sells his shares. Bill, a trading enthusiast, buys shares in Viacom Communications because he believes that the share prices cannot go anywhere but up. Which of the following characteristics of a public stock company does this scenario best exemplify?A.Insider tradingB.separation of legal ownership and management controlC.transferability of investor personality1 points QUESTION 83Bill founded Super hitech Inc. in 1993. Ten years later, the company went public. Despite Bill’s death in 2005, the company reported a 75 percent increase in revenue in 2006. Which of the following characteristics of a publicly traded company does this scenario best exemplify? personalityB.separation of legal ownership and management liability for investorsD.transferability of investor ownership1 points QUESTION 84Janet is a firm believer in Milton Friedman’s view of a firm’s social obligations. With which of the following statements is Janet most likely to agree?A.Businesses can use their resources to create profit as long as they do so within the rules of the game.B.Businesses should engage in open and free competition without deception or fraud, only as long as their competitors do so.C.Firms should not go beyond their economic responsibility to increase profits.D.Firms should define value creation more narrowly in terms of financial performance.1 points QUESTION 85Jane is a graduate student pursuing a course in business. Presented with the case of Uber’s unethical behavior, Jane wonders if Uber’s board of directors should ask the CEO of Uber, Travis Kalanick, to step down. Having a strong belief in Michael Porter’s idea of value creation, Leila is most likely to conclude thatA.Uber’s board of directors should ask Kalanick to step down because it has a greater obligation toward society.B.Uber’s board of directors should not ask Kalanick to step down because he was responsible for an almost 90 percent appreciation of the company’s stock.C.Uber’s board of directors should ask Kalanick to step down because agents, unlike principals, are disposable.D.Uber’s board of directors should not ask Kalanick to step down because doing so would cause a profit dip that would affect its shareholders.1 points QUESTION 86Which of the following perspectives best supports the shared value creation framework?A.A firm’s competitive advantage depends on pitting economic and societal needs in a trade-off.B.Markets are more often than not defined by societal needs rather than economic needs.C.Failing to create value for society almost always reflects on the bottom line.D.Externalities such as pollution, wasted energy, and costly accidents actually create internal costs.1 points QUESTION 87If the board of directors at GE decides to pursue a stakeholder strategy, should they change the ecomagination strategy?A.No, they should not change the strategy because the strategy already helps them save costs while generating huge revenues.B.Yes, they should change the strategy because creating value for society is against the principles of stakeholder strategy.C.Yes, they should change the strategy because it provides benefits to the society.D.No, they should not change the strategy because the change would necessitate making tough ethical decisions. >1 points QUESTION 88Grameen Bank in Bangladesh was founded to provide microcredit to impoverished farmers who wanted to start their own entrepreneurial ventures that would help themselves climb out of poverty. This best exemplifies Michael Porter’s suggestion thatA.the largest but poorest socioeconomic group can yield significant business opportunities.B.businesses should focus on creating regional clusters such as Silicon Valley in the U.S.C.a firm should expand its internal value chain to include nontraditional partners.D.managers need to keep economic needs and societal needs disconnected from each other.1 points QUESTION 89David is a manager at StyleOne Apparels Inc. and is friends with the company’s CEO. This privilege gives David the information that StyleOne Apparels is in the midst of talks to take over a leading rival. David buys stocks of StyleOne with the expectation that its stocks will appreciate. But the deal falls through and the stocks of StyleOne depreciate in the following months. Are David’s actions unethical? Why?A.Yes, because it is illegal and unethical for Sam to possess any kind of insider information.B.Yes, because it is unethical to trade stocks based on insider information irrespective of the final outcome.C.No, because Sam did not make any profits from trading stocks using this information.D.No, because Sam did not ask the CEO to disclose such information to him.1 points QUESTION 90In a public stock company, senior executives, such as the CEO, face agency problems whenA.the firm designs work tasks, incentives, and employments that minimize opportunism.B.the board of directors possesses more information about the company than they do.C.they use output controls to reduce moral hazard.D.they delegate authority of strategic business units to general managers.1 points QUESTION 91Sergei is a recent graduate who states that he has interned at a major accounting firm so that his value as a candidate for employment increases. A start-up recruits Sergei based on his stated credentials without verifying them. Two days into the job, Sergei’s team lead realizes that Sergei does not know much of what he claimed to know during the interview. This scenario best exemplifiesA.corporate governance.B.adverse selection.C.moral hazard.D.shared value creation.1 points QUESTION 92Amos serves on the board of Blixt Electronics and is a senior executive at Garfield Motors Inc. The board is chaired by Ernest Jones, the CEO of Blixt Electronics. According to this scenario, AmosA.Is an outside director of Garfield Motors.B.cannot serve on the board of any other an inside director of Blixt more likely than Ernest to take care of stockholder interests.


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