conflicts of interest
that can arise
between managers
and owners.
Difficulty: 2
Intermediate
Section: 1.3 Forms of
Business
Organization
45.
Award: 10.00 points
A firm that opts to "go dark" in response to the Sarbanes-Oxley Act:
must continue to provide audited financial statements to the public.
must continue to provide a detailed list of internal control deficiencies on an annual basis.
can provide less information to its shareholders than it did prior to "going dark".
can continue publicly trading its stock but only on the exchange on which it was previously
listed.
ceases to exist.
References
Multiple Choice Learning Objective:
01-04 Explain the
conflicts of interest
that can arise
between managers
and owners.
Difficulty: 1 Basic Section: 1.3 Forms of
Business
Organization
46.
Award: 10.00 points
The Sarbanes-Oxley Act of 2002 holds a public company's ______ responsible for the accuracy of
the company's financial statements.
managers
internal auditors
external legal counsel
internal legal counsel
Securities and Exchange Commission agent
References
Multiple Choice Learning Objective:
01-04 Explain the
conflicts of interest
that can arise
between managers
and owners.
Difficulty: 1 Basic Section: 1.3 Forms of
Business
Organization
47.
Award: 10.00 points
Which one of the following actions by a financial manager is most apt to create an agency problem?
Refusing to borrow money when doing so will create losses for the firm
Refusing to lower selling prices if doing so will reduce the net profits
Refusing to expand the company if doing so will lower the value of the equity
Agreeing to pay bonuses based on the market value of the company's stock rather than on
its level of sales
Increasing current profits when doing so lowers the value of the company's equity
References
Multiple Choice Learning Objective:
01-04 Explain the
conflicts of interest
that can arise
between managers
and owners.
Difficulty: 2
Intermediate
Section: 1.4 The Goal
of Financial
Management
48.
Award: 10.00 points
Which one of the following is least apt to help convince managers to work in the best interest of the
stockholders? Assume there are no golden parachutes.
Compensation based on the value of the stock
Stock option plans
Threat of a company takeover
Threat of a proxy fight
Increasing managers' base salaries
References
Multiple Choice Learning Objective:
01-04 Explain the
conflicts of interest
that can arise
between managers
and owners.
Difficulty: 2
Intermediate
Section: 1.4 The Goal
of Financial
Management
49.
Award: 10.00 points
Agency problems are most likely to be associated with:
sole proprietorships.
general partnerships.
limited partnerships.
corporations.
limited liability companies.
References
Multiple Choice Learning Objective:
01-04 Explain the
conflicts of interest
that can arise
between managers
and owners.
Difficulty: 1 Basic Section: 1.4 The Goal
of Financial
Management
50.
Award: 10.00 points
Which one of the following is an agency cost?
Accepting an investment opportunity that will add value to the firm
Increasing the quarterly dividend
Investing in a new project that creates firm value
Hiring outside accountants to audit the company's financial statements
Closing a division of the firm that is operating at a loss
References
Multiple Choice Learning Objective:
01-04 Explain the
conflicts of interest
that can arise
between managers
and owners.
Difficulty: 2
Intermediate
Section: 1.4 The Goal
of Financial
Management
51.
Award: 10.00 points
Shareholders can replace company management by implementing:
stock options.
promotions.
the Sarbanes-Oxley Act.
an agency play.
a proxy fight.
References
Multiple Choice Learning Objective:
01-04 Explain the
conflicts of interest
that can arise
between managers
and owners.
Difficulty: 1 Basic Section: 1.4 The Goal
of Financial
Management