BSG FINAL EXAM LATEST 2024 QUESTIONS AND

BSG FINAL EXAM LATEST 2024 QUESTIONS AND

DETAILED CORRECT ANSWERS AGRADE

In the US, monitoring by shareholders is usually accomplished through

• management consultants.
• government auditors.
• the firm's top managers.
• the board of directors. - ANSWER✔✔d. the board of directors.

Generally, a board member who is a source of information about a firm's day-to-day activities is classified as a(an) ____ director.

• lead independent
• inside
• related
• encumbered - ANSWER✔✔b. inside

A primary objective of corporate governance is to

• determine and control the strategic direction of an organization, so that the top

executives are focused on minimizing corporate profits. 1 / 4

• ensure that the interests of top-level managers are aligned with the interests of

shareholders.

• lobby legislators to pass laws that are aligned with the organization's interests.
• resolve conflicts among corporate employees. - ANSWER✔✔b. ensure that the

interests of top-level managers are aligned with the interests of shareholders.Executive compensation is a governance mechanism that seeks to align managers' and owners' interests through all of the following EXCEPT

• bonuses.
• long-term incentives such as stock options.
• salary.
• penalties for inadequate firm performance - ANSWER✔✔d. penalties for inadequate

firm performance Which of the following is NOT an internal governance mechanism?

• the board of directors
• ownership concentration
• executive compensation
• the market for corporate control - ANSWER✔✔d. the market for corporate control

The separation between firm ownership and management creates a(n) ____ relationship. 2 / 4

• governance
• control
• agency
• dependent - ANSWER✔✔c. agency

Usually, large block shareholders are considered to be those shareholders with at least ____ percent of the firm's stock.

• 5
• 25
• 50
• 75 - ANSWER✔✔a. 5

A major conflict of interest between top executives and owners, is that top executives wish to diversify the firm in order to ____, while owners wish to diversify the firm to ____.

• generate free cash flows, reduce the risk of total firm failure
• increase the price of the firm's stock, increase the dividends paid out from free cash

flows

• reduce the risk of total firm failure, reduce their total portfolio risk 3 / 4

• reduce their employment risk, increase the company's value - ANSWER✔✔d.

reduce their employment risk, increase the company's value Managerial employment risk is the

• risk that managers will behave opportunistically.
• risk undertaken by managers to earn stock options.
• managers' risk of job loss, loss of compensation, and/or loss of reputation.
• risk managers will not find a new top management position if they should be

dismissed. - ANSWER✔✔c. managers' risk of job loss, loss of compensation, and/or loss of reputation The top management team at Sierra Infusion is concerned about the declining performance of firms in their industry. The team members are becoming concerned about the security of their jobs at Sierra Infusion. At a meeting over dinner, the top management team agrees to go to the board of directors with a proposal for

• increased diversification of Sierra Infusion.
• the addition of outside directors to the board.
• increased shareholder participation in decision making.
• greater concentration on Sierra's core industry. - ANSWER✔✔a. increased

diversification of Sierra Infusion.The market for corporate control serves as a means of governance when

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