Chapter 2 - Decision objectives

Which of following are the principals of the company?
1. The directors
2. The senior management team
3. The shareholders
4. The company's bankers
The agency problem arises because:
1. It is difficult to value property
2. Agents take a cut of any profits made
3. Companies have to produce accounts each year
4. The owners of a company and the people running it might have different objectives
The fiduciary responsibilities of directors involve:
1. Acting in the best interests of shareholders
2. Producing annual financial statements
3. Ensuring that the company does its best to preserve the environment
4. Ensuring that employees are treated properly
Which of the following activities would be allowable for a company director?
1. Buying and selling shares in the company on a regular basis
2. Buying shares in the company if there is about to be a takeover bid
3. Advising their husband to buy shares because of something that is about to happen
4. Selling shares that they acquired as part of a share bonus scheme
Which of the following is NOT dealt with by the 'Combined Code'?
1. Mergers and takeovers
2. Directors' remuneration
3. The role of non-executive directors
4. The roles of CEO and Chairman
Which of the following is NOT a criterion for a successful management incentive scheme?
1. It should form a significant part of the managers' rewards
2. It should penalise poor performance
3. An increase in the share price should automatically result in rewards for managers
4. It should take account of risk
The main criticism of share option schemes is that:
1. They tend to tie managers to the company
2. They can produce big rewards for managers
3. Whilst they reward good performance, they do not generally penalise poor performance
4. They are difficult to administer
Executive share option plans are
1. A perfect way to reward performance
2. Open to abuse through manipulation of financial reports
3. Guaranteed to improve the performance of the company
4. Very unpopular with managers
The purpose of Sarbanes-Oxley is to
1. Make it less likely that managers will manipulate information for their own purposes
2. Control the activities of auditors
3. Increase share prices
4. Ensure that managers are not overpaid
Share option schemes are regarded as being more beneficial than profit related bonuses because
1. They are cheaper to administer
2. They are less likely to be manipulated
3. They are likely to be more closely linked to the assumed objectives of shareholders
4. They are more tax efficient

Chapter 2 - Decision objectives

Quiz