Hrm 531 Week 3 Quiz
Which of the following actions would be likely to reduce conflicts of interest between stockholders and managers?
Student Response 1.
Congress passes a law that severely restricts hostile takeovers.
2. A firm's compensation system is changed so that managers receive larger cash salaries but fewer long-term options to buy stock.
3. The company changes the way executive stock options are handled, with all options vesting after 2 years rather than having 20% of the options awarded vest every 2 years over a 10-year period.
4. The company's outside auditing firm is given a lucrative year-by-year consulting contract with the company.
5. The composition of the board of directors is changed from all inside directors to all outside directors, and the directors are compensated with stock rather …show more content…
It is generally less expensive to form a corporation than a proprietorship because, with a proprietorship, extensive legal documents are required.
4. If a partnership goes bankrupt, each partner is exposed to liabilities only up to the amount of his or her investment in the business.
5. Corporations face fewer regulations than sole proprietorships.
3. Which of the following statements is CORRECT?
Student Response
1. Managers who face the threat of hostile takeovers are less likely to pursue policies that maximize shareholder value compared to managers who do not face the threat of hostile takeovers.
2. Bond covenants are an effective way to resolve conflicts between shareholders and managers. 3.
One advantage to forming a corporation is that the owners of the firm have limited liability.
4. Because of their simplified organization, it is easier for sole proprietors and partnerships to raise large amounts of outside capital than it is for corporations.
5. Corporations face few regulations and more favorable tax treatment than do sole proprietorships and partnerships.
4. Which of the following statements is
Student Response 1.
Congress passes a law that severely restricts hostile takeovers.
2. A firm's compensation system is changed so that managers receive larger cash salaries but fewer long-term options to buy stock.
3. The company changes the way executive stock options are handled, with all options vesting after 2 years rather than having 20% of the options awarded vest every 2 years over a 10-year period.
4. The company's outside auditing firm is given a lucrative year-by-year consulting contract with the company.
5. The composition of the board of directors is changed from all inside directors to all outside directors, and the directors are compensated with stock rather …show more content…
It is generally less expensive to form a corporation than a proprietorship because, with a proprietorship, extensive legal documents are required.
4. If a partnership goes bankrupt, each partner is exposed to liabilities only up to the amount of his or her investment in the business.
5. Corporations face fewer regulations than sole proprietorships.
3. Which of the following statements is CORRECT?
Student Response
1. Managers who face the threat of hostile takeovers are less likely to pursue policies that maximize shareholder value compared to managers who do not face the threat of hostile takeovers.
2. Bond covenants are an effective way to resolve conflicts between shareholders and managers. 3.
One advantage to forming a corporation is that the owners of the firm have limited liability.
4. Because of their simplified organization, it is easier for sole proprietors and partnerships to raise large amounts of outside capital than it is for corporations.
5. Corporations face few regulations and more favorable tax treatment than do sole proprietorships and partnerships.
4. Which of the following statements is