A) Large European firms generally have many more individual owners than large U.S.firms.
B) One reason domestic firms "go global" is to sell products in new markets.
C) Often firms can avoid regulatory hurdles that apply to foreign manufacturers by establishing operations in the country where the hurdles apply.
D) A difficulty associated with doing business in international markets is that not all countries have the same currency.
E) Cultural differences among countries make it difficult for a multinational firm to use the same marketing strategy that is, packaging, advertising, and so forth in every country in which it operates.
G) A) and C)
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A) Threat of firing
B) Managerial compensation.
C) Golden parachute.
D) Threat of takeover.
E) Answers b and c above.
G) C) and E)
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A) A hostile takeover is a primary method of transferring ownership interest in a corporation.
B) The corporation is a legal entity created by the state and is a direct extension of the legal status of its owners and managers, that is, the owners and managers are the corporation.
C) Unlimited liability and limited life are two key advantages of the corporate form over other forms of business organization.
D) In part due to limited liability and ease of ownership transfer, corporations have less trouble raising money in financial markets than other organizational forms.
E) Although stockholders of the corporation are insulated by limited legal liability, the legal status of the corporation does not protect the firm's managers in the same way.
G) A) and B)
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A) legal constraints
B) capital structure
C) tax laws
D) general level of economic activity
E) conditions in the stock market
G) A) and C)
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B) False
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B) False
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A) In extremely competitive industries, we would expect firms would voluntarily engage in many socially beneficial projects to try to maximize their stocks' values.
B) Actions that maximize a firm's stock price are inconsistent with maximizing social welfare.
C) The concepts of social responsibility and ethical responsibility on the part of corporations are completely different and neither is relevant in maximizing stock price.
D) In a competitive market, if a group of firms does not spend resources making social welfare improvements, but another group does, in general, this will not affect the second group's ability to attract funds.
E) If government did not mandate socially responsible corporate actions, such as those relating to product safety and fair hiring practices, most firms in competitive markets probably would not pursue such policies voluntarily.
G) C) and D)
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A) An U.S.corporation that is publicly traded.
B) A proprietorship.
C) A partnership in which all the partners share management and decision-making responsibilities equally.
D) A foreign corporation with concentrated ownership that is, relatively few owners.
F) B) and D)
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B) False
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B) False
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B) False
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A) The optimal dividend policy is the one that satisfies the shareholders because they supply the firm's capital.
B) The use of debt financing has no effect on earnings per share (EPS) or stock price.
C) The riskiness of projected EPS depends upon how the firm is financed.
D) Stock price is dependent on the projected EPS and the use of debt but not on the timing of the earnings stream.
E) Dividend policy is one aspect of the firm's financial policy that is determined directly by the shareholders.
G) A) and B)
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B) False
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B) False
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A) Regardless of economic conditions, if a firm's stock price falls during the year, this indicates that the firm's managers must not be acting in the best interests of the shareholders.
B) One method of controlling agency problems is to engage in the taking of "poison pills."
C) One of the best means to control agency problems is to require the managers and other important decision makers of the firm to also be owners of the firm.
D) Agency problems probably would not exist if the important decisions of a firm were made by persons who have no vested interests, such as ownership, in the firm.
E) None of the above is a correct statement.
G) A) and E)
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A) Maximize net income (profits) .
B) Maximize the firm's net worth, or book value.
C) Maximize dividends paid to common stockholders.
D) Minimize variable operating expenses.
E) Maximize the market value of the firm's stock.
G) C) and D)
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A) The corporation must have a committee that consists of outside directors to oversee the firm's audits.
B) The corporation must hire an external auditor that will render an unbiased (independent) opinion concerning the firm's financial statement.
C) The corporation must maximize social welfare through funding of environmentally friendly activities.
D) The corporation must provide additional information about the procedures used to construct and report financial statements.
E) The firm's CEO and CFO must certify financial reports submitted to the Securities Exchange Commission.
G) B) and D)
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B) False
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A) an agency problem.
B) an accounting glitch.
C) an appropriate use of the tax laws.
D) an appropriate action, because executive compensation should always be increased substantially each year.
E) acceptable, because it is obvious that the executives were trying to maximize the value of the firm, which is what the shareholders want them to do.
G) B) and D)
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A) take on new ventures with much greater risk than was anticipated by creditors.
B) take on more debt to increase the returns to shareholders.
C) issue more stock than was anticipated by creditors.
D) answers a and b are correct.
E) answers b and c are correct.
G) C) and D)
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