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Taking a poison pill refers to a potential takeover firm selling additional stocks to existing shareholders, increasing the shares needed for a viable takeover.

A) True
B) False

Correct Answer

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CEO pay is a function of a day's work for a day's pay.

A) True
B) False

Correct Answer

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Which of the following statements is true regarding the composition of the board of directors?


A) CEOs often favor significant representation by board outsiders.
B) Institutional investors favor people who have intimate knowledge of the firm's business affairs.
C) Making the CEO the chairman of the board of directors helps avoid bitter divide within a corporation.
D) CEOs often favor the use of people who have intimate knowledge of the firm's business affairs.
E) Significant representation by board outsiders increases the potential for CEO duality.

F) A) and E)
G) D) and E)

Correct Answer

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Ruth is the store manager at Pink & Blue, a store that sells children's clothing and baby care products. Whenever the sales are high at the store, Ruth feels that it is because she manages the store efficiently. When the sale drops and there are instances of customer dissatisfaction, she decides that it is caused by the inefficiency of her sales staff. In this example, Ruth exhibits which of the following decision biases?


A) Escalation of commitment
B) Fundamental attribution error
C) Availability bias
D) Judgments about correlation and casualty
E) Anchoring and adjustment bias

F) B) and C)
G) B) and E)

Correct Answer

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According to Kohlberg, _____ level of moral reasoning is very egocentric in nature.


A) post-operational
B) sub-conventional
C) conventional
D) pre-conventional
E) pre-operational

F) B) and C)
G) A) and B)

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Who, among the following, has the power to potentially hire or fire the CEO of a publicly traded firm?


A) The federal government
B) Shareholders of the firm
C) The Secretary of State
D) Stakeholders of the firm
E) The board of directors

F) A) and E)
G) B) and C)

Correct Answer

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Sharon works as a customer service agent at Ace Technologies, a firm that develops inventory management software. Sharon needs to inform her manager about a customer issue that has escalated. Sharon, to avoid presenting negative information to her manager, frames information in a more positive light than reality. In this example, _____ bias occurs.


A) representativeness
B) satisficing
C) overconfidence
D) underconfidence
E) hindsight

F) C) and E)
G) None of the above

Correct Answer

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The fundamental attribution error occurs when more readily available information is incorrectly assessed to also be more likely.

A) True
B) False

Correct Answer

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A(n) _____ refers to a situation where a publicly traded company is purchased and then taken off the stock market.


A) insider takeover
B) market delisting
C) outsider takeover
D) leveraged buyout
E) premium purchase

F) B) and E)
G) None of the above

Correct Answer

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The term perks, derived from perquisite, refers to special privileges or rights as a function of one's position.

A) True
B) False

Correct Answer

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The board of directors has the power to hire or fire a CEO.

A) True
B) False

Correct Answer

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According to Kohlberg, in which of the following stages of moral reasoning is the importance of obeying laws, social conventions, or other forms of authority to aid in the maintenance of a functional society encouraged?


A) Stage one
B) Stage two
C) Stage three
D) Stage four
E) Stage five

F) D) and E)
G) A) and C)

Correct Answer

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Greenmail refers to a corporate raider purchasing large blocks of stock at a premium to execute a takeover.

A) True
B) False

Correct Answer

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An agency problem reflects the separation of interest between the board of directors of a company and its employees.

A) True
B) False

Correct Answer

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Describe the various functions of a board of directors.

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The various functions of a board of dire...

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Shark repellants are potential defenses against CEO duality.

A) True
B) False

Correct Answer

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To avoid delivering an unpleasant message to the CEO, an employee frames the information in a more positive light than reality. This is an example of overconfidence bias.

A) True
B) False

Correct Answer

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Which of the following refers to a lucrative financial settlement given to existing executives of a taken over firm?


A) Greenmail
B) A white knight settlement
C) A poison pill
D) A golden parachute
E) A leveraged defense

F) B) and E)
G) A) and D)

Correct Answer

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Which of the following is true about satisficing?


A) It occurs when individuals settle for the first acceptable alternative instead of seeking the best possible decision.
B) It occurs when information that is readily available is incorrectly assessed to also be more likely.
C) It occurs when good outcomes are attributed to personal characteristics, but undesirable outcomes are attributed to external circumstances.
D) It occurs when the way information is presented alters the decision an individual will make.
E) It occurs when individuals have more faith in their abilities to predict an event than logic suggests is actually possible.

F) B) and C)
G) A) and E)

Correct Answer

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Hindsight bias occurs when mistakes seem obvious after they have already occurred.

A) True
B) False

Correct Answer

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