LYCEUM-NORTHWESTERN UNIVERSITY
Tapuac District, Dagupan City
COLLEGE OF BUSINESS EDUCATION
QUIZ – BA5 ECONOMICS FOR GOOD GOVERNANCE & CSR
1st Semester, AY 2020 – 2021
Prepared by: Mariel Karen Francesca O. Aquino, MBA
I. Multiple Choice.
1. Which form of invested capital is subject to most of the firm's business and financial
risk?
a. debt capital
b. equity capital
c. borrowed capital
d. intellectual capital
2. The ultimate owner(s) of a corporation are
a. the national government.
b. the debt holders.
c. the equity holders.
d. the executive staff of the corporation.
3. Managers of firms should only take actions that:
a. increases the value of the firm's future cash flows.
b. they expect will increase the firm's share price.
c. has benefits which are at least as great as the cost of those actions.
d. all of the above.
4. Shareholders can attempt to overcome agency problems by all but the following:
a. incurring costs to monitor managers
b. paying managers a good salary
c. relying on market forces to exert managerial discipline
d. paying the manager a proportion of the profits that the firm generates
5. Which of the following is the best bonding expenditure to help limit agency costs?
a. auditing the managers work on a monthly basis
b. a contract whereby the manager will forfeit a portion of his deferred compensation in
the event of poor performance
c. granting the manager a large number of options that will become valuable if the firm
performs well
d. paying the manager a bonus if the firm performs well
6. Which of the following is a strength of the corporate form of business?
a. Limited life of the business
b. Unlimited access to capital
c. Unlimited liability
d. Double taxation of income
7. Shareholders are said to have a residual claim on the firm's assets. What does this
mean?
a. Shareholders have limited liability in their investment.
b. Shareholders do not receive any payoff from the firm until all creditors are paid.
c. Shareholders are allowed to recover their investment first if the firm experiences
financial distress.
d. Shareholders have priority in electing the board of directors for the firm.
8. What is the proper goal for management of a firm?
a Maximize shareholder wealth
b. Maximize net income or earnings
c. Maximize sales revenue
d. Minimize expenses
9. Which of the following describes the "collective action problem"?
a. When a CEO fails to represent the interest of shareholders in daily decisions of the
firm.
b. When the shareholders of a firm fail to act in their own best interests.
c. When the managers of a firm lack incentive to maximize shareholder wealth.
d. When an individual stockholder spends time and resources monitoring managers,
bearing the cost, while the benefits go to all the shareholders in the firm.
10. What should be the objective of a focus on stakeholders?
a. Maximize the stakeholders' interests.
b. In situations of conflict pick stakeholders' interests over shareholders' interests.
c. Preserve stakeholders' interests.
d. Disregard shareholders' interests all together.
