Question 1

To the extent that a board of directors begins to operate a business on a day-to-day basis, it goes beyond its capabilities.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following statements regarding CEO compensation is accurate?

Accepted Answer

A)  Differences in CEO cash compensation are very responsive to differences in firm performance. 
B)  If a substantial percentage of a CEO's compensation comes in the form of stock and stock options in the firm, changes in compensation are closely linked with changes in firm performance. 
C)  If a substantial percentage of a CEO's compensation comes in the form of stock and stock options in the firm, changes in compensation are not closely linked with changes in firm performance. 
D)  If a substantial percentage of a CEO's compensation comes in the form of salary, changes in compensation can be expected to be closely linked with changes in firm performance. 
A)  Differences in CEO cash compensation are very responsive to differences in firm performance. 
B)  If a substantial percentage of a CEO's compensation comes in the form of stock and stock options in the firm, changes in compensation are closely linked with changes in firm performance. 
C)  If a substantial percentage of a CEO's compensation comes in the form of stock and stock options in the firm, changes in compensation are not closely linked with changes in firm performance. 
D)  If a substantial percentage of a CEO's compensation comes in the form of salary, changes in compensation can be expected to be closely linked with changes in firm performance.

Question 3

In examining the question of whether the roles of CEO and chairman should be combined, empirical research on this question suggests

Accepted Answer

A)  that combining these roles is always positively related with firm performance. 
B)  that separating these roles is always positively related with firm performance. 
C)  that combining these roles is positively correlated with firm performance when the firm operates in slow-growth and simple competitive environments. 
D)  that separating these roles is positively correlated with firm performance when the firm operates in slow-growth and simple competitive environments. 
A)  that combining these roles is always positively related with firm performance. 
B)  that separating these roles is always positively related with firm performance. 
C)  that combining these roles is positively correlated with firm performance when the firm operates in slow-growth and simple competitive environments. 
D)  that separating these roles is positively correlated with firm performance when the firm operates in slow-growth and simple competitive environments.

Question 4

Discuss the role of division general managers in an M-form organization and compare and contrast this role with that of senior executives in U-form organizations.

Accepted Answer

Division general managers in an M-form o

Question 5

SpandoCorp is a diversified firm that makes industrial, military and consumer products from Spandex. SpandoCorp manages each of the businesses that it operates in as a separate division and treats each as a True profit-and-loss center. In this organization, Grace McKenna is responsible for deciding which set of businesses SpandoCorp will operate in and for encouraging behavior that is consistent with this strategy, Wells Tucker provides information to McKenna about the internal and external environments that she uses in her decision making, and Kelly Rae is one of the individuals who is responsible for evaluating the firm's decision making to ensure that it is consistent with the interests of equity holders.
-If Todd Hienz were the chief operating officer for SpandoCorp, his responsibilities would include

Accepted Answer

A)  supervision of the board of directors in its monitoring role. 
B)  strategy implementation. 
C)  strategy formulation. 
D)  strategy control. 
A)  supervision of the board of directors in its monitoring role. 
B)  strategy implementation. 
C)  strategy formulation. 
D)  strategy control.

Question 6

Managerial risk aversion is not as important in diversified firms where risk is distributed.

Accepted Answer

A) True 
 B)False

Question 7

________ have full profit-and-loss responsibility and typically have multiple functional managers reporting to them.

Accepted Answer

A)  Division general managers 
B)  Corporate staff managers 
C)  Senior executives 
D)  Shared activity managers 
A)  Division general managers 
B)  Corporate staff managers 
C)  Senior executives 
D)  Shared activity managers

Question 8

In choosing which transfer pricing system to use, a firm should be less concerned about finding the "right" transfer-pricing mechanism and be more concerned about choosing a transfer-pricing policy that creates the fewest management problems.

Accepted Answer

A) True 
 B)False

Question 9

Identify the responsibilities of the senior executive in an M-form organization and discuss the three different roles in the office of the president and the responsibilities of each role.

Accepted Answer

The senior executive (the president or C

Question 10

In an agency relationship, the party that delegates decision-making authority to another individual is known as the

Accepted Answer

A)  stakeholder. 
B)  principal. 
C)  agent. 
D)  stockholder. 
A)  stakeholder. 
B)  principal. 
C)  agent. 
D)  stockholder.

Question 11

________ is an economic measure of divisional performance.

Accepted Answer

A)  Return on assets 
B)  Return on a division's sales 
C)  Economic value added 
D)  A division's growth rate 
A)  Return on assets 
B)  Return on a division's sales 
C)  Economic value added 
D)  A division's growth rate

Question 12

Discuss the role of transfer pricing systems in an M-form organization, identify difficulties with setting optimal prices, and identify four alternative transfer pricing schemes.

Accepted Answer

The transfer of intermediate products or

Question 13

One of the strengths of using a hurdle rate to measure the performance of divisions in a diversified firm is that if the corporation has a single hurdle rate, there is little ambiguity about the performance objectives of divisions.

Accepted Answer

A) True 
 B)False

Question 14

The divisions in an M-form organization are True profit-and-loss centers.

Accepted Answer

A) True 
 B)False

Question 15

If a division of a multidivisional firm has adjusted accounting earnings of $10 million, a weighted average cost of capital of 10% and a total capital employed by the division of $50 million, the division has an EVA of

Accepted Answer

A)  $25 million. 
B)  $5 million. 
C)  $15 million. 
D)  $20 million. 
A)  $25 million. 
B)  $5 million. 
C)  $15 million. 
D)  $20 million.

Question 16

If a well-managed diversified firm uses both accounting and economic measures, it will be able to unambiguously evaluate divisional performance.

Accepted Answer

A) True 
 B)False

Question 17

SpandoCorp is a diversified firm that makes industrial, military and consumer products from Spandex. SpandoCorp manages each of the businesses that it operates in as a separate division and treats each as a True profit-and-loss center. In this organization, Grace McKenna is responsible for deciding which set of businesses SpandoCorp will operate in and for encouraging behavior that is consistent with this strategy, Wells Tucker provides information to McKenna about the internal and external environments that she uses in her decision making, and Kelly Rae is one of the individuals who is responsible for evaluating the firm's decision making to ensure that it is consistent with the interests of equity holders.
-If SpandoCorp wanted to measure the performance of its divisions with a method that would minimize any potential short-term bias, it should use a(n)

Accepted Answer

A)  hurdle rate based measure of divisional performance. 
B)  divisional budget based measure of performance. 
C)  economic value added measure of divisional performance. 
D)  measure of performance based on the average level of profitability of firms in a division's industry. 
A)  hurdle rate based measure of divisional performance. 
B)  divisional budget based measure of performance. 
C)  economic value added measure of divisional performance. 
D)  measure of performance based on the average level of profitability of firms in a division's industry.

Question 18

Which of the following statements regarding outside members of boards of directors is accurate?

Accepted Answer

A)  Outside directors, as compared to insiders, tend to focus less on monitoring a firm's economic performance than on other measures of firm performance and are more likely than insider members to dismiss CEOs following poor performance. 
B)  Outside directors, as compared to insiders, tend to focus less on monitoring a firm's economic performance than on other measures of firm performance and are less likely than insider members to dismiss CEOs following poor performance. 
C)  Outside directors, as compared to insiders, tend to focus more on monitoring a firm's economic performance than on other measures of firm performance and are less likely than insider members to dismiss CEOs following poor performance. 
D)  Outside directors, as compared to insiders, tend to focus more on monitoring a firm's economic performance than on other measures of firm performance and are more likely than insider members to dismiss CEOs following poor performance. 
A)  Outside directors, as compared to insiders, tend to focus less on monitoring a firm's economic performance than on other measures of firm performance and are more likely than insider members to dismiss CEOs following poor performance. 
B)  Outside directors, as compared to insiders, tend to focus less on monitoring a firm's economic performance than on other measures of firm performance and are less likely than insider members to dismiss CEOs following poor performance. 
C)  Outside directors, as compared to insiders, tend to focus more on monitoring a firm's economic performance than on other measures of firm performance and are less likely than insider members to dismiss CEOs following poor performance. 
D)  Outside directors, as compared to insiders, tend to focus more on monitoring a firm's economic performance than on other measures of firm performance and are more likely than insider members to dismiss CEOs following poor performance.

Question 19

SpandoCorp is a diversified firm that makes industrial, military and consumer products from Spandex. SpandoCorp manages each of the businesses that it operates in as a separate division and treats each as a True profit-and-loss center. In this organization, Grace McKenna is responsible for deciding which set of businesses SpandoCorp will operate in and for encouraging behavior that is consistent with this strategy, Wells Tucker provides information to McKenna about the internal and external environments that she uses in her decision making, and Kelly Rae is one of the individuals who is responsible for evaluating the firm's decision making to ensure that it is consistent with the interests of equity holders.
-Which organizational structure is SpandoCorp using?

Accepted Answer

A)  U-form 
B)  matrix 
C)  M-form 
D)  functional 
A)  U-form 
B)  matrix 
C)  M-form 
D)  functional

Question 20

Which component of the M-form structure evaluates the firm's decision making to ensure that it is consistent with the interests of equity holders?

Accepted Answer

A)  senior executives 
B)  corporate staff 
C)  board of directors 
D)  division general managers 
A)  senior executives 
B)  corporate staff 
C)  board of directors 
D)  division general managers

To the extent that a board of directors begins to operate a business on a day-to-day basis, it goes beyond its capabilities.

Which of the following statements regarding CEO compensation is accurate?

In examining the question of whether the roles of CEO and chairman should be combined, empirical research on this question suggests

Discuss the role of division general managers in an M-form organization and compare and contrast this role with that of senior executives in U-form organizations.

Managerial risk aversion is not as important in diversified firms where risk is distributed.

________ have full profit-and-loss responsibility and typically have multiple functional managers reporting to them.

In choosing which transfer pricing system to use, a firm should be less concerned about finding the "right" transfer-pricing mechanism and be more concerned about choosing a transfer-pricing policy that creates the fewest management problems.

Identify the responsibilities of the senior executive in an M-form organization and discuss the three different roles in the office of the president and the responsibilities of each role.

In an agency relationship, the party that delegates decision-making authority to another individual is known as the

________ is an economic measure of divisional performance.

Discuss the role of transfer pricing systems in an M-form organization, identify difficulties with setting optimal prices, and identify four alternative transfer pricing schemes.

One of the strengths of using a hurdle rate to measure the performance of divisions in a diversified firm is that if the corporation has a single hurdle rate, there is little ambiguity about the performance objectives of divisions.

The divisions in an M-form organization are True profit-and-loss centers.

If a division of a multidivisional firm has adjusted accounting earnings of $10 million, a weighted average cost of capital of 10% and a total capital employed by the division of $50 million, the division has an EVA of

If a well-managed diversified firm uses both accounting and economic measures, it will be able to unambiguously evaluate divisional performance.

Which of the following statements regarding outside members of boards of directors is accurate?

Which component of the M-form structure evaluates the firm's decision making to ensure that it is consistent with the interests of equity holders?

What Is Strategy and the Strategic Management Process

Evaluating a Firms External Environment

Evaluating a Firms Internal Capabilities

Cost Leadership

Product Differentiation

Vertical Integration

Corporate Diversification

Strategic Alliances

Mergers and Acquisitions

International Strategies

Filters

Exam 8: Organizing to Implement Corporate Diversification

To the extent that a board of directors begins to operate a business on a day-to-day basis, it goes beyond its capabilities.

Which of the following statements regarding CEO compensation is accurate?

In examining the question of whether the roles of CEO and chairman should be combined, empirical research on this question suggests

Discuss the role of division general managers in an M-form organization and compare and contrast this role with that of senior executives in U-form organizations.

Managerial risk aversion is not as important in diversified firms where risk is distributed.

________ have full profit-and-loss responsibility and typically have multiple functional managers reporting to them.

In choosing which transfer pricing system to use, a firm should be less concerned about finding the "right" transfer-pricing mechanism and be more concerned about choosing a transfer-pricing policy that creates the fewest management problems.

Identify the responsibilities of the senior executive in an M-form organization and discuss the three different roles in the office of the president and the responsibilities of each role.

In an agency relationship, the party that delegates decision-making authority to another individual is known as the

________ is an economic measure of divisional performance.

Discuss the role of transfer pricing systems in an M-form organization, identify difficulties with setting optimal prices, and identify four alternative transfer pricing schemes.

One of the strengths of using a hurdle rate to measure the performance of divisions in a diversified firm is that if the corporation has a single hurdle rate, there is little ambiguity about the performance objectives of divisions.

The divisions in an M-form organization are True profit-and-loss centers.

If a division of a multidivisional firm has adjusted accounting earnings of $10 million, a weighted average cost of capital of 10% and a total capital employed by the division of $50 million, the division has an EVA of

If a well-managed diversified firm uses both accounting and economic measures, it will be able to unambiguously evaluate divisional performance.

Which of the following statements regarding outside members of boards of directors is accurate?

Which component of the M-form structure evaluates the firm's decision making to ensure that it is consistent with the interests of equity holders?

What Is Strategy and the Strategic Management Process

Evaluating a Firms External Environment

Evaluating a Firms Internal Capabilities

Cost Leadership

Product Differentiation

Vertical Integration

Corporate Diversification

Strategic Alliances

Mergers and Acquisitions

International Strategies

Filters