Question 1

Which of the following statements regarding institutional investors is accurate?

Accepted Answer

A)  Institutional investors tend to be more interested in maximizing the short-term value of their portfolios than in the long-term performance of firms in those portfolios. 
B)  High levels of institutional ownership are negatively related to the level of R&D in a firm. 
C)  High levels of institutional ownership have a strong, positive relationship with the level of R&D in a firm. 
D)  High levels of institutional ownership lead firms to sell strategically unrelated businesses.

Question 2

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 3

A board of directors typically consists of

Accepted Answer

A)  10 to 15 individuals drawn from a firm's top management group and from individuals outside the firm. 
B)  10 to 15 individuals drawn exclusively from a firm's top management group. 
C)  10 to 15 individuals drawn exclusively from individuals outside the firm. 
D)  10 to 15 individuals drawn from all stakeholder groups associated with the firm.

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

The answer of Discuss the role of division general managers...

Question 5

The divisions of an M-form organization are true

Accepted Answer

A)  profit-and-loss centers. 
B)  functional units. 
C)  matrix teams. 
D)  organic structures.

Question 6

A business unit within a diversified firm may be sold to the public through a(n)

Accepted Answer

A)  corporate spin-off. 
B)  liquidation. 
C)  IPO. 
D)  harvest strategy.

Question 7

If the bulk materials division of SpandoCorp sold its reams of Spandex to the military division and set the transfer price of these reams equal to the bulk materials actual cost of production, SpandoCorp would be using the ________ transfer pricing scheme.

Accepted Answer

A)  exchange autonomy 
B)  mandated full cost 
C)  mandated market based 
D)  dual pricing

Question 8

Describe the nature and role of the board of directors in an M-form organization and discuss who generally serves on the board, the role of outside members on a board of directors and when the roles of CEO and chairman of the board should be combined or separated.

Accepted Answer

The answer of Describe the nature and role of the...

Question 9

The M-form structure is designed to create checks and balances for managers that increase the probability that a diversified firm will be managed in ways consistent with

Accepted Answer

A)  the interests of all of its stakeholders. 
B)  an exclusively short-term perspective. 
C)  an exclusively long-term perspective. 
D)  the interests of its equity holders.

Question 10

An important study on executive compensation found that differences in CEO cash compensation is not very responsive to differences in firm performance even if a substantial percentage of the CEO's compensation came in the form of stock and stock options in the firm.

Accepted Answer

A) True 
 B)False

Question 11

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.

Question 12

Each division in an M-form organization typically adopts a matrix structure and the division general manager takes on the role of senior project executive.

Accepted Answer

A) True 
 B)False

Question 13

Discuss the role of institutional investors in an M-form organization. In addressing this question, be sure to identify who institutional investors are and discuss trends in institutional ownership and whether institutional investors encourage managers to act in ways that are consistent with the interests of equity holders or if institutional investors are overly myopic.

Accepted Answer

The answer of Discuss the role of institutional investors in...

Question 14

________ 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

Question 15

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.

Question 16

Traditionally, the compensation of corporate managers in a diversified firm has been only loosely connected to the firm's economic performance.

Accepted Answer

A) True 
 B)False

Question 17

In principle, only the CEO and the president report to the board of directors while other senior managers report only to the CEO.

Accepted Answer

A) True 
 B)False

Question 18

Divisions in an M-form organization should be large enough to represent identifiable business entities but small enough so that a division general manager can manage each one effectively.

Accepted Answer

A) True 
 B)False

Question 19

Which role in the office of the president is responsible for strategy implementation?

Accepted Answer

A)  Chairman of the board 
B)  Chief executive officer 
C)  Chief operating officer 
D)  Chief strategist

Question 20

The most common organizational structure for implementing a corporate diversification strategy is the ________ structure.

Accepted Answer

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

Exam 8: Organizing to Implement Corporate Diversification

Which of the following statements regarding institutional investors is accurate?

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.

A board of directors typically consists of

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.

The divisions of an M-form organization are true

A business unit within a diversified firm may be sold to the public through a(n)

If the bulk materials division of SpandoCorp sold its reams of Spandex to the military division and set the transfer price of these reams equal to the bulk materials actual cost of production, SpandoCorp would be using the ________ transfer pricing scheme.

Describe the nature and role of the board of directors in an M-form organization and discuss who generally serves on the board, the role of outside members on a board of directors and when the roles of CEO and chairman of the board should be combined or separated.

The M-form structure is designed to create checks and balances for managers that increase the probability that a diversified firm will be managed in ways consistent with

An important study on executive compensation found that differences in CEO cash compensation is not very responsive to differences in firm performance even if a substantial percentage of the CEO's compensation came in the form of stock and stock options in the firm.

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

Each division in an M-form organization typically adopts a matrix structure and the division general manager takes on the role of senior project executive.

________ is an economic measure of divisional performance.

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)

Traditionally, the compensation of corporate managers in a diversified firm has been only loosely connected to the firm's economic performance.

In principle, only the CEO and the president report to the board of directors while other senior managers report only to the CEO.

Divisions in an M-form organization should be large enough to represent identifiable business entities but small enough so that a division general manager can manage each one effectively.

Which role in the office of the president is responsible for strategy implementation?

The most common organizational structure for implementing a corporate diversification strategy is the ________ structure.