Question 1

Grace McKenna is best described as a(n) ________ in SpandoCorp.

Accepted Answer

A)  senior executive 
B)  corporate staff member 
C)  division general manager 
D)  institutional investor

Question 2

________ 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

Question 3

A ________ exists when a large, typically diversified firm divests itself of a business in which it has historically been operating and the divested business operates as an independent entity.

Accepted Answer

A)  corporate spin-off 
B)  franchise 
C)  division 
D)  subsidiary

Question 4

Supervision of the board of directors in its monitoring role is the responsibility of

Accepted Answer

A)  the CEO. 
B)  the chairman of the board. 
C)  the chief operating officer. 
D)  the president.

Question 5

If SpandoCorp used a ________ budgeting process, it would assume that no project would receive funding for the future simply because it was funded in the past and would require each project to stand on its own merits each year to be included in a list of important projects that the firm can afford to fund.

Accepted Answer

A)  zero-based 
B)  cost plus 
C)  dynamic 
D)  traditional

Question 6

The divided loyalties that divisional staff managers have between corporate staff managers and functional managers is potentially the most problematic in ________ staff functions.

Accepted Answer

A)  marketing 
B)  accounting 
C)  logistics 
D)  production

Question 7

Intermediate products or services are those products or services that are produced in one division of a diversified firm that are used as inputs by another division.

Accepted Answer

A) True 
 B)False

Question 8

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.

Question 9

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.

Question 10

The ________ is a subcommittee of the board of directors that maintains the relationship between the firm and external capital markets.

Accepted Answer

A)  nominating committee 
B)  audit committee 
C)  personnel and compensation committee 
D)  finance committee

Question 11

The senior executive in an M-form organization has two responsibilities: strategy formulation and strategy implementation.

Accepted Answer

A) True 
 B)False

Question 12

If SpandoCorp's board of directors wanted to ensure that changes in the CEO's compensation would be closely linked to changes in the firm's performance, it should

Accepted Answer

A)  use a compensation package that includes only a salary for the CEO. 
B)  use a compensation package that includes a salary and a cash bonus for the CEO. 
C)  use a compensation package the includes a salary, a cash bonus and stock options that represent only a relatively small percentage of the CEO's total compensation package. 
D)  use a compensation package that includes a salary and stock options that represent a relatively substantial percentage of the CEO's total compensation package.

Question 13

Transfer pricing should equal

Accepted Answer

A)  selling price. 
B)  opportunity cost. 
C)  total cost. 
D)  marginal cost.

Question 14

Discuss the importance of compensation policies in diversified firms and identify the CEO compensation package that most closely aligns the interests of the CEO with those of stockholders.

Accepted Answer

The answer of Discuss the importance of compensation policies in...

Question 15

In ________ budgeting, corporate executives create a list of all capital allocation requests from divisions in a firm, rank them from "most important" to "least important" and then fund all the projects a firm can afford, given the amount of capital that is available and no project receives funding simply because it was funded in the past.

Accepted Answer

A)  cost-plus 
B)  activity-based 
C)  zero-based 
D)  revenue-based

Question 16

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 the interests of its equity holders.

Accepted Answer

A) True 
 B)False

Question 17

Wells Tucker's position in SpandoCorp is best described as

Accepted Answer

A)  a division general manager. 
B)  a member of the corporate staff. 
C)  the senior executive. 
D)  a member of the board of directors.

Question 18

The most popular economically oriented measure of division performance in a diversified firm is economic value added.

Accepted Answer

A) True 
 B)False

Question 19

Corporate spin-offs are different from asset divestitures.

Accepted Answer

A) True 
 B)False

Question 20

To the extent that a firm exploits real economies of scope in implementing a diversification strategy, it will be able to unambiguously evaluate the performance of individual division in that firm.

Accepted Answer

A) True 
 B)False

Exam 8: Organizing to Implement Corporate Diversification

Grace McKenna is best described as a(n) ________ in SpandoCorp.

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

A ________ exists when a large, typically diversified firm divests itself of a business in which it has historically been operating and the divested business operates as an independent entity.

Supervision of the board of directors in its monitoring role is the responsibility of

The divided loyalties that divisional staff managers have between corporate staff managers and functional managers is potentially the most problematic in ________ staff functions.

Intermediate products or services are those products or services that are produced in one division of a diversified firm that are used as inputs by another division.

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

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

The ________ is a subcommittee of the board of directors that maintains the relationship between the firm and external capital markets.

The senior executive in an M-form organization has two responsibilities: strategy formulation and strategy implementation.

If SpandoCorp's board of directors wanted to ensure that changes in the CEO's compensation would be closely linked to changes in the firm's performance, it should

Transfer pricing should equal

Discuss the importance of compensation policies in diversified firms and identify the CEO compensation package that most closely aligns the interests of the CEO with those of stockholders.

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 the interests of its equity holders.

Wells Tucker's position in SpandoCorp is best described as

The most popular economically oriented measure of division performance in a diversified firm is economic value added.

Corporate spin-offs are different from asset divestitures.

To the extent that a firm exploits real economies of scope in implementing a diversification strategy, it will be able to unambiguously evaluate the performance of individual division in that firm.