Question 1

A company is concerned that investor dissatisfaction could lead to a rapid change in its board membership. To prevent this, which of the following strategies should the company employ?

Options :

A : Grant shareowners preemptive rights for new shares.

B : Give shareowners cumulative voting rights.

C : Stagger the election of its directors.

D : Allow shareowners to vote by proxy.

Answer: C

Question 2

When a company must determine the optimal mix of long-term borrowings versus common equity, it is making which of the following types of corporate financial decisions?

Options :

A : Capital structure

B : Dividend

C : Financing

D : Investment

Answer: A

Question 3

DGB Inc.’s CEO and founder retired shortly after the company went public two years ago. DGB Inc. has recently struggled, and the founder has agreed to return as an independent director. What violation, if any, has occurred?

Options :

A : The cooling-off period has not been met.

B : Section 404 of the Sarbanes-Oxley Act has been violated.

C : ERISA disclosure requirements have not been met.

D : No violation has occurred.

Answer: A

Question 4

The issue of corporate governance in publicly traded companies arises from:

Options :

A : the separation of shareholder ownership and management control.

B : the conflict between the interests of bond holders and equity holders.

C : the secrecy surrounding the proceedings of board of directors meetings.

D : the inherent conflict of interest that exists when accounting firms are paid to provide audit services.

Answer: A

Question 5

If the spot foreign exchange rate and the forward foreign exchange rate are the same between two countries, which of the following is implied?

Options :

A : The currency is at a discount to par

B : The currency is at a premium to par.

C : There is an interest rate differential between the two countries equalizing the rates.

D : The interest rate structure between the two countries is the same.

Answer: D