The Business Judgment Rule Protects the Decisions of the Board

question 19

True/False

The business judgment rule protects the decisions of the board of directors in situations where it acts in good faith that the action taken was in the best interests of the corporation and its shareholders.

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Definitions:

Minimum Acceptable Return

The lowest return on investment that a company or individual is willing to accept when making an investment decision.

Residual Income

The amount of income that an individual or company has after all personal debts and expenses, including the cost of capital, have been paid.

Transfer Price

Transfer price is the price at which goods and services are transferred between departments or subsidiaries of the same company.

Market Price

The current price at which an asset or service can be bought or sold in the marketplace.