Gargantua Inc Is a Very Large Company with a Very

question 54

Multiple Choice

Gargantua Inc is a very large company with a very large board of directors. Lada is one of those directors. The corporation recently became involved in a number of scandals. As a result, the various members of the board of directors have been named as defendants in several lawsuits. Lada is, of course, hoping to avoid liability. Which of the following statements is TRUE?

• A) If another director was granted sole responsibility for the corporation's financial dealings, Lada cannot possibly be held liable for misconduct that arose in connection with those financial dealings.
• B) The business judgment rule states that business decisions of the directors will not be found to be a breach of duty so long as they were within the range of of reasonable alternatives available and the process by which the decision was taken was reasonable.
• C) As a director, Lada is personally responsible for the accuracy of any documents that accountants prepared on behalf of the company.
• D) In order to protect shareholders, judges require proof that every decision made by a board of directors was the best decision possible.
• E) none of the above

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Definitions:

Declared

Often refers to the official announcement by a company's board of directors of a dividend or other corporate action.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded against a fixed asset since it was put into use.

Original Cost

The initial monetary value of an asset, including the purchase price and any related acquisition costs, but before depreciation or amortization.

Decrease

A reduction or decline in quantity, size, or overall value of an item or entity.