Which of the Following Statements Is False

question 40

Multiple Choice

Which of the following statements is false?

• A) The shareholders as a group elect a board of directors to monitor managers. The directors themselves, however, have the same conflict of interest-monitoring is costly and in many cases directors do not get significantly greater benefits than other shareholders from monitoring the managers closely.
• B) In principle, the board of directors hires the executive team, sets its compensation, approves major investments and acquisitions, and dismisses executives if necessary.
• C) In the United States, the board of directors has a clear fiduciary duty to protect the interests of both the owners of the firm (the shareholders) and the interests of other stakeholders in the firm (such as the employees).
• D) When the ownership of a corporation is widely held, no one shareholder has an incentive to bear the cost of monitoring, because she bears the full cost of monitoring but the benefit is divided among all shareholders.

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Definitions:

Accounts Payable

Obligations of a business to pay for goods or services that have been delivered but not yet paid for.

Inventory

The total amount of goods and materials a company holds for the purpose of resale or production, including raw materials, work-in-progress, and finished goods.

Profit Margin

A financial ratio that calculates the amount of net income earned with each dollar of sales by dividing net profit by total revenue.

ROE

Return on Equity, which measures a corporation's financial productivity, is computed by dividing the net income by the total equity of shareholders.