In the Text Case Auerbach V

question 76

Multiple Choice

In the text case Auerbach v.Bennett a shareholder brought a derivative action after an internal audit of the GTE Corporation suggested that the corporation's management had paid significant amounts in bribes and kickbacks over a period of several years.Which of the following was the result on appeal?

• A)The court ruled that the business judgment rule shielded the lawsuit insofar as foreign wrongdoing was alleged,but not for wrongdoing committed in the U.S.
• B)The court ruled that the business judgment rule exempted the directors from liability unless the shareholder could establish that the shareholders lost money on account of their actions.
• C)The court ruled that the business judgment rule exempted the directors from liability only so long as the directors could establish that the shareholders did not lose money on account of their actions.
• D)The court ruled that the business judgment rule did not apply because illegality was involved and that the corporation was,therefore,liable.
• E)The court ruled that the business judgment rule exempted the directors from liability.

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Definitions:

Vertical Analysis

The presentation of a company’s financial statements in common-size form.

Total Asset Turnover

Total asset turnover is a financial ratio that measures a company's efficiency in using its assets to generate sales revenue.

Stockholders' Equity

The residual interest in the assets of an entity after deducting liabilities, representing the ownership interest of shareholders.

Inventory Turnover Ratio

A financial metric that shows how many times a company has sold and replaced its inventory over a certain period of time.