【正文】 e potential conflict between management and shareholders.A.agency problemB.diversification problemC.liquidity problemD.solvency problemE.regulatory problemThe agency problem describes potential conflict between management and shareholders. The other problems are those of firm management only.AACSB: AnalyticBlooms: RememberDifficulty: BasicTopic: Financial Management25.A disadvantage of using stock options to pensate managers is thatA.it encourages managers to undertake projects that will increase stock price.B.it encourages managers to engage in empire building.C.it can create an incentive for managers to manipulate information to prop up a stock price temporarily, giving them a chance to cash out before the price returns to a level reflective of the firm39。s true prospects.D.All of the optionsEncouraging managers to undertake projects that will increase stock price is a desired characteristic. Encouraging managers to engage in empire building is not necessarily a good or bad thing in and of itself. Creating an incentive for managers to manipulate information to prop up a stock price temporarily creates an agency problem.AACSB: AnalyticBlooms: UnderstandDifficulty: BasicTopic: Financial Management26.Which of the following are mechanisms that have evolved to mitigate potential agency problems?I) Using the firm39。s stock options for pensationII) Hiring bickering family members as corporate spiesIII) Boards of directors forcing out underperforming managementIV) Security analysts monitoring the firm closelyV) Takeover threatsA.II and VB.I, III, and IVC.I, III, IV, and VD.III, IV, and VE.I, III, and VAll the options except hiring bickering family members as corporate spies have been used to try to limit agency problems.AACSB: AnalyticBlooms: UnderstandDifficulty: IntermediateTopic: Financial Management27.Corporate shareholders are best protected from inpetent management decisions byA.the ability to engage in proxy fights.B.management39。s control of pecuniary rewards.C.the ability to call shareholder meetings.D.the threat of takeover by other firms.E.oneshare/onevote election rules.Proxy fights are expensive and seldom successful, and management may often control the board or own significant shares. It is the threat of takeover of underperforming firms that has the strongest ability to keep management on their toes.AACSB: AnalyticBlooms: UnderstandDifficulty: IntermediateTopic: Financial Management28.Theoretically, takeovers should result inA.improved management.B.increased stock price.C.increased benefits to existing management of takenover firm.D.improved management and increased stock price.E.All of the optionsTheoretically, when firms are taken over, better managers e in and thus increase the price of the stock。 existing management often must either leave the firm, be demoted, or suffer a loss of existing benefits.AACSB: AnalyticBlooms: RememberDifficulty: BasicTopic: Financial Management29.During the period between 2000 and 2002, a large number of scandals were uncovered. Most of these scandals were related toI) manipulation of financial data to misrepresent the actual condition of the firm.II) misleading and overly optimistic research reports produced by analysts.III) allocating IPOs to executives as a quid pro quo for personal favors. IV) greenmail.A.II, III, and IVB.I, II, and IVC.II and IVD.I, III, and IVE.I, II, and IIII, II, and III are all mentioned as causes of recent scandals.AACSB: AnalyticBlooms: UnderstandDifficulty: IntermediateTopic: Financial Management30.The SarbanesOxley ActA.requires corporations to have more independent directors.B.requires the firm39。s CFO to personally vouch for the firm39。s accounting statements.C.prohibits auditing firms from providing other services to clients.D.requires corporations to have more independent directors and requires the firm39。s CFO to personally vouch for the firm39。s accounting statements.E.All of the optionsThe SarbanesOxley Act does all of the above.AACSB: AnalyticBlooms: RememberDifficulty: IntermediateTopic: Regulation31.Asset allocation refers toA.choosing which securities to hold based on their valuation.B.investing only in safe securities.C.the allocation of assets into broad asset classes.D.bottomup analysis.Asset allocation refers to the allocation of assets into broad asset classes.AACSB: AnalyticBlooms: RememberDifficulty: IntermediateTopic: Financial Management32.Security selection refers toA.choosing which securities to hold based on their valuation.B.investing only in safe securities.C.the allocation of assets into broad asset classes.D.topdown analysis.Security selection refers to choosing which securities to hold based on their valuation.AACSB: AnalyticBlooms: RememberDifficulty: IntermediateTopic: Financial Management33.Which of the following portfolio construction methods starts with security analysis?A.TopdownB.BottomupC.MiddleoutD.Buy and holdE.Asset allocationBottomup refers to using security analysis to find securities that are attractively priced. Topdown refers to using asset allocation as a starting point.AACSB: AnalyticBlooms: RememberDifficulty: IntermediateTopic: Portfolios34.Which of the following portfolio construction methods starts with asset allocation?A.TopdownB.BottomupC.MiddleoutD.Buy and holdE.Asset allocationBottomup refers to using security analysis to find securities that are attractively priced.AACSB: AnalyticBlooms: RememberDifficulty: IntermediateTopic: Portfolios35._______ are exa