Quiz
Chapter 8 - Organizing to Implement Corporate Diversification
Questions in this quiz (46)
1The most common organizational structure for implementing a corporate diversification strategy is the ________ structure.
- Amatrix
- BU-form
- CM-form
- Dfunctional
2In a multidivisional structure, each business that the firm engages in is managed through a
- Aproduct line.
- Bdivision.
- Cgeographic unit.
- Dfunction.
3The divisions of an M-form organization are true
- Aprofit-and-loss centers.
- Bfunctional units.
- Cmatrix teams.
- Dorganic structures.
4The M-form structure is designed to create checks and balances for managers that increase the probability that a diversified firm will be managed in ways consistent with
- Athe interests of all of its stakeholders.
- Ban exclusively short-term perspective.
- Can exclusively long-term perspective.
- Dthe interests of its equity holders.
5In an agency relationship, the party that delegates decision-making authority to another individual is known as the
- Astakeholder.
- Bprincipal.
- Cagent.
- Dstockholder.
6Two common agency problems include
- Amanagers investing some of a firm's capital in managerial perquisites that do not add economic value to a firm and managerial risk aversion.
- Bmanagers not investing enough of a firm's capital in managerial perquisites and managerial risk aversion.
- Cmanagers investing some of a firm's capital in managerial perquisites that do not add economic value to a firm and managerial risk seeking.
- Dmanagers not investing enough of a firm's capital in managerial perquisites and managerial risk seeking.
7Which component of the M-form structure evaluates the firm's decision making to ensure that it is consistent with the interests of equity holders?
- Asenior executives
- Bcorporate staff
- Cboard of directors
- Ddivision general managers
8A board of directors typically consists of
- A10 to 15 individuals drawn from a firm's top management group and from individuals outside the firm.
- B10 to 15 individuals drawn exclusively from a firm's top management group.
- C10 to 15 individuals drawn exclusively from individuals outside the firm.
- D10 to 15 individuals drawn from all stakeholder groups associated with the firm.
9Which of the following statements regarding outside members of boards of directors is accurate?
- AOutside directors, as compared to insiders, tend to focus less on monitoring a firm's economic performance than on other measures of firm performance and are more likely than insider members to dismiss CEOs following poor performance.
- BOutside directors, as compared to insiders, tend to focus less on monitoring a firm's economic performance than on other measures of firm performance and are less likely than insider members to dismiss CEOs following poor performance.
- COutside directors, as compared to insiders, tend to focus more on monitoring a firm's economic performance than on other measures of firm performance and are less likely than insider members to dismiss CEOs following poor performance.
- DOutside directors, as compared to insiders, tend to focus more on monitoring a firm's economic performance than on other measures of firm performance and are more likely than insider members to dismiss CEOs following poor performance.
10In examining the question of whether the roles of CEO and chairman should be combined, empirical research on this question suggests
- Athat combining these roles is always positively related with firm performance.
- Bthat separating these roles is always positively related with firm performance.
- Cthat combining these roles is positively correlated with firm performance when the firm operates in slow-growth and simple competitive environments.
- Dthat separating these roles is positively correlated with firm performance when the firm operates in slow-growth and simple competitive environments.
11The ________ is the subcommittee of the board of directors that is responsible for ensuring the accuracy of accounting and financial statements.
- Aaudit committee
- Bfinance committee
- Cnominating committee
- Dpersonnel and compensation committee
12The ________ is a subcommittee of the board of directors that maintains the relationship between the firm and external capital markets.
- Anominating committee
- Baudit committee
- Cpersonnel and compensation committee
- Dfinance committee
13Supervision of the board of directors in its monitoring role is the responsibility of
- Athe CEO.
- Bthe chairman of the board.
- Cthe chief operating officer.
- Dthe president.
14The senior executive (the president or CEO) in an M-form organization has two responsibilities:
- Abudgeting and accounting.
- Bbudgeting and mission setting.
- Cstrategy formulation and strategy implementation.
- Dstrategy formulation and budgeting.
15Which of the following statements regarding institutional investors is accurate?
- AInstitutional investors tend to be more interested in maximizing the short-term value of their portfolios than in the long-term performance of firms in those portfolios
- BHigh levels of institutional ownership are negatively related to the level of R&D in a firm.
- CHigh levels of institutional ownership have a strong, positive relationship with the level of R&D in a firm.
- DHigh levels of institutional ownership lead firms to sell strategically unrelated businesses.
16Which role in the office of the president is responsible for strategy implementation?
- Achairman of the board
- Bchief executive officer
- Cchief operating officer
- Dchief strategist
17The primary responsibility of the ________ is to provide information about the firm's external and internal environments to the firm's senior executive.
- Acorporate staff
- Bboard of directors
- Cdivision general managers
- Dshared activity managers
18The divided loyalties that divisional staff managers have between corporate staff managers and functional managers are potentially the most problematic in ________ staff functions.
- Amarketing
- Baccounting
- Clogistics
- Dproduction
19In an M-form organization, the management of day-to-day operations is delegated to
- Adivisional general managers and corporate staff managers.
- Bcorporate staff managers and functional managers who report to corporate staff managers.
- Cdivisional general managers and functional managers who report to division general managers.
- Dthe board of directors and corporate staff managers who report to the board of directors.
20________ have full profit-and-loss responsibility and typically have multiple functional managers reporting to them.
- ADivision general managers
- BCorporate staff managers
- CSenior executives
- DShared activity managers
21When compared to the strategy implementation responsibilities of senior executives in U-form organizations, when implementing strategy, division general managers in M-form organizations
- Atend to have to deal with less conflict.
- Bhave to compete for external capital funding.
- Ctend to have to deal with substantially more conflict.
- Dmust cooperate with other divisions to exploit corporate economies of scope.
22Rather than having profit-and-loss responsibilities, ________ are assigned a budget and manage their operations to that budget.
- Aprofit centers
- Bcost centers
- Coperation centers
- Dfunctional centers
23When the cost of services from a shared activity is ________ the cost of comparable services provided by a division itself or by an outside supplier than the division, general managers have a strong incentive ________.
- Aless than; to use the services of shared activities
- Bgreater than; to use the services of shared activities
- Cless than; to use the services of an outside supplier
- Dequal to; to use the services of an outside supplier
24________ is an economic measure of divisional performance.
- AReturn on assets
- BReturn on a division's sales
- CEconomic value added
- DA division's growth rate
25Which of the following is a weakness of using a hurdle rate as a standard of evaluating the performance of a division?
- AThe process is time-consuming.
- BThe process is fraught with political intrigue.
- CThis approach lets other firms determine what is and what is not excellent performance for a division within a diversified firm.
- DThe use of such a single standard ignores important differences in performance that might exist across divisions.
26Most accounting measures of divisional performance have a common limitation in that they
- Ahave a short-term bias.
- Bare costly to implement.
- Care difficult to interpret.
- Dhave a long-term bias.
27If a division of a multidivisional firm has adjusted accounting earnings of $10 million, a weighted average cost of capital of 10% and a total capital employed by the division of $50 million, the division has an EVA of
- A$25 million.
- B$5 million.
- C$15 million.
- D$20 million.
28When adjusting a division's accounting earnings for use in the economic value added calculations, R&D spending is usually
- Asubtracted from the division's performance.
- Bdepreciated over the life of the average R&D projected and subtracted from the division's performance.
- Camortized over the life of the average R&D projected and added back to the division's performance.
- Dadded back into the division's performance.
29In ________ budgeting, corporate executives create a list of all capital allocation requests from divisions in a firm, rank them from "most important" to "least important" and then fund all the projects a firm can afford, given the amount of capital that is available and no project receives funding simply because it was funded in the past.
- Acost-plus
- Bactivity-based
- Czero-based
- Drevenue-based
30In a multidivisional company, one division "sells" its products or services to a second division for a(n) ________, which is set by a firm's corporate management to accomplish corporate objectives.
- Aallocation price
- Btransfer cost
- Cmarket price
- Dtransfer price
31Under which transfer pricing scheme is the transfer price set equal to the selling division's actual cost of production or set equal to the cost of production if the selling division were operating at maximum efficiency?
- Aexchange autonomy
- Bmandated full cost
- Cmandated market based
- Ddual pricing
32Which of the following statements regarding CEO compensation is accurate?
- ADifferences in CEO cash compensation are very responsive to differences in firm performance.
- BIf a substantial percentage of a CEO's compensation comes in the form of stock and stock options in the firm, changes in compensation are closely linked with changes in firm performance.
- CIf a substantial percentage of a CEO's compensation comes in the form of stock and stock options in the firm, changes in compensation are not closely linked with changes in firm performance.
- DIf a substantial percentage of a CEO's compensation comes in the form of salary, changes in compensation can be expected to be closely linked with changes in firm performance.
33A(n) ________ occurs when a large, typically diversified firm divests itself of a business in which it has historically been operating and the divested business operates as an independent unit.
- Aharvest
- Bliquidation
- Cinitial public offering
- Dcorporate spin-off
34A business unit within a diversified firm may be sold to the public through a(n)
- Acorporate spin-off.
- Bliquidation.
- CIPO.
- Dharvest strategy.
35Which of the following is not a reason that diversified firms might spin off businesses?
- AManagement may require specific skills that are not present.
- BAnticipated economies of scope may not be realized.
- CFunding may be needed for other businesses.
- DThe business is too related to other firm businesses.
36Transfer pricing should equal
- Aselling price.
- Bopportunity cost.
- Ctotal cost.
- Dmarginal cost.
37Which organizational structure is SpandoCorp using?
- AU-form
- Bmatrix
- CM-form
- Dfunctional
38Grace McKenna is best described as a(n) ________ in SpandoCorp.
- Asenior executive
- Bcorporate staff member
- Cdivision general manager
- Dinstitutional investor
39Wells Tucker's position in SpandoCorp is best described as
- Aa division general manager.
- Ba member of the corporate staff.
- Cthe senior executive.
- Da member of the board of directors.
40Kelly Rae's position is SpandoCorp is best described as a(n)
- Ainstitutional investor.
- Bsenior executive.
- Cdivision general manager.
- Dmember of the board of directors.
41If Todd Hienz were the chief operating officer for SpandoCorp, his responsibilities would include
- Asupervision of the board of directors in its monitoring role.
- Bstrategy implementation.
- Cstrategy formulation.
- Dstrategy control.
42If SpandoCorp wanted to measure the performance of its divisions with a method that would minimize any potential short-term bias, it should use a(n)
- Ahurdle rate based measure of divisional performance.
- Bdivisional budget based measure of performance.
- Ceconomic value added measure of divisional performance.
- Dmeasure of performance based on the average level of profitability of firms in a division's industry.
43If SpandoCorp used a ________ budgeting process, it would assume that no project would receive funding for the future simply because it was funded in the past and would require each project to stand on its own merits each year to be included in a list of important projects that the firm can afford to fund.
- Azero-based
- Bcost plus
- Cdynamic
- Dtraditional
44If the bulk materials division of SpandoCorp sold its reams of Spandex to the military division and set the transfer price of these reams equal to the bulk materials actual cost of production, SpandoCorp would be using the ________ transfer pricing scheme.
- Aexchange autonomy
- Bmandated full cost
- Cmandated market based
- Ddual pricing
45If SpandoCorp's board of directors wanted to ensure that changes in the CEO's compensation would be closely linked to changes in the firm's performance, it should
- Ause a compensation package that includes only a salary for the CEO.
- Buse a compensation package that includes a salary and a cash bonus for the CEO.
- Cuse a compensation package the includes a salary, a cash bonus and stock options that represent only a relatively small percentage of the CEO's total compensation package.
- Duse a compensation package that includes a salary and stock options that represent a relatively substantial percentage of the CEO's total compensation package.
46If SpandoCorp decides to use the method of allocating capital where each project receives funding on its merit and not because it received funding the previous year, it is using
- Azero-based budgeting.
- Bcorporate budgeting.
- Ccentralized budgeting
- Dcoordinated budgeting.
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- Quiz on Chapter 8 - Organizing to Implement Corporate Diversification, created by Strategy IO on 14/11/2016.
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