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| 1 | |
Which of the following aspects of the relationship between Enron's special purpose entities (SPE's) and Enron itself is not particularly egregious? |
| | A) | Enron had no reason for forming SPE's other than to create a deceptive impression that it was in better financial shape that it actually was. |
| | B) | Hedging risks by entering into agreements with oneself does not lower risks. |
| | C) | Underwriting one's own risks is not underwriting them at all. |
| | D) | Using Enron's own stock to finance the SPE's provided a very strong incentive for Enron management to keep its stock value high. |
| | E) | All of the above. |
| | F) | None of the above. |
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| 2 | |
Which statement is not true of the agency concept? |
| | A) | In actual fact, not all agents are employees. |
| | B) | Under the common law tradition of the United States, all employees are treated as agents of employers. |
| | C) | The primary responsibilities in the employer-agent relationship lie with the employer. |
| | D) | The law has described the employee-employer connection as a master-servant relationship. |
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| 3 | |
Select the statement that does not support the narrow view of non-managerial employees' responsibilities to their employer, the idea that the employer exercises a great deal of control over the nature and terms of employment with very little discretion given to the employee: |
| | A) | Employees consent to obeying managers when they take a job. |
| | B) | Employees who agree to obey employers are not truly abandoning their own responsibility. |
| | C) | The choice of obeying someone's command or jeopardizing one's job is a fundamentally coercive situation and, therefore, the consent involved is not fully free. |
| | D) | Owners have property rights and have to be protected against the harms they might suffer from employees. |
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| 4 | |
Identify the statement that does not correctly present the fiduciary relationship that is said to exist between managerial employees and employers: |
| | A) | Managers have special expertise that owners must rely on, so they are given wider responsibilities. |
| | B) | Managers are free from close day-to-day oversight by owners. |
| | C) | Because managers have greater freedom from day-to-day supervision by owners, they are not generally understood to have a strong fiduciary duty to always act in the best financial interest of the owners. |
| | D) | The legal duties of loyalty, trust, obedience and confidentiality are understood to override the manager's personal interests. |
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| 5 | |
Identify the statements that reflect the varied owner interests corporate managers are supposed to serve: |
| | A) | Investors buy stock because they believe in the company and its products. |
| | B) | Investors are playing the stock for short-term gain. |
| | C) | Investors see their stock ownership as an investment in a company and its technology. |
| | D) | Investors see their stock ownership as a long-term investment for personal retirement and security. |
| | E) | All of the above. |
| | F) | None of the above. |
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| 6 | |
Which statement describes a managerial action that does not unethically impose costs upon stockholders and other stakeholders? |
| | A) | The action imposes unwanted costs on stockholders and stakeholder by giving up some alternatives in favor of others in the interest of maintaining the fiscal stability of the enterprise. |
| | B) | A personal interest of a manager hinders the exercise of his or her professional judgment. |
| | C) | A portion of some payment is kicked back to the payer as an incentive to make the payment in the first place. |
| | D) | Financial advisers receive payments from a brokerage house to pay for research and legal services that should be used to benefit the advisers' clients, not the advisers' personal interests. |
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| 7 | |
Select the statement that, ethically speaking, best represents a valid concept of what loyalty to a firm means: |
| | A) | Loyalty means a willingness to sacrifice one's own interest by going above and beyond ordinary employee responsibilities. |
| | B) | Loyal employees are expected to sacrifice for the firm even though the firm is not necessarily bound to sacrifice for the employee. |
| | C) | Since the model of agency law lays a legal duty of loyalty on employees, employees clearly have a corresponding ethical responsibility to be loyal. |
| | D) | While a willingness to sacrifice might be a part of loyalty, it would seem that devotion and faithfulness to a common good is both more essential to loyalty and what explains the willingness to sacrifice. |
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| 8 | |
Identify the statement that challenges Albert Carr's analogy that, like poker, business is a game that has its own rules and, therefore, is exempt from ordinary requirements of morality: |
| | A) | Carr overestimates the prevalence and acceptability of dishonesty within business. |
| | B) | Even if business did have its ownset of ethical conventions, that fact alone does not exempt it from ordinary ethical evaluations. |
| | C) | There are major disanalogies between business and games like poker that weaken the conclusions drawn from Carr's analogy. |
| | D) | Unlike poker games, individual often have no choice but to participate in business practices. |
| | E) | All of the above. |
| | F) | None of the above. |
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| 9 | |
According to Richard DeGeorge, which statement presents a condition that makes blowing the whistle on a company not just permissible but obligatory? |
| | A) | A threat of serious harm exists. |
| | B) | The whistleblower has exhausted all internal channels for resolving the problem. |
| | C) | The harm to be prevented overrides the harm done to the firm and to other employees. |
| | D) | The whistleblower has good reason to believe that blowing the whistle will prevent the harm. |
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| 10 | |
Select the statement that is not a criticism of insider trading: |
| | A) | The insider benefits inappropriately by buying or selling the stock at a price below or above what the market will demand when the inside information is made public. |
| | B) | An insider can benefit by trading on bad news as well as good, and this might be an incentive to work against the firm's best interests. |
| | C) | The insider's action sends the correct message to the market, reflecting the stock's true value, moving the market toward equilibrium. |
| | D) | The insider's information is often used without the firm's permission in a way that harms the stockholder's interests. |
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