Chapter 8: Rganizing To Implement Corporate Diversification

40 Questions | Total Attempts: 52

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Chapter 8:  Rganizing To Implement Corporate Diversification - Quiz

Questions and Answers
  • 1. 
    The most common organization structure for implementing a corporate diversification strategy is the U-form.
    • A. 

      True

    • B. 

      False

  • 2. 
    Another name for the M-form is the multidivisional structure.
    • A. 

      True

    • B. 

      False

  • 3. 
    In the multidivisional structure, each business that the firm engages in is managed through a division.
    • A. 

      True

    • B. 

      False

  • 4. 
    The divisions in an M-form organization are true profit-and-loss centers.
    • A. 

      True

    • B. 

      False

  • 5. 
    All firms that use the multidivisional structure use the same criteria for defining the boundaries of profit-and-loss centers.
    • A. 

      True

    • B. 

      False

  • 6. 
    Divisions in an M-form organization should be large enough to represent identifiable business entities but small enough so that a division general manager can manage each one effectively.
    • A. 

      True

    • B. 

      False

  • 7. 
    Each division in an M-form organization typically adopts a matrix structure and the division general manager takes on the role of senior project executive.
    • A. 

      True

    • B. 

      False

  • 8. 
    The 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 the interests of its equity holders.
    • A. 

      True

    • B. 

      False

  • 9. 
    Whenever one party to an exchange delegates decision-making authority to a second party, an agency relationship has been created between these parties.
    • A. 

      True

    • B. 

      False

  • 10. 
    In an M-form organization the role of the Board of Directors is to formulate corporate strategies consistent with equity holders' interests and to assure strategy implementation.
    • A. 

      True

    • B. 

      False

  • 11. 
    In an agency relationship the party delegating the decision making authority is called the agent.
    • A. 

      True

    • B. 

      False

  • 12. 
    One common agency problem occurs when managers decide to take some of a firm's capital and invest it in managerial perquisites that do not add economic value to the firm but that do directly benefit those managers.
    • A. 

      True

    • B. 

      False

  • 13. 
    In principle, only the CEO and the President report to the board of directors while other senior managers report only to the CEO.
    • A. 

      True

    • B. 

      False

  • 14. 
    Research on outside members of boards of directors tends to show that outside directors, as compared to insiders, tend to focus less on monitoring a firm's economic performance than on other measures of firm performance.
    • A. 

      True

    • B. 

      False

  • 15. 
    Research has shown that separating the roles of CEO and board chair is positively correlated with firm performance when firms operated in high-growth and very complex environments.
    • A. 

      True

    • B. 

      False

  • 16. 
    To the extent that a board of directors begins to operate a business on a day-to-day basis, it goes beyond its capabilities. 
    • A. 

      True

    • B. 

      False

  • 17. 
    A board of directors typically consists of 15 to 30 individuals drawn from a firm's top management group and from individuals outside the firm.
    • A. 

      True

    • B. 

      False

  • 18. 
    The title chairman of the board often, but not always, identifies the firm's senior executive.
    • A. 

      True

    • B. 

      False

  • 19. 
    Institutional owners are usually pension funds, mutual funds, insurance companies, or other groups of investors that have joined together to manage their investments.
    • A. 

      True

    • B. 

      False

  • 20. 
    In 1970, institutions owned 62 percent of the equity traded in the United States; by 1990, institutions owned 48 percent of this equity and by 2002, they owned only 32 percent of this equity.
    • A. 

      True

    • B. 

      False

  • 21. 
    The senior executive in an M-form organization has two responsibilities: strategy formulation and strategy implementation.
    • A. 

      True

    • B. 

      False

  • 22. 
    In an M-form organization, the chief executive officer is solely responsible for strategy implementation.
    • A. 

      True

    • B. 

      False

  • 23. 
    Only accounting measures of performance can be used in accurately measuring the performance of divisions within a diversified firm.
    • A. 

      True

    • B. 

      False

  • 24. 
    One of the strengths of using a hurdle rate to measure the performance of divisions in a diversified firm is that if the corporation has a single hurdle rate, there is little ambiguity about the performance objectives of divisions.
    • A. 

      True

    • B. 

      False

  • 25. 
    Most accounting measures of divisional performance focus on long-term benefits and minimize the possibility of a short-term bias.
    • A. 

      True

    • B. 

      False

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