TBCH01RF - CHAPTER 1 Law, Value Creation, and Risk...

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C H A P T E R 1 Law, Value Creation, and Risk Management T RUE F ALSE Q UESTIONS 1. Private law provides the legal rules within which firms compete. ANSWER: False SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 2. Managers can make their own “public” law. ANSWER: False SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 3. An insight of the “stakeholder” theory is that firms have relationships with many constituent groups. ANSWER: True SKILL LEVEL: AACSB Ethics OBJECTIVE: AICPA Legal 4. Researchers have determined that Fortune 500 firms convicted of illegal conduct earned significantly lower returns on assets than firms that had not been convicted of wrongdoing. ANSWER: True SKILL LEVEL: AACSB Ethics OBJECTIVE: AICPA Legal 5.Lobbying legislators is one method by which managers can help shape the environment in which they do business. ANSWER: True SKILL LEVEL: AACSB Ethics OBJECTIVE: AICPA Critical Thinking 6. Laws enacted in response to corporate misdeeds often impose fewer restrictions and costs on business than would have been imposed had firms acted more responsibly at the outset. ANSWER: False SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 7. Promoting economic growth is one of the primary public policy objective of laws and regulations applicable to business. ANSWER: True SKILL LEVEL: AACSB Reflective Thinking 1
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LAW, VALUE CREATION, AND RISK MANAGEMENT OBJECTIVE: AICPA Critical Thinking 8. Worker protection is one major public policy concern underlying U.S. business law. ANSWER: True SKILL LEVEL: AACSB Ethics OBJECTIVE: AICPA Critical Thinking 9. Supervisory boards of large German corporations are elected entirely by the shareholders. ANSWER: False SKILL LEVEL: AACSB Diversity OBJECTIVE: AICPA Legal 10. As used in the text, the term “legal astuteness” refers to the ability of a manager to avoid situations making consultation with legal counsel necessary. ANSWER: False SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 11. It is the job of the general manager of a business, not the lawyer, to decide which allocation of resources and rewards makes the most business sense. ANSWER: True SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 12. A legally astute manager would wait as long as possible to consult legal counsel once a problem arises in order to keep legal fees to a minimum. ANSWER: False SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Critical Thinking 13. A legally astute manager understands that legal analysis is often ambiguous. ANSWER: True SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Critical Thinking 14. The choice of business entity will determine the investors’ liability for the debts of the business. ANSWER: True SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 15. The European Union’s center of operations is in Brussels, Belgium. ANSWER:
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This note was uploaded on 10/18/2011 for the course BUSS 240 taught by Professor Na during the Fall '10 term at Strayer.

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TBCH01RF - CHAPTER 1 Law, Value Creation, and Risk...

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