Introduction to Directors and Officers Self-Quiz








Who orchestrates and originates the accounting rules for any company required to report financials in the U.S. and what are those rules called?
Choice 1 The IRS and the Code
Choice 2 The SEC and the Rulings
Choice 3 The Congress and the Regs
Choice 4 The FASB and the GAAP
Which of the following represents a likely group of individuals to sit on the board of a company that produces basketball shoes, has had severe economic distress for the past eight financial quarters, and is backed by several prominent venture capitalists?
Choice 1 The company's CEO, CFO, and a representative of its labor union
Choice 2 The company's president, a retired basketball star and a bankruptcy expert
Choice 3 The company's COO, a well known government official, and the firm's lead investment banker
Choice 4 The company's CFO, a Washington lobbyist, and one of its founders who recently retired
InsideOut Co. has a seven member board of directors. They are trying to boost the value of their stock and are trying to better organize their internal operations as one means of achieving those ends. As concerns the board, what might the company do to satisfy the market?
Choice 1 Elect several prominent accounting experts to help improve the company's cash flows
Choice 2 Shrink the size of the company's board from seven to three
Choice 3 Expand the board's size to thirteen and hire several individuals from various high-glamour fields like movies and sports to gain notoriety with the public
Choice 4 Vote in several directors who have no prior relations to the firm and pay them nominal compensation.
Troubled, Inc. has been sued by several parties regarding its accounting practices. The board decides that to help respond to the suit, it will create a subcommittee made up of several of the firm’s lawyers who are also board members, and give the group full power to decide on the course of the litigation and recommend actions to shareholders to help stop the suit. The board’s actions are:
Choice 1 Well advised because a litigation committee is appropriate whenever a firm is sued
Choice 2 Proper because a board has the power to appoint subcommittees for any task
Choice 3 Improper as such a committee would go beyond the scope of a board's delegation powers
Choice 4 A bad move as such a committee shows that the firm believes in the truth of the suit and is likely to lose
Profitable, Inc. has been doing great business for the last five years. Each year, the company has made huge amounts of money in various parts of its business line. However, shareholders have been getting upset because the firm has failed to pay any dividends during those five years. A group of shareholders believes that the board is about to engage in a major transaction with all the spare cash that will have the effect of devastating the firm. As such, they petition a court in the company’s state of incorporation to compel the board to pay a dividend before the company squanders the money. Such an action is likely to result in:
Choice 1 Nothing, as the shareholders cannot compel a dividend
Choice 2 Payment of a dividend equal to the full amount of profits retained over the last five years
Choice 3 A court sponsored investigation into the anticipated transaction to determine if shareholders are correct that the firm is likely to squander the money
Choice 4 Payment of the dividend, but only if the shareholders can prove, by a preponderance of the evidence, that the deal the board is going to do will fail
The absolute minimum that a state will allow for a board vote to have effect on the company is:
Choice 1 A majority
Choice 2 One-third
Choice 3 Unanimous
Choice 4 50% + 1 vote

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