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1.
In terms of financial transparency, investors should prefer companies that _______.
Disclose the minimum information, plus useful information that helps investors understand the business. Certainly every company should disclose all the information required by the SEC and other regulators. Above and beyond that, we think investors should favor companies that are forthright about their businesses, in good times and bad, and provide information that helps investors understand operations.
2.
Investors should look for companies that _______.
Have set clear goals for measuring progress. Good measurement is good management.
3.
A stock analyst might interview a companys customers to get a sense of whether the company would be a good investment.
True. An analyst might interview customers, typically larger institutional ones.
4.
Whom does the board of directors of a company represent?
The shareholders. The board is elected by the shareholders and technically represents them.
5.
Which of the following signs may indicate that company directors are motivated to look out for the firms long-term interests?
They own many shares of the company. If a director has a significant stake (in terms of his or her personal wealth) in the shares of the firm, we think this is the best sign that he or she will look out for the long-term interests of the firm.
