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1.
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.
2.
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.
3.
Investors should look for companies that _______.
Have set clear goals for measuring progress. Good measurement is good management.
4.
A companys board of directors represents its management.
False. The board represents the shareholders and their interests.
5.
How much money the company pays its CEO and top management is _______.
An important sign of how the company has set up its incentive system. The compensation of top corporate officers is a touchy subject, mostly because a lot of corporate officers are paid a great deal of money. We dont have any hard and fast rules for determining how much is "too much," but at the extremes, executive pay can eat up a significant chunk of corporate profits, which eats directly into shareholder returns.
