Stocks Intermediate: Weighing Management Quality

Test your knowledge

Choose wisely. There is only one correct answer to each question.

0%
Keep studying!

Get a certificate for this quiz
Enter your name to generate a certificate that you can save or print immediately. Optionally, add your email address to have a copy of the certificate emailed to you.


Review your answers below to learn more.
1.
A great way to reward managers for building a successful business is to _______.
Choose wisely. There is only one correct answer.
Pay them a reasonable salary and a bonus tied to company profits. We like to see executive pay, in any form, tied to the operating and financial performance of the company. The best way to motivate executives is to pay them a reasonable salary (maybe even a "low" salary) and give them the opportunity to earn a significantly higher amount in the form of a bonus. Tying executive compensation to the stock price creates a perverse, short-term incentive for managers to say good things in public about the company rather than focus on making the company run better.
2.
Investors should look for companies that _______.
Choose wisely. There is only one correct answer.
Have set clear goals for measuring progress. Good measurement is good management.
3.
Should an investor look with suspicion on companies whose employees do not have a clear separation between business and personal relationships?
Choose wisely. There is only one correct answer.
Yes. Lack of a boundary can be very bad for business.
4.
A stock analyst might interview a companys customers to get a sense of whether the company would be a good investment.
Choose wisely. There is only one correct answer.
True. An analyst might interview customers, typically larger institutional ones.
5.
Whom does the board of directors of a company represent?
Choose wisely. There is only one correct answer.
The shareholders. The board is elected by the shareholders and technically represents them.