Chapter 8

Question 1

M - form multidivisional structure

Answer 1

has a BOD over a CEO who is over all of the departments, each business is a division

Question 2

profit and loss centers

Answer 2

profits and losses are calculated at the level of the division in these firms

Question 3

BOD

Answer 3

watches over the firm

Question 4

senior executive/ CEO

Answer 4

on the board of directors

Question 5

chairman of the board

Answer 5

leads the board

Question 6

agency problem

Answer 6

agents don’t have the same incentives as the principal

Question 7

audit committee

Answer 7

responsible for ensuring the accuracy of accounting

Question 8

finance committee

Answer 8

maintains the relationship with the firm and external capital markets

Question 9

nominating committee

Answer 9

nominates new board members

Question 10

personnel and compensation cimmittee

Answer 10

evaluates and compensates the performance of a firm’s senior executive and other seniors

Question 11

institutional owners

Answer 11

usually pension funds, mutual funds, insurance comps. etc

Question 12

office of the president(when CEO duties are too great)

Answer 12

chairman of the board, chief executive officer, chief operating officer

Question 13

corporate staff

Answer 13

provide info about the firm’s external and internal environments to the firm’s senior executive.

Question 14

cost centers

Answer 14

operations that are assigned a budget

Question 15

economic value addes

Answer 15

adjusted accounting earnings(weighted average cost of capital * total capital employed by a division

Question 16

zero based budgeting

Answer 16

allocating capital to the most important divisions

Question 17

intermediate products or services

Answer 17

products from one department used as inputs for another department

Question 18

transfer pricing system

Answer 18

one division sells its product to another division