P3 Risk Management - Practice Questions | Study4Pass

Question 13

H manufactures and sells healthy dietary supplements. The company recruits individuals as part-time agents to sell its products to friends and colleagues. These agents are required to buy H's products and to resell them at a small mark-up.

For a fee H will provide agents with training in persuasive selling techniques. Agents who pass exams at the conclusion of this training can become distributors. Distributors buy bulk quantities of H's products at a discount and can recruit their own sales agents. Those agents can also take training and can recruit agents of their own.

At what stage does H stop being a legitimate business and become a pyramid selling fraud?

Select an option, then click Submit answer.

○
When it asks its agents to buy product and marketing material up front.
○
When it offers returns on its agents' investments that seem remarkable.
○
When it offers its agents more reward for recruiting other agents than for selling its product.
○
When its training programmes promise to unlock the secret of selling its product.

Question 14

GHY is a listed company. Tom is GHY's CEO and Peter is its non-executive Chair of the Board. Tom and Peter both have substantial relevant business and industrial experience and both are believed to have considerable integrity. Tom and Peter quickly developed a good working relationship after Peter's appointment. They have become close friends.

Tom briefs Peter on every aspect of the business. Tom and Peter jointly agree the agenda for every board meeting and both agree on the manner in which matters will be presented to the board.

Taking account of the principles of good corporate governance which of the following statements is correct?

Select an option, then click Submit answer.

○
It is entirely appropriate that Tom and Peter have this kind of relationship and both are acting in the best interests of the company.
○
Non-contentious board meetings show how well Tom and Peter are running the company and shows that the management is cohesive.
○
The relationship between Peter and Tom may have a detrimental effect on company decision making as the Board is not always being informed about matters in an unbiased manner.
○
Since the non-executive chair clearly has a significant role within this company there is little danger that any individual will become excessively dominant.

Question 15

The managers of a company are agents for the shareholders tasked with increasing shareholders' wealth. Which of the following will usually increase shareholders' wealth?

Select an option, then click Submit answer.

○
Investing in projects with the shortest payback period.
○
Investing in projects with positive net present value.
○
Investing in projects with the greatest level of risk.
○
Not paying a dividend for several years in order to invest in new projects.

P3 – Risk Management