5 Stakeholders in a business
Multiple-choice questions
1 The ‘shareholder concept’ of business is that:
a The firm has a duty to put the needs of owners first.
b The firm has a duty to consider the interests of society when making decisions.
c The firm has a duty to consider the views of stakeholders.
d Shareholders should be responsible for the day-to-day running of the business.
2 Which of the following is an accurate definition of the term ‘stakeholder’?
a people or groups of people who have an interest in the success of a business
b people or groups of people who own shares in a business
c people or groups of people who have a legal responsibility for the success of the
business
d the customers of a business
3 In country X, the minimum legal wage is $5.00 per hour. It is typical for firms in
country X to pay cleaning staff the minimum wage. However, firm Y has recently
decided to increase cleaning-staff wages from $5.00 to $5.50 per hour. Which of the
following arguments could provide a reason for shareholders approving of this policy?
a It would encourage other low-paid workers in the firm to seek higher wages.
b It could reduce the long-term costs of the business due to higher productivity
and lower labour turnover.
c It would prevent legal intervention from the courts regarding wages.
d It would improve the short-term liquidity of the business.
4 Which of the following is an example of an internal stakeholder?
a suppliers
b lenders
c employees
d customers
5 Which stakeholder group is most likely to view higher profits as a key objective?
a employees
b suppliers
c shareholders
d customers
Chapter 5 Multiple-choice questions © Cambridge University Press 2010 1
6 Which of the following groups is most likely to have a stakeholder objective of low
prices?
a employees
b suppliers
c lenders
d customers
7 Corporate social responsibility is:
a the concept that businesses should act within the law
b the concept that businesses should consider the interests of society when making
decisions
c a modern term widely used to sum up the shareholder concept
d the concept that the interests of shareholders are unimportant when making
business decisions.
8 Which of the following best illustrates the behaviour of an oil company that is
concerned about its social responsibilities?
a making donations to a political party
b paying bonuses to senior managers in recognition of their contribution to
increasing profit
c increasing short-term profit by reducing spending on safety equipment on its
oil rigs
d providing financial support to an education charity
9 Which of the following is the most likely reason for a business to pay for an
independent social audit of its activities?
a to ‘window dress’ its activities
b because it is a legal requirement in many countries
c to reassure financial institutions when seeking to borrow money
d to promote a better image among stakeholder groups
10 Consider the following two statements:
• Shareholder objectives may conflict with the long-term growth of the firm.
• Shareholders seek higher dividends, which reduce retained profit.
a Both statements are true and the second is a correct explanation of the first.
b Neither statement is true.
c Both statements are true, but the second statement is not a correct explanation of
the first.
d The first statement is true, but the second statement is false.
Chapter 5 Multiple-choice questions © Cambridge University Press 2010 2
