September 23rd, 2005
Aaron J Hudson
AMM 101
Dr. Silverman
Chapter 5: Review Questions
7) Stockholders have the right to share in the profit earned by the corporation, rights to
receive information about the corporation, rights to vote on changes to the Corporate
Charter, the rights to attend the corporation’s annual stockholder’s meeting, and the rights
to vote on corporate matters if they own common stocks.
8) The primary duties of the Board of Directors are setting company goals and
developing plans or strategies to achieve those goals. The directors are elected by the
corporation’s stockholders.
14) A hostile takeover is where the management and the Board of Directors of the firm,
targeted for acquisition, disapprove of the merger because they know that their company
will become a subsidiary of the purchasing firm and most likely will lose their control.
Management of the purchasing firm can do 1 of 2 things to prevent this hostile takeover.
First, they can make a tender offer, a tactic to purchase the stock of the targeted firm at a
high enough price that it will temp the stockholders to sell all their shares. Secondly, the
purchasing firm can start a proxy fight which if enough of the stockholder’s votes are
gathered, the purchasing firm can control the targeted firm.
15) A horizontal firm is a merger of 2 firms that make and sale similar products or
services in similar markets. A vertical merger is when 2 firms operate at different but
related levels in the production and marketing of a product. A conglomerate merger is a
merger of 2 complete different companies in unrelated industries.