1. Driving a car negligently, Adam crashes into a phone pole. The pole falls, smashing through the roof of a house, killing Beth. But for Adam’s negligence, Beth would not have died. Regarding the death, the crash is the

a.  cause in fact. 

b. intervening cause. 

c. unforeseeable cause. 

d. superseding cause. 

2. Tomas is a business student with a very good business idea for academia. Tomas, with the help of his school’s entrepreneurship center, then develops a detailed business plan for an academic online course registration system. The faculty at the entrepreneurship center thinks that Tomas’ concept and plan have economic potential and thus are quite marketable. Tomas places on his business plan a Confidentiality statement, and also when he “shops” his plan to potential investors and school administrators he asks them to sign a Non-Disclosure Agreement. Based on the aforementioned facts, which statement is likely TRUE?

 a. Tomas has protected his business plan by means of federal patent law. 

b. Tomas has protected his business plan by means of federal copyright law. 

c. Tomas has failed to protect his business plan by trade secret law since a plan, concept, or idea is too “soft” information, as opposed to a “hard” formula or device, for legal trade secret protection. 

d. Tomas has protected his business plan by means of state trade secret law. 

3. Big Oil Company wants to adopt an English-only policy for its employees working on its oil rigs. The policy applies only when the employees are actually working on the rig, and not while they are on break or otherwise on their own personal time. This policy is:

a. Legal if the company can demonstrate a legitimate business reason for the policy, such as safety concerns. 

b. Legal if the employer gives it employees a reasonable amount of time to adopt and to conform to the new policy. 

c. Legal if the employer teaches any of its non-English speaking employees to speak English. 

d. All of the above. 

4. The directors of Global Investment Company made a “bad” business decision in 2006, by relying on the advice of financial experts and lawyers and accountants, who all thought the real estate market would continue to rise for years and years; and thus the directors invested heavily in mortgage backed securities instead of conservative gold and gold stocks and Treasury bonds. Of course, when the recession came, Global Investment Company lost a great deal of money for its shareholder investors. The shareholders then sued the directors for negligence. The directors are best protected legally by:

a. The comparative negligence doctrine because the shareholders likely were sophisticated investors who should have known that “what goes up, must come down.” 

b. The assumption of the risk doctrine since everyone knows that the stock market is a risky venture. 

c. The Business Judgment Rule even though the decision turned out to be a “bad” business one. 

d. The doctrine of strict liability for ultra-hazardous activities since it was common knowledge at the time that people were being granted mortgages with no down-payment and no verifiable evidence of income, assets, or employment. 

1. The term “corporate social responsibility” is today best defined in the U.S. by:

Federal statutory incorporation law.

Securities and Exchange Commission (SEC) Rule 10b(5)

Kant’s ethical writings condemning the corporate form of business for being selfish, greedy, and immoral

Current definitions in business of the term which indicate that a company should be socially responsible and thus contribute to charities and civic organizations, but in a prudent and smart manner.

2. How would the Sophists best treat the value of social responsibility?

Ignore it since nothing is real anyway.

Adhere to it since God commands it as in the parable of the Good Samaritan.

Use it instrumentally as a tool to empower yourself and your company.

Adhere to it since it is an intrinsic moral truth to help others.

 3. Which of the following is a correct statement regarding the definition of the term “social responsibility” in a business context?

A socially responsible business person believes that the formal legal law is inferior to universal moral and ethical principles that can be determined by intuition.

Social responsibility is the branch of philosophy that focuses on morally right and wrong behavior.

Social responsibility is based on current societal views as to how and the extent a business should contribute to charities and civic organizations and be involved in helping the community.

A business cannot adhere to social responsibility principles and the doctrine of ethical egoism since both are always mutually exclusive.

 4. Today, critics of the corporation argue for various corporate governance reform proposals to improve the legal, moral, and socially responsible behavior of the corporation. Which of the following is the most convincing argument AGAINST these proposals?

These proposals are inadvisable because corporate managers should never have any duty other than to maximize profits for the shareholders

These proposals are unnecessary because market forces invariably operate to deter any corporate misbehavior

These proposals are unnecessary because existing law already establishes clear standards for what is and is not moral corporate behavior globally

These proposals are inadvisable because they will reduce corporate ability to respond quickly to changing business conditions and therefore will create allocational inefficiency.

1. A government places an order for a particular item of equipment and encumbers $5,500. The item arrives accompanied by an invoice for $5,200. The entries that the government should make should include (but no necessarily be limited to):

a. A debit to expenditures for $5,200, a debit to fund balance for $300, and a credit to reserve for encumbrances for $5500

b. A debit to expenditures for $5200, a credit to encumbrances for $5200, and a credit to accounts payable for $5200

c. A debit to expenditures for $5200, a credit to encumbrances for $5500, and a credit to accounts payable for $5200

d. A debit to expenditures for $5200, a credit to reserve for encumbrances for $5200, and a credit to accounts payable for $5200

2. Per GASB Statement No. 34, governments must..

a. Prepare a general fund budget on a cash basis

b. Prepare a general fund budget on a modified accrual basis

c. Prepare a schedule that reconciles any differences between amounts reported on a GAAP basis and a budgetary basis

d. Prepare a schedule that reconciles any differences between the original budget and the amended budget

3. The amount that a government has available to spend for a particular purpose in a particular year would be indicated by

a. Encumbrances minus the sum of appropriations, expenditures and net adjustments

b. Reserve for encumbrances plus appropriations minus the sum of expenditures and net adjustments

c. Appropriations plus encumbrances minus the sum of expenditures and net adjustments

d. Appropriations minus the sum of expenditures, encumbrances and net adjustments

4. Upon ordering supplies a government should…

a. Debit encumbrances and credit reserve for encumbrances

b. Debit reserve for encumbrances and credit encumbrances

c. Debit expenditures and credit encumbrances

d. Debit expenditures and credit vouchers payable

1) Which of the following is true?

A. The maker of a note does not have priXXXXX XXXXXability upon signing the note, nor does the drawer of a check upon signing the check.

B. The maker of a note has priXXXXX XXXXXability upon signing the note, and the drawee of a check has priXXXXX XXXXXability upon the drawer’s signing of the check.

C. The maker of a note has priXXXXX XXXXXability upon signing a note, but the drawer of a check does not have priXXXXX XXXXXability upon signing the check.

D. The maker of a note has priXXXXX XXXXXability upon signing the note and the drawer of a check has priXXXXX XXXXXability upon signing the check.

E. The drawer of check has priXXXXX XXXXXability upon signing the check, but the maker of a note does not have priXXXXX XXXXXability upon signing the note.

2) Alan guarantees Visa that he will pay for his daughter Florence’s debt with Visa. If Alan fails to pay Visa, who is liable for Florence’s debt?

A. Neither Alan nor Florence is liable to Visa.

B. Florence is primarily liable to Visa, as she was the party who used the credit in the first place.

C. Alan is primarily liable to Visa, the accommodation maker.

D. Both Alan and Florence are primarily liable to Visa for Florence’s debt.

3) In order for a security interest to give the secured party protection against the claims of other creditors of the debtor, the security interest must:

A. Entitle the creditor to possession.

B. Attach to the subject matter.

C. Terminate the debtor’s interest.

D. Become perfected.

4) Which of the following is true about the distinction between secured and unsecured credit?

A. Secured debt results from a judgment of the court, whereas unsecured debt results from the agreement of the parties.

B. Secured debt will be collected over more than 1 year, whereas unsecured debt is expected to be collected within 1 year.

C. Secured debt is debt that has already been paid, and unsecured has not yet been paid.

D. Secured debt is expected to be collected, whereas collection of unsecured debt is doubtful.

E. Secured debt has collateral associated with it, whereas unsecured debt has no associated collateral.

1) Dad has a negotiable instrument that he gives to his daughter as a birthday present. Dad is a holder in due course of that instrument. Circumstances arise such that the daughter can collect that instrument only if she has holder in due course status. Which of the following best describes this situation?

A. The shelter provision cannot apply to the daughter in this situation.

B. The daughter does not qualify as a holder in due course, but she can claim the holder in due course status of her father and collect the instrument.

C. The daughter is not a holder in due course, so she cannot collect on this instrument.

D. The daughter qualifies as a holder in due course, so she can collect on this instrument.

2) Under what doctrine could a party who is aware that an instrument is overdue take that instrument and acquire the rights of a holder in due course?

A. The taking for value doctrine.

B. The public policy exception.

C. The shelter principle.

D. The personal defense doctrine.

E. The indorsement protection doctrine

3) Billy, a minor, buys a car form Ajax Auto Dealers, signing a $2,000 negotiable installment note in payment. Ajax needs the cash, so it sells the note to Acme Finance Company, for its fair market value, indorsing the note in blank. The owner of Acme, who personally purchased the note, knew that Billy was a minor. Circumstances occur such that Acme can collect the note only if it is a holder in due course. Is Acme a holder in due course with respect to this note?

A. No, Acme is not a holder in due course because of some other reason.

B. No, because Acme took the note with notice that there was a defense to its payment.

C. Yes, Acme is a holder in due course.

D. No, because Acme did not take the note in good faith.

E. No, because the note was not properly negotiated to Acme.

4) Marti issues a check payable to the order of John, who indorses the check in blank and transfers the check to Amy, who transfers the check to Bill without indorsement. Bill wishes to cash the check. Which of the following best describes the liabilities of the parties?

A. At this point, no one is primarily liable on the check and the drawee bank is not primarily liable on the check until it accepts the check.

B. The drawee bank is not primarily liable on the check until it accepts the check.

C. The drawee bank is primarily liable on the check.

D. At this point, no one is primarily liable on the check.

E. Marti is primarily liable on the check.