NACD : NACD Directorship Certification 2025 Exam

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NACD Directorship Certification
NACD
National Association of Certified Directors Exam - 2025
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stion: 749
ording to the NACD's Principles of Governance, which of the followin responsibility of the board in the area of succession planning?
verseeing the development of the organization's talent pipeline pproving the CEO's compensation and incentive structures valuating the board's own composition and diversity
ll of the above wer: D
anation: According to the NACD's Principles of Governance, the boar esponsibilities in the area of succession planning include overseeing t lopment of the organization's talent pipeline, approving the CEO's pensation and incentive structures, and evaluating the board's own position and diversity. These elements are all considered essential for
Que
Acc g is
a key
1. O
2. A
3. E
4. A
Ans
Expl d's
key r he
deve com com
ensuring effective leadership continuity and organizational sustainability.
Question: 750
What is the purpose of the "Householding of Proxy Materials" section in a proxy statement?
1. To explain the company's environmental initiatives
2. To disclose the company's political contributions
3. To provide information about the company's dividend policy
4. To explain the practice of "householding" proxy materials sent to shareholders
Answer: D
anation: The "Householding of Proxy Materials" section is designed t ain the practice of "householding," where a company sends a single se materials to households with multiple shareholders, rather than send
rate copies to each individual shareholder.
stion: 751
ch of the following is an example of a leading practice for improving b sity?
equiring all new director nominees to be women
aintaining a board that reflects the demographics of the local commu stablishing a "Rooney Rule" to interview at least one underrepresente idate
imiting board service to a maximum of two terms wer: C
Expl o
expl t of
proxy ing
sepa
Que
Whi oard
diver
1. R
2. M nity
3. E d
cand
4. L
Ans
Explanation: The "Rooney Rule", which requires interviewing at least one candidate from an underrepresented group for every open board seat, helps expand the pool of diverse, qualified director nominees considered. This is a more effective practice than rigid quotas or term limits.
Question: 752
Which of the following is a common risk management strategy in the face of emerging risks?
1. Risk avoidance
2. Risk acceptance
3. Risk transfer
wer: D
anation: A common risk management strategy in the face of emerging ntinuous risk monitoring. This involves regularly reviewing and updat rganization's risk profile to identify and address new risks as they aris wing for a more proactive and adaptive approach to risk management.
stion: 753
ch of the following is not a key responsibility of the board's technolog mittee?
verseeing the organization's cybersecurity and data privacy measures eviewing the organization's technology strategy and investment plans pproving the organization's annual IT budget
etermining the organization's technology staffing and hiring needs
wer: D
Continuous risk monitoring Ans
Expl risks
is co ing
the o e,
allo
Que
Whi y
com
1. O
2. R
3. A
4. D
Ans
Explanation: Determining the organization's technology staffing and hiring needs is not a key responsibility of the board's technology committee. The technology committee's responsibilities typically include overseeing the organization's cybersecurity and data privacy measures, reviewing the organization's technology strategy and investment plans, and approving the organization's annual IT budget.
Question: 754
A company's cash conversion cycle has increased significantly over the past year. This trend most likely indicates:
1. Improved working capital management
eakening customer demand neffective inventory management
wer: D
anation: The cash conversion cycle measures the time it takes for a pany to convert its investments in inventory and other resources into c sales. An increase in this cycle suggests inefficient inventory manage or issues with accounts receivable collection.
stion: 755
ch of the following is a best practice for the board when evaluating the 's performance?
elying solely on the CEO's self-assessment and input onsidering feedback from the company's major shareholders
asing the evaluation primarily on the company's stock price performa
Increased production efficiency
2. W
3. I
Ans Expl
com ash
from ment
and/
Que
Whi CEO
1. R
2. C
3. B nce
4. Conducting the evaluation in a closed-door session without the CEO present Answer: B
Explanation: A best practice for the board when evaluating the CEO's performance is to consider feedback from the company's major shareholders. Shareholder input can provide valuable outside perspective on the CEO's
leadership and the company's overall performance. Relying solely on the CEO's self-assessment, basing the evaluation primarily on stock price, or conducting the evaluation without the CEO present would not represent best practices for a thorough and objective performance review.
Question: 756
wing factors should be the most important in the board's decision-ma ess?
he project's internal rate of return (IRR)
he project's potential impact on the company's brand and reputation he project's alignment with the company's long-term strategic plan he project's potential to disrupt the company's existing operations
wer: C
anation: The most important factor in the board's decision-making pro major capital investment project should be the project's alignment wit pany's long-term strategic plan. The strategic alignment of the project al, as it ensures that the investment will support and advance the pany's overall business objectives and create long-term value for eholders. While factors such as the project's IRR, impact on brand and ation, and potential for disruption are also important considerations, t
should prioritize the project's strategic fit as the primary driver of its
The board is considering a major capital investment project. Which of the follo king
proc
1. T
2. T
3. T
4. T
Ans
Expl cess
for a h the
com is
cruci com shar
reput he
board
decision-making.
Question: 757
Which of the following is considered a best practice for director tenure?
1. Mandatory retirement at age 72
2. Maximum tenure limit of 10-15 years
3. No set term limits, with annual re-election
4. Staggered board terms of 3-5 years Answer: B
pectives, skills, and independence to the board over time, while also ning institutional knowledge and continuity. Overly long tenures can promise director independence and lead to entrenched leadership, whi e detrimental to shareholder interests.
stion: 758
ch COSO ERM component is responsible for communicating risk mation to relevant stakeholders and ensuring that the organization's ri agement practices are understood throughout the organization?
nformation and communication onitoring
isk assessment isk response
wer: A
Explanation: Establishing a maximum director tenure limit of 10-15 years is considered a best practice for corporate governance. This helps introduce fresh pers
retai
com ch
can b
Que
Whi
infor sk
man
1. I
2. M
3. R
4. R
Ans
Explanation: The "Information and Communication" component of the COSO ERM framework is responsible for communicating risk information to relevant stakeholders and ensuring that the organization's risk management practices are understood throughout the organization.
Question: 759
A company is considering two mutually exclusive investment projects, Project
Project A:
Initial investment: $50,000
Expected annual cash inflows: $15,000 for 5 years Discount rate: 10%
al investment: $100,000
cted annual cash inflows: $25,000 for 5 years ount rate: 10%
ch project should the company choose if the objective is to maximize resent value (NPV)?
roject A roject B
oth projects have the same NPV
annot determine without more information wer: B
anation:
alculate the NPV, we can use the formula:
= -Initial Investment + Σ (Annual Cash Inflows / (1 + Discount Rate e t represents the year.
Project B: Initi
Expe Disc
Whi the
net p
1. P
2. P
3. B
4. C
Ans Expl
To c
NPV )^t)
wher
For Project A:
NPV = -$50,000 + ($15,000 / 1.1) + ($15,000 / 1.21) + ($15,000 / 1.331) + ($15,000 / 1.4641) + ($15,000 / 1.61051) = $3,636.36
For Project B:
NPV = -$100,000 + ($25,000 / 1.1) + ($25,000 / 1.21) + ($25,000 / 1.331) +
Since Project B has a higher NPV, the company should choose Project B.
Question: 760
pproving the overall M&A strategy and investment parameters eviewing and approving individual acquisition or divestiture proposal onitoring the post-merger integration and synergy capture process
ll of the above wer: D
anation: The board's role in overseeing the company's mergers and isitions strategy includes approving the overall M&A strategy and stment parameters, reviewing and approving individual acquisition or stiture proposals, and monitoring the post-merger integration and syne ure process. The board must provide strategic oversight across the enti A lifecycle to ensure alignment with the company's long-term objectiv
stion: 761
rganization is considering investing in a new manufacturing facility. T investment required is $10 million, and the expected annual cash flo
What is the board's role in overseeing the company's mergers and acquisitions strategy?
1. A
2. R s
3. M
4. A
Ans Expl
acqu inve
dive rgy
capt re
M& es.
Que
An o he
initial ws
from the facility are: Year 1: $2 million Year 2: $2.5 million Year 3: $3 million Year 4: $2.5 million Year 5: $2 million
What is the ROI of this investment?
1. 20%
2. 30%
3. 40%
4. 50%
anation:
alculate the ROI, we need to find the net profit and divide it by the ini stment.
rofit = $2 million + $2.5 million + $3 million + $2.5 million + $2 mil million
= (Net Profit - Initial Investment) / Initial Investment x 100
= ($12 million - $10 million) / $10 million x 100 = 20% efore, the ROI of this investment is 20%.
stion: 762
oard is reviewing the company's financial planning and budgeting esses. Which of the following would be the most significant concern f oard?
Answer: C Expl
To c tial
inve
Net P lion
= $12
ROI ROI
Ther Que The b
proc or
the b
1. Lack of alignment between the company's strategic plan and the financial plan
2. Insufficient involvement of the board in the financial planning process
3. Inadequate monitoring and reporting of financial performance against budget
4. Lack of detailed and comprehensive financial projections beyond the current fiscal year
Answer: A
inancial plans, it can undermine the company's ability to execute its egy and achieve its desired financial outcomes. The other factors, such
involvement, performance monitoring, and financial projections, are rtant, but the alignment between the strategic and financial plans is th al issue that the board should address.
stion: 763
ch COSO ERM component is responsible for monitoring the effective sk management practices and making necessary adjustments?
ontrol activities
formation and communication onitoring
isk assessment wer: C
Explanation: The most significant concern for the board in reviewing the company's financial planning and budgeting processes would be the lack of alignment between the company's strategic plan and the financial plan. The financial plan should be a direct translation of the strategic plan, ensuring that the company's financial resources are allocated to support the achievement of its long-term strategic objectives. If there is a disconnect between the strategic and f
strat as
board also
impo e
critic
Que
Whi ness
of ri
1. C
2. In
3. M
4. R
Ans
Explanation: The "Monitoring" component of the COSO ERM framework is responsible for continuously monitoring the effectiveness of risk management practices and making any necessary adjustments to ensure that the organization's risk management strategy remains effective over time.
Which of the following is not a typical requirement for the disclosure of executive compensation in a proxy statement?
1. The total compensation for the company's CEO and other named executive officers
2. The criteria used to determine executive compensation
3. The target and actual performance metrics used to determine incentive pay
wer: D
anation: The proxy statement is required to disclose the total compens he company's CEO and other named executive officers, as well as the ria and performance metrics used to determine their compensation. ever, the disclosure of specific salaries and bonuses for all employees typical requirement.
stion: 765
ch of the following is a key responsibility of the board's mergers and isitions (M&A) committee?
oversee the organization's compliance with antitrust and competitio ations
monitor and evaluate the organization's due diligence process for ntial transactions
The specific salaries and bonuses of all the company's employees Ans
Expl ation
for t crite
How is
not a
Que
Whi acqu
1. To n
regul
2. To
pote
3. To identify and assess the organization's strategic growth opportunities through M&A
4. To ensure the effectiveness of the organization's internal controls and reporting processes related to M&A activities
Explanation: A key responsibility of the board's mergers and acquisitions (M&A) committee is to monitor and evaluate the organization's due diligence process for potential transactions. This includes reviewing the financial, operational, and strategic implications of proposed acquisitions or divestitures, and ensuring that appropriate risk assessment and mitigation measures are in place. The other options, while important, are not the primary focus of this committee.
stion: 766
ch of the following is not a typical activity within the "Recovery Plan gory of the "Recover" function?
eveloping recovery strategies and plans.
mplementing maintenance and testing procedures for recovery plans. oordinating with internal and external stakeholders during recovery ef nalyzing the root causes of the cybersecurity incident.
wer: D
anation: Analyzing the root causes of a cybersecurity incident is not a al activity within the "Recovery Planning" category. That would fall u Improvements" category or the "Respond" function of the NIST ersecurity Framework.
Que
Whi ning"
cate
1. D
2. I
3. C forts.
4. A
Ans Expl
typic nder
the " Cyb

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