The Wall Street Journal Weekly Quiz s6

The Wall Street Journal Education Program Weekly Review & Quiz Covering front-page articles from January 14 – 20, 2006 Professor Guide with Summaries Spring 2006 Issue #2 Developed by: Scott R. Homan Ph.D., Purdue University

Questions 1 – 12 from The First Section, Section A

Foundation Devoted To Dr. King's Dream Has Real World Woes As Building Decays, Family Feuds Over Sale to U.S. By EVAN PEREZ and COREY DADE January 14, 2006; Page A1 http://online.wsj.com/article/SB113720885325046782.html

ATLANTA -- Monday's parade down Auburn Avenue, an annual ritual here to honor the birth of the Rev. Martin Luther King Jr., will end as usual at the King Center, home to thousands of the slain civil-rights leader's important papers and his marble crypt, engraved with "Free at last, free at last, thank God almighty, I'm free at last." But there is little to celebrate this year about the complex of red-brick buildings that opened in 1981 as the official King memorial. The base of the reflecting pool surrounding the tomb is cracked. Some archived documents have been endangered by a leaky roof. The Atlanta city government filed a lien against the King Center in November to collect $88.74 in overdue garbage-pickup fees. It will cost millions to fix all the problems, way beyond the nonprofit King Center's means. Federal tax returns show that the organization, launched by Dr. King's widow shortly after his 1968 assassination, operated at a loss in six of the eight most recent years for which its financial results are available. The combined deficits of $1.5 million shrank its assets by more than 20%. Adding to the troubles hanging over events to commemorate the 77th anniversary of Dr. King's birth is a nasty public spat among his four grown children over the future of the King Center. Dexter Scott King, 45 years old and chairman of the organization's board, last month pushed through a vote initiating the sale of properties controlled by the King Center to the National Park Service. The federal agency runs a nearby visitors' center and gives guided tours of the two-story house where Dr. King was born. The house, too, would be part of the sale. The proposed selling price hasn't been disclosed, but the King Center valued its land, buildings and equipment at about $11.1 million in 2004. Negotiations haven't begun, says Barbara Goodman, a National Park Service spokeswoman. "It is not something that the National Park Service will be putting any pressure on or pursuing if it's something that the King family isn't prepared to do." Dexter King has two influential allies: his older sister Yolanda, 50, a motivational speaker and actor; and the Rev. Andrew Young, the former United Nations ambassador

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 1 of 29 and Atlanta mayor who was one of Dr. King's top lieutenants in the civil-rights movement. That might not be enough. The push to sell has been denounced by Dr. King's first-born son, Martin Luther King III, 48, a former president of the Southern Christian Leadership Conference, the civil-rights group co-founded by Dr. King; and daughter Bernice, 42, a Baptist minister who was just 5 years old when her father was gunned down in 1968. Dexter and Martin have clashed repeatedly over the leadership and direction of the King Center. Martin was CEO from 2004 until late last year, when according to Martin, Dexter got him replaced by a cousin. The battle is about much more than whether the federal government will rescue the King Center from its physical and operational distress. Martin and Bernice insist that preserving the King family's control is the only way to safeguard Dr. King's memory and social message. Mr. Young, who serves on the King Center board, says he voted in favor of exploring a sale because certain members of the family believe "that the government can better maintain the physical property." The four King offspring "have never had a chance to define who they were" and now want to show that they are more "than just the kids of Martin Luther King," says Mr. Young, a King Center director whom Dr. King's sons and daughters call "Uncle Andy." Coretta Scott King, Dr. King's 78-year-old widow, has mediated a number of family disputes before they became public. But she has been slowed by a stroke she suffered last summer. None of the King children could be reached to comment on this story. A center spokesman referred calls and email inquiries to Dexter King and Isaac Farris, the newly appointed chief executive, neither of whom responded. Yolanda King didn't return calls to her office in Culver City, Calif. Martin and Bernice King didn't return calls placed to their assistants. The feud draws attention to the decline of the King Center as an intellectual repository and civil-rights training ground. In 2004, the National Park Service estimated that the facility, officially called the Martin Luther King Jr. Center for Nonviolent Social Change Inc., needed $11.6 million in repairs. Problems included malfunctioning heating and air- conditioning systems, the leaky roof and "abandoned" fire-suppression systems, according to the service's report. It isn't clear that any of the deficiencies has been fixed. The complex anchors nearly four blocks of Atlanta's Sweet Auburn district, the economic heart of the South for African-Americans during segregation. The area surrounding the King Center is a designated national historic district, attracting more than 600,000 visitors a year.

1. The King Center, home to thousands of the slain civil-rights leader's important papers and his marble crypt, officially opened in the year _____. a. 1968 b. 1974 c. 1981 Correct d. 1992

2. In 2004, the National Park Service estimated that the facility, officially called the Martin Luther King Jr. Center for Nonviolent Social Change Inc., needed______in repairs.

Peru May Join Latin America's Populist Tilt to Left Free-Trade Opponent's Lead In Polls Poses New Challenge To Market Reforms in Region By DAVID LUHNOW in Mexico City and ROBERT KOZAK in Lima, Peru January 16, 2006; Page A1 http://online.wsj.com/article/SB113736736723647173.html

In the latest sign of the populist wave coursing through Latin America, presidential candidate Ollanta Humala, a left-wing opponent of free trade and free-market policies, has surged to the top of the polls ahead of Peru's election in April, prompting fears that the region's commitment to market-based reforms is waning. The former army officer's rapid rise reflects the emergence of a more radical and populist left in Latin America, particularly in the impoverished Andean region, which forms an arc stretching from Venezuela at the top of South America to Peru in the west. Mr. Humala, who led a short-lived coup against a democratically elected leader in 2000, has the vocal backing of Venezuelan President Hugo Chávez, who has cultivated close ties with Cuban dictator Fidel Castro. Like Mr. Chávez and Evo Morales, a former coca-leaf grower who won the presidency of Bolivia in December, Mr. Humala has campaigned on a promise to increase state control over the economy's key mining and oil sectors. And like his counterparts in Caracas and La Paz, Mr. Humala condemns globalization as a U.S.-led assault on the poor. Since 2000, the left has done well in Latin America, helped by the popular perception that free-market reforms aren't helping the poor, by corruption among traditional political elites, and by an unpopular U.S. foreign policy. Leftists who have won power in places like Chile, Brazil and Uruguay have largely governed from the center, controlling public spending and keeping their economies open to trade. Yesterday, Chile's moderate Socialist party, whose policies include the mandatory study of English in public schools, won a second consecutive victory with the election of the country's first female president, Michelle Bachelet. But the possible rise of an Andean "troika" -- Messrs. Chávez, Morales and Humala -- mentored from afar by Cuba's Mr. Castro, has raised concern about how far to the left the region as a whole could drift, especially in a year loaded with contested elections. On the U.S. doorstep in Mexico, meanwhile, former Mexico City mayor Andres Manuel Lopez Obrador leads the polls ahead of July's presidential election on a populist platform, although he has tried to distance himself from Mr. Chávez. Argentine President Nestor Kirchner, who has a strong populist streak, recently turned more leftward by dismissing his market-minded finance minister. And in Brazil, leftist President Luíz Inácio Lula da Silva is trying to win re-election. The populist wave is another headache for the Bush administration, which has been widely criticized in the region for ignoring Latin America. Mr. Morales has followed Mr. Chávez in attacking President Bush as a "terrorist," for instance, and Mr. Humala has

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 3 of 29 spoken out against U.S. "domination." But the White House so far hasn't responded in kind, reiterating its support for free elections even if it doesn't like the results. The U.S. remains a major source of aid for Andean nations and has great influence in the International Monetary Fund and World Bank, which are major creditors of the region. By stressing aid and support for democracy, the U.S. hopes to limit the influence of Mr. Chávez, Washington's main regional rival. Although Peru's economy has grown rapidly in the past few years, Mr. Humala has been able to seize on the discontent of the poor, especially the region's marginalized Indian groups, who have benefited only slightly from the growth and are impatient for faster results. A national survey released yesterday by Peru's leading pollster, Apoyo Opinion & Mercado SA, showed Mr. Humala leading in the presidential race for the first time, with 28% support, compared with 25% for the second-place candidate, center-right former congresswoman Lourdes Flores. Mr. Humala's rise has been meteoric. He had just 8% support in Apoyo's October poll, compared with 27% for Ms. Flores. The surge in support for Mr. Humala, who vows to call a national referendum on a free- trade deal signed in December between Peru and the U.S., has rattled Peru's financial markets. Stock prices have fallen steadily during the past months, and weakness in the country's currency, the sol, prompted Peru's Central Reserve Bank to intervene to support it every day last week, selling a total of $292.5 million in the foreign-exchange market. In a note to clients last week, investment bank Bear Stearns Cos. warned that political trends in Latin America could hurt overseas investors who have poured billions of dollars into stocks and bonds in the past year, sending stock prices to highs in some places, such as Mexico. The bank recommended that investors cut their exposure to the region. Other analysts say a pragmatic left will continue to dominate the landscape, especially since most leaders will have to rely on outside investment, debt or taxes to generate funding for their social programs, unlike Mr. Chávez, who has the advantage of Venezuela's oil wealth.

3. Presidential candidate Ollanta Humala, a left-wing ______of free trade and free-market policies, has surged to the top of the polls ahead of Peru's election in April. a. professor b. supporter c. opponent Correct d. teacher

4. Mr. Humala condemns ______as a U.S.-led assault on the poor. a. globalization Correct b. nationalization c. Wal-Mart d. Target

For Some Chinese, Success in Life Is A Name Change Away Businesspeople Use Feng Shui To Choose New Monikers By LI YUAN January 17, 2006; Page A1 http://online.wsj.com/article/SB113746737599348280.html

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 4 of 29 When Li Jun asked a feng shui master last March for tips on how to make his new investment consultancy in Beijing successful, he got a quick answer: Change your name. "Jun," which is Mandarin for "handsome," would not help his career, the master determined. Instead, he suggested Mr. Li call himself "Jianming," which means "establishing a bright future." Mr. Li immediately started using the name Li Jianming in all his social and business dealings. Ever since, his business has been growing. His staff has expanded to more than 20 from just a handful in less than a year. Mr. Li attributes his success to his new name. "I will do whatever the master says can bring better luck to my business," says Mr. Li. Name changes such as Mr. Li's are increasingly common in China amid a business boom and a resurgence of feng shui. An ancient Chinese art, feng shui aims to help people achieve health, prosperity and harmony through the layout of buildings, the arrangement of furniture and the bestowing of names with good omen. Shortly after Mr. Li changed his name, his wife changed hers. Later in the year, three of his close friends did the same. Though no official records exist, Chinese scholars believe that more than a million people in China have changed their given names in recent years. The number of feng shui masters specializing in changing names also has increased rapidly. A street outside Yonghe Gong, a Tibetan Buddhist temple in central Beijing, is lined with dozens of shops that offer help with name changes. Less than a decade ago, there was just one. Thousands of Web sites are dedicated to finding names for newborns and adults. In chat groups, Chinese discuss which names are good and which are bad. People can even use their cellphones to send a text message containing their name to a feng shui consultancy. Seconds later, they receive a text message saying whether the name is "auspicious" or "ominous" or a mixture of the two. Name changes have gained popularity as the country's political climate eased over the past decade. Many name changers are driven by a desire to reconnect with China's rich pre-Communist history, when feng shui-blessed names were popular and superstition about names was prevalent in all parts of society, from emperors to farmers. Today, name changes are especially popular among the country's new business elite. Entrepreneurs believe a new given name offers a chance to start a new chapter in life. Moreover, a new name is seen as an expression of personal freedom, at a time when individualism is on the rise.

5. An ancient Chinese art,______aims to help people achieve health, prosperity and harmony through the layout of buildings, the arrangement of furniture and the bestowing of names with good omen a. kung fu b. Mingjian c. feng shui Correct d. Tse-tung

6. Though no official records exist, Chinese scholars believe that more than_____ people in China have changed their given names in recent years a. 10,000

Revenue Search In Latest Deal, Google Steps Further Into World of Old Media Internet Giant Expands Role As an Advertising Broker By KEVIN J. DELANEY January 18, 2006; Page A1 http://online.wsj.com/article/SB113750713079248534.html

Google Inc. has brought in billions of dollars in revenue by brokering advertisements that appear on Web sites. Now it is taking its ad machine beyond the Internet in an ambitious quest to place ads in traditional media such as newspapers and radio. The move could open enormous new markets to the search company. But it could also test the limits of Google's automated ad-placement technology that brought it more than $3 billion in online ad revenue in 2004. The Mountain View, Calif., company yesterday announced the latest prong of its offline- ad efforts, the acquisition of closely held dMarc Broadcasting Inc. of Newport Beach, Calif. DMarc runs an online system for advertisers to buy radio airtime. It then automatically slots the advertisers' commercials into radio stations' computers for broadcast. The deal calls for Google to pay $102 million in cash and up to an additional more than $1.1 billion over three years if dMarc meets certain targets. Most people think of Google as a place to go to gather information. But in a business sense, Google operates as a huge clearinghouse for advertisers. At the heart of Google's advertising operation is an automated system that auctions off the right to place advertisements on its search-results pages when an Internet user types in certain key words. Most of its advertisers simply log into the system to place their ads and make their bids. They pay only when someone clicks on the ad. Google also brokers the sale of ads that appear on other Web sites -- sometimes tied into key words and sometimes not. The radio deal is the latest of a series of recent moves by Google in which it aims to bring its Internet advertising expertise to bear on old-media markets. Since last year, Google says it has been placing ads on behalf of advertisers in three magazines and the Chicago Sun-Times newspaper. And Chief Executive Eric Schmidt late last year acknowledged in an interview that the company is considering extending its ad system to TV advertising as well.

7. Google Inc. has brought in _____ dollars in revenue by brokering advertisements that appear on Web sites. a. 200,000 b. millions of c. billions of Correct d. trillions of

8. Since last year, Google says it has been placing ads on behalf of advertisers in three ______and the Chicago Sun-Times newspaper. a. billboards

Walt Disney Is In Serious Talks To Acquire Pixar By MERISSA MARR and NICK WINGFIELD January 19, 2006; Page A1 http://online.wsj.com/article/SB113764205313450605.html

Walt Disney Co. is in serious discussions to buy Pixar Animation Studios after months in which the two animation giants have been exploring ways to continue their lucrative partnership, according to people familiar with the matter. In the deal under discussion, Disney would pay a nominal premium to Pixar's current market value of $6.7 billion in a stock transaction that would make Pixar Chairman and Chief Executive Officer Steve Jobs the largest individual shareholder in Disney, according to people familiar with the situation. That would vault Mr. Jobs into an even more influential place in the media world, where he already holds tremendous sway as head of Apple Computer Inc. Yesterday, Apple reported that net income nearly doubled in the latest quarter on huge demand for its iPod music players. People familiar with the situation caution that the talks are at a sensitive stage and that the outcome isn't certain, noting that other options are possible. Disney and Pixar have been partners for more than a dozen years under an arrangement in which Disney has distributed and co-financed popular and profitable Pixar movies such as "Toy Story," "Finding Nemo" and "The Incredibles." Two years ago, however, Mr. Jobs abruptly said he would end the relationship when it expires later this year and seek a new distribution partner, amid acrimony with then-Disney CEO Michael Eisner. Disney CEO Robert Iger, who took over last October, has made it a priority to get the companies' relationship back on track. Talks have gained momentum in recent months and a resolution could come soon. In a warming of relations, Mr. Iger last fall decided to allow Disney TV shows like "Desperate Housewives" and "Lost" to be made available in a format that could be downloaded and played on Apple's iPod devices. Both sides accept that Pixar's stock price has a takeover premium built into it after weeks of speculation that Disney might try to take a stake in the company or buy it outright. However, the companies are still haggling over a final price, and any sharp moves in Pixar's share price could easily push the negotiations off course. People familiar with the situation say the two sides could decide on a less-ambitious course, including some form of agreement for Disney to distribute movies that Pixar finances and makes. An acquisition would give Pixar and Mr. Jobs a way to cash in on the company's unbroken run of blockbuster, computer-animated films. Mr. Jobs would likely join the Disney board, people familiar with the situation say. And Pixar's John Lasseter, the Disney alumnus who directed "Toy Story" and the upcoming "Cars," would take on an expanded role overseeing Disney animated movies. Pixar is now near a point where it needs to decide who will distribute its post-Disney releases, including a film about a rat living in an upmarket Parisian restaurant.

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 7 of 29 While Disney could face questions about Pixar's high valuation, the deal under discussion would secure for Disney the most successful producer of one of its most important products: animated movies. Disney's own feature animation department is in the midst of a still-uncertain transformation as the company moves from the hand-drawn movies on which it made its name to the computer-animation genre that has overtaken it in recent years. Disney's first entry in the computer-animation business, the recent "Chicken Little," was a modest success. Since taking over last fall, Mr. Iger has made it clear that animation must be the No. 1 creative priority for the Burbank, Calif., entertainment company. Disney pioneered the genre with classics such as "Snow White and the Seven Dwarfs" and revived it decades later with a string of new hits such as "The Lion King." But Disney's traditional hand-drawn films began to suffer commercially when movie audiences took to computer-animated fare such as Pixar's films and DreamWorks Animation SKG's "Shrek" series. Still, Disney was able to benefit from the rise of computer animation through its association with Pixar. An acquisition of Pixar would give Disney a much-needed leg up in restoring its leadership in the business. An acquisition also would give Disney greater access to a stable of new characters that could be leveraged across the Disney empire in the same way it built franchises around its own characters. It would also ensure that Pixar is involved in making sequels to its movies -- something Disney currently controls -- and give Disney access to cutting-edge technology. For the fiscal year ended last Oct. 1, Disney reported profit of $2.53 billion on revenue of $31.94 billion.

9. Disney hopes to acquire Pixar to help in its transition from hand-drawn animation movies to______. a. cartoon versions of Desperate Housewives and Lost b. computer generated movies such as Chicken Little Correct c. reviving The Mickey Mouse Club d. building a Finding Nemo theme park in Sidney

10. Disney's first entry in the computer-animation business, the recent "Chicken Little," was ______. a. a modest success Correct b. a modest failure c. a major blockbuster d. a major bomb

An Audacious Enron Defense: Company's Moves Were All Legal By JOHN R. EMSHWILLER January 20, 2006; Page A1 http://online.wsj.com/article/SB113772974804651717.html

HOUSTON -- Four years of investigations and intense news coverage have made Enron a synonym for fraud and sleaze. But when the trial of former top executives Jeffrey Skilling and Kenneth Lay begins Jan. 30, defense lawyers will make a bold argument: Everything their company did was legal.

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 8 of 29 That approach stands in stark contrast to some other big-name corporate defendants in recent history. Lawyers for former WorldCom Inc. Chief Executive Bernard Ebbers and former HealthSouth Corp. chief Richard Scrushy didn't dispute that large-scale financial shenanigans had occurred at the companies. They simply argued that their clients didn't know about the wrongdoing. A New York jury convicted Mr. Ebbers, while a Birmingham, Ala., jury acquitted Mr. Scrushy. To make his case, Mr. Skilling has chosen Daniel Petrocelli, a civil litigator with no criminal-trial experience. The 52-year-old Mr. Petrocelli will argue that the government is trying to criminalize legitimate accounting and financial decisions. Mr. Skilling, also 52, is armed with an eye-popping war chest. To date, according to people familiar with the matter, he has supplied his lawyers with about $23 million of his own funds, supplemented by $17 million in insurance coverage that Enron had for its officers and directors. And that's before the trial even begins. Mr. Petrocelli says he plans to ask the case's presiding judge, Sim Lake, to free up more of Mr. Skilling's money to pay legal costs. Mr. Lay reaped over $200 million and Mr. Skilling over $100 million from Enron in compensation and stock profits, according to an indictment that charges the men with conspiracy and securities fraud. The 63-year-old Mr. Lay has said that his available liquid assets total only about $1 million. Mr. Lay's lawyer, Michael Ramsey declined to comment on the Lays' finances, other than to say that his client has spent "millions" on his own defense. Mr. Ramsey acknowledged that the Skilling legal team has "been carrying the pretrial oars." The remarkable spending by Mr. Skilling is paying for a phalanx of lawyers, document crunchers and other specialists that would be far out of reach for the average criminal defendant. Those on the payroll have included an economist and a public-opinion pollster. The team has sifted through millions of pages of records and sat through hundreds of hours of depositions and hearings in other Enron cases, looking to glean any nugget that could work to their advantage. Kathryn Ruemmler, deputy director of the Justice Department's Enron Task Force, declined to comment on the defense's spending or other aspects of the case. Mr. Petrocelli, a partner at Los Angeles-based O'Melveny & Myers LLP, argues that the scope of Enron's operations and the breadth of the criminal charges against Mr. Skilling require an unprecedented defense effort. Enron, whose peak revenue reached $100 billion a year, collapsed into bankruptcy in December 2001. Mr. Skilling was indicted in February 2004, and the charges include insider trading. Mr. Petrocelli says corporations have a lot at stake in Mr. Skilling's defense. The lawyer seeks to prove that the alleged crimes were actually commonplace and legitimate business practices, used for such routine purposes as managing cash flow and hedging against losses on investments. "This is probably the most important case in business history," says Mr. Petrocelli. Adds Mr. Skilling: "I believe strongly that this is a business case. I don't believe that I'm involved in a criminal case." While some 30 other people have been criminally charged in connection with Enron, Messrs. Lay and Skilling have long been the prime targets. The two men were the public faces of Enron, the only people to hold the chief executive's post and, according to the government, the two leaders of an elaborate scheme to hide the company's mounting

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 9 of 29 financial problems from the public. Though officially No. 2 at the company for much of the period in dispute, Mr. Skilling was widely viewed as the man most responsible for building and running the Enron colossus. Both defendants chose lawyers who mirrored their own personalities. Mr. Lay's lawyer, Mr. Ramsey, is a veteran Houston criminal attorney with a folksy demeanor that masks a shrewd and tough mind, say people who know him. In 2003, he helped win the acquittal of Robert Durst, scion of a wealthy New York real-estate family, on a charge of murdering and dismembering a man. Mr. Durst claimed self-defense. Mr. Petrocelli, like his client, is smart, intense, and willing to argue over even small points. "I value passion probably more than any other attribute," says Mr. Skilling, adding that he was impressed by Mr. Petrocelli's experience in business cases. Mr. Skilling's team also includes two lawyers, Ron Woods and Mark Holscher, with criminal- law experience and another business litigator, Randy Oppenheimer. Around the time of Enron's collapse, Mr. Skilling hired O'Melveny & Myers to help him with the wave of government investigations and shareholder lawsuits that were springing up. Mr. Petrocelli says he had nothing to do with the case -- and paid little attention to the Enron scandal -- until just before Mr. Skilling's indictment, when colleagues brought him into the matter. He says that at his first meeting with Mr. Skilling he noted he wasn't a criminal lawyer. The client replied: "Great, I'm not a criminal." Mr. Petrocelli has pushed himself into unfamiliar territory before. Working as an auditor at a bank in Los Angeles after college -- a job he didn't like much -- he enrolled in a night law school and graduated first in his class. After joining a small Los Angeles law firm as a litigator, his profile skyrocketed in 1995 when he got involved in a suit related to the O.J. Simpson case. Mr. Simpson had just been acquitted in the murders of his ex-wife and her friend, Ron Goldman. A business client of Mr. Petrocelli's helped introduce him to Fred Goldman, Ron's father, who was looking to sue Mr. Simpson. Fred Goldman recalls being impressed by Mr. Petrocelli's record as a litigator and his candor. "He was very upfront and honest," says Mr. Goldman. "He said that he had never done a suit like this before." In Mr. Goldman's civil suit for wrongful death, where the burden of proof was lower than in a criminal trial, the jury awarded a $33.5 million judgment against Mr. Simpson. Mr. Petrocelli garnered a bonanza of press attention, a $2 million advance for a book called "Triumph of Justice" and eventually an offer to become a partner at O'Melveny, one of the biggest law firms in Los Angeles. In his Simpson book, Mr. Petrocelli says his motto for the case was "less is more." Unlike the Simpson criminal trial, which meandered on for months, Mr. Petrocelli wanted to keep his case against the former football star relatively short, simple and tightly focused on the two murders.

11. Four years of investigations and intense news coverage have made Enron a synonym for ______. a. corporate ethics b. corporate charity c. corporate success d. fraud Correct

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 10 of 29 12. Though officially No. 2 at the company for much of the period in dispute, ______was widely viewed as the one most responsible for building and running the Enron colossus. a. Mr. Lay b. Ms. Ramsey c. Mr. Petrocelli d. Mr. Skilling Correct

Questions 13 – 17 from Marketplace

When Filling Top Jobs Inside Makes Sense -- And When It Doesn't By GEORGE ANDERS January 16, 2006; Page B1 http://online.wsj.com/article/SB113736902205847220.html

When should your company fill senior vacancies by looking outside for fresh talent? And when are the best candidates already on your payroll, being carefully groomed for promotions or new assignments? Some of America's best-known companies have staked out sharply different positions on these questions. At one extreme is General Electric, where as many as 80% of the top executives have built their entire careers at the company. "We have a mandate to develop our own talent," says GE's head of human resources, William Conaty. "We try not to rely any more than we have to on the outside world." As proof, he says, look at the $1 billion a year GE spends on its Crotonville, N.Y., management training center and other in-house leadership development programs. By contrast, Cisco Systems wants fresh faces. CEO John Chambers has said for years that the network-equipment maker should fill just 60% of its management vacancies internally and look elsewhere for the rest. "Talent from the outside, in selective and strategic roles, can help to spark new ideas," he declares. Grafting in new leaders has its risks. They often want sign-on bonuses and pay boosts that make them 20% to 30% more expensive than a homegrown contender, says David Ulrich, a professor at the University of Michigan business school. Some don't get the hang of their new company's culture, he adds. And they may not stay as long. But if companies don't seek fresh blood periodically, they can become dangerously insular, Prof. Ulrich warns. The "full sponge" syndrome can take hold, where managers are so busy doing familiar tasks that they overlook new opportunities. "At fast-growing or fast-changing businesses," he adds, "you may find that existing managers can't scale up or transform what they do." In general, experts see five situations where it makes sense to overcome the natural desire to promote from within -- and turn to a newcomer instead. Three are straightforward and unlikely to cause much organizational stress. The last two call for serious soul-searching about a company's goals, capabilities and shortcomings. The easiest cases involve geographic expansion plans. Open an office in Kazakhstan, and it's likely that no existing managers have the local contacts and language skills to be effective. It's easier to snap up a capable outsider.

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 11 of 29 General Mills, for example, promotes insiders for the vast majority of its domestic management positions. But outside the U.S., it's harder to rotate capable managers into each opening. "International talent isn't as mobile," explains Michael Peel, the food company's head of human resources. So General Mills turns to newcomers for as many as 50% of its non-U.S. management jobs. Looking outside is a natural choice, too, when companies want to expand an existing line of business by adding expertise in a fast-moving new specialty. GE has done that lately by snapping up real-estate experts to help expand that part of its financial services business. And Cisco's Internet business solutions group repeatedly goes outside for experts who can lead industry-specific teams that advise customers.

13. One of the downsides to promoting from outside a company is______. a. they stay for a long time b. they bring fresh ideas to the company c. they sometimes don’t relate very well to the company culture Correct d. they are always experts

Dread and Smiley Faces Greet All Those Cards That Circulate at Work By JARED SANDBERG January 17, 2006; Page B1 http://online.wsj.com/article/SB113745227138147935.html

You would never mistake Kristin Eitzel for the sort of bubbly person who makes liberal use of exclamation points. But that's what the accountant often becomes when she gets back to the office after spending several weeks at a client site. Inevitably, she's greeted by a pile of birthday cards for co-workers prepared by an office secretary and already signed by others at the firm. "So now not only do I have to think of one witty comment," she says, "I have to think of [several] distinctly unique, witty comments." Instead, though, she often writes, "Happy Birthday," and draws a smiley face with two exclamation points for the eyes. "It's ridiculously eighth grade and I don't know why I always revert back to it," she says. But, she adds, "I don't understand why 35 people in the office have to do the same thing I do -- try to think of something to say." Almost nothing at work seems as simple as signing the get-well, going away, or birthday greeting card, but nothing on the job is so disproportionately difficult. One doesn't need a PowerPoint chart, a process meeting or a clarifying email to know what to do. Simply remove the card from its unmarked manila folder and before passing it on write your missive on anything but the horizontal axis. Easy, right? "It's this moment of incredible pressure like standing on top of the diving board doing a triple flip at the Olympics and you've never actually done this before," says James McDonnell, a partner at a strategy consultancy. Part of the difficulty lies in the fact that greeting card notes have a trove of rules, mostly unwritten. For starters: encapsulate relevance, wit, sentiment and reminiscence in less space than a Haiku takes. There also can be a discrepancy between the sentiment that must be expressed and some of the underlying facts. In the case of going-away cards, for example, we feel pressure to

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 12 of 29 be incredibly kind even though someone is voting with his feet, notes Mr. McDonnell: "They've said, 'I may not be so thrilled about it here. I may not be so thrilled about you.' " But even if it's someone you've barely spoken to, he adds, you can't just say, "I have chosen this moment to finally recognize your existence, now that I am assured I will never have to cross paths with you again." Mr. McDonnell belongs to the camp that believes it's preferable to sign late in the continuum, figuring that, "if you're lucky, all the space is taken up." But that theory has its detractors. "You definitely don't want to be at the end," cautions Alesya Opelt, senior director of marketing at interactive promotions company ePrize. "You have everyone else to compete with and you're cornered out of the good real estate on the card." Still, even with an expansive location, Ms. Opelt finds it easier to enumerate what she can't write than what she can: You can't talk about someone's age, burn a bridge, use more than one exclamation point (a rule often broken, she concedes), or say anything to offend the rest of the audience, which extends well beyond the card's recipient. "Leadership and people you don't talk to are judging you because that's the only interaction with those people you have," Ms. Opelt notes. Public affairs consultant Trish Wexler adds another don't: "You can't cross out." Accustomed to her computer's "Backspace" key, Ms. Wexler sometimes finds she has written something that sounded funny in her head before it looked so offensive on paper. Then she is faced with either excising words on a card that may land in a keepsake box handed down for generations, or trying to make "You will have great attendance at your funeral" look like "You will have great things coming in your future." And if you think that you're not writing for posterity, best wishes. "I have one of those goodbye cards in front of me," says Rich Layton, founder of Transform Communications, a branding consultancy. Before he left his former company, colleagues passed a card around and most wrote notes like "Hope your future is bright." But some simply autographed the note without saying anything, including his manager. "You wish that the guy had something encouraging to say," says Mr. Layton, even though it's already 29 years later. In the 22 years that engineer Don Benjamin has worked for his employer, he has written notes in dozens of cards but still finds the experience frustrating. For him, much depends upon how well he knows the recipient. If it's a colleague he's worked with for years, "adding some snippet of good wishes to the card seems to trivialize our entire relationship," he says. "Can I really say goodbye forever all wrapped up into 'Best wishes and may I have your Aeron chair?' " If he barely knows the person -- or better yet, doesn't like him -- writing the note is easier. One solution: "Words can't express my feelings about your leaving the company." But even now, Mr. Benjamin is still unearthing unwritten rules of office greeting card etiquette. Late last year, when he gathered in a conference room with 40 colleagues to sign the company Christmas card, he made the mistake of signing just below the card's printed greeting. A colleague told him: That's where the company president is supposed to sign.

14. Signing greeting cards at the office can be difficult because: a. there is pressure to be witty and original b. sometimes you do not like or know the person very well

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 13 of 29 c. unlike a computer, you can’t easily change or erase what you have written d. all of the above Correct

Some Students Use Net To Hire Experts to Do Their School Work January 18, 2006; Page B1 By LEE GOMES http://online.wsj.com/article/SB113754697326149204.html

That a student who freely admits to a fondness for night life is also behind in his studies won't come as a surprise. And it certainly isn't news that students have been partying their way to bad grades since As and Fs were invented. But what the computer-programming student who goes by the handle "Lover Of Nightlife" did last month, as the fall semester raced to a close, could only have happened in the age of the Internet: He went online to outsource his predicament. "This is homework I did not have time to study for," he said in a message on a Web site devoted to outsourcing computer projects. "I need you guys to help me." Attached was a take-home final exam for a computer class that Mr. Nightlife Lover wanted to pay someone else -- presumably, someone from a place where people can't afford a lot of night life to begin with -- to take for him. This bit of commerce took place on Rentacoder.com, a Web site that has been mentioned before in this column as an example of globalization in all its blood-curdling efficiency. Rent A Coder enables people -- usually Americans -- who need computer programs to put them out to bid -- usually for cut-throat prices by Indians and Eastern Europeans. But if U.S. companies can go online to outsource their programming, why can't U.S. computer students outsource their homework -- which, after all, often involves writing sample programs? Scruples aside, no reason at all. Search for "homework" in the data base of Rent A Coder projects, and you get 1,000 hits. (An impressive number, but still a tiny fraction of all computer students, the vast majority of whom are no doubt an honest and hardworking lot.) A few examples: "I need a simple console-based program and a PHP script written that uses the openssl library." "I need 2 algorithms filtering -- median and Gaussian." "A C++ program that will implement a billing system using threads. Needs to be completed tonight if possible."

15. “RentACoder.com” is a web site that can be used for______. a. outsourcing computer programming homework Correct b. writing term papers on the Civil War c. finding computer geeks to party with d. finding out whether a term paper has been plagiarized

Cingular Joins Rivals With Fast, Reliable Wireless Broadband By WALTER S. MOSSBERG January 19, 2006; Page A9 http://online.wsj.com/article/SB113762837312550211.html

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 14 of 29 Gradually, over the past couple of years, it has become possible in many major U.S. cities to get wireless Internet access, at speeds comparable with those of wired home DSL lines, without having to be anywhere near a wireless "hot spot" in a cafe or hotel or airport. These wireless broadband connections, available over a wide swath of the major metropolitan areas where they are offered, have been sold by two big cellphone companies, Verizon Wireless and Sprint. Both charge $60 a month for unlimited use of the services, which Verizon calls BroadbandAccess and Sprint calls Mobile Broadband. Both companies' services are based on a technology called EV-DO, which stands for Evolution-Data Only. This is a revolutionary development. It means that, with a properly equipped laptop or smart phone, you can now get enough speed on a wireless connection to do everything you would do with a fast Internet connection at your desk -- stream video, download large Web sites, open large email attachments. And you don't have to shell out $4 for a Venti latte just to gain access to a Wi-Fi hot spot. Not only that, but these fast, new networks have, for the first time in years, given the U.S. the edge over Europe in cellular wireless data networks. Actual speeds on the EV-DO networks tend to be 600-700 kilobits a second, which is double or triple the actual speeds of the fastest widely deployed cellphone networks in Europe. Even the lowest speed the U.S. companies promise, 400 kbps, is faster than the maximum speed of today's common European systems. Now, this American trend has taken another step forward. Last month, Cingular Wireless announced it is leaping into the broadband wireless arena. It rolled out a service called BroadbandConnect to compete with Verizon and Sprint. Like its competitors, Cingular is charging $60 a month for unlimited use of its service, and it is promising speeds averaging 400-700 kbps -- about what you'd actually see with the slowest home DSL services. But Cingular's new offering is based on a different technology, called HSDPA, for High Speed Downlink Packet Access. It's the successor technology to the one being used today in Europe. Because of its late start, Cingular's wireless broadband service is much less widely deployed than its Verizon and Sprint competitors. It is available in only 16 major cities -- Austin, Texas; Baltimore; Boston; Chicago; Dallas; Houston; Las Vegas; Phoenix; Portland, Ore.; Salt Lake City; San Diego; San Francisco; San Jose, Calif.; Seattle; Tacoma, Wash., and Washington, D.C. By contrast, Verizon's wireless broadband service can be used in 180 major markets, and Sprint's covers more than 100. But Cingular is planning to have most major markets online by year end. Currently, the service is available on laptops using special wireless modem cards Cingular is selling for $99, after rebates. Eventually, it will also be available on smart phones.

16. Cingular's new wireless broadband service is based on ______technology. It's the successor technology to the one being used today in Europe. a. Cin-ABON b. HSDPA Correct c. EV-DO d. GTALL

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 15 of 29 How NBC Plans To Skate Out Of Last Place By BROOKS BARNES January 20, 2006; Page A9 http://online.wsj.com/article/SB113772614068951620.html

At first glance, General Electric Co.'s NBC seems to be in worse shape than ever. Prime- time ratings are down 16% over last year. Big franchises such as "The Apprentice" have faltered. Overall, NBC -- which until last season spent almost two decades as the No. 1 television network -- still remains in last place among major broadcasters. But the Peacock is stronger than it seems. Amid its ratings plunge, the network has launched two hit comedies popular with upscale viewers, "My Name is Earl" and "The Office." Its new game show, "Deal or No Deal," is a budding ratings phenomenon. The network's highly profitable late-night segment continues to rank a solid No. 1, and the news division is sizzling. Even the "Today" show has regained a wide lead over "Good Morning America" on Walt Disney Co.'s ABC, after suffering a highly-publicized rough patch in May. NBC still has a brutal climb ahead, lined with land mines such Katie Couric's possible departure from "Today." And nobody expects the network to regain its all-around No. 1 crown soon. That would take a prime-time hit on the scale of "American Idol" on News Corp.'s Fox or "CSI: Crime Scene Investigation" on CBS Corp.'s CBS. Even so, NBC has an opportunity in its nascent successes, together with the coming Winter Olympics, to regain its footing and woo back advertisers, media buyers say. "NBC is starting to get its act together," says Laura Caraccioli-Davis, a senior vice president at Starcom Entertainment, a Chicago ad-buying firm owned by Publicis Groupe SA. "Let's hope they don't blow it." Whether NBC can take advantage of its newfound momentum depends on how well it uses the Winter Olympics as a promotional platform and how viewers respond to a slew of expensive new programs the network plans to launch in March. It is crucial for NBC to enter the spring on the move because that is the "upfront" selling season, when advertisers commit to spending levels for the following fall season -- and it is especially crucial as marketers look to new opportunities on the Internet. Last year, NBC's haul during the "upfront" declined by more than $800 million. "We're clearly not in the running for No. 1, but we want to show advertisers that we have some spark," says Kevin Reilly, NBC's president of entertainment. "We're going to be very aggressive with promotion to make a lot of noise. This isn't going to be the usual downhill trot into May." Promoting entertainment programs during sports events is tricky because most viewers of the Super Bowl or World Series tune out when the games are over. The TV industry refers to these viewers as "borrowed." And the upcoming Winter Olympics, which start Feb. 10 and conclude Feb. 26, lack buzz this time around, partly because they won't be held in the U.S. -- the last cycle was in Salt Lake City -- and partly because NBC doesn't have juggernaut shows, such as "Friends," to help promote them. But the Winter Olympics are unlike most other sports programming in that they attract a large number of female viewers. Women are more likely to watch prime-time TV than men, and NBC hopes heavy promotion of new programs during figure skating and other

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 16 of 29 highly rated Olympics events will persuade female viewers to stick around after the games are over. Along with giving "Will & Grace" a major finale as it ends its run, NBC plans to launch three major new shows after the Winter Olympics. "Conviction," a character-driven drama from "Law & Order" impresario Dick Wolf, focuses on assistant district attorneys in New York. "They have all of the responsibility and none of the experience," says Mr. Reilly, adding that the series has "absolutely no resemblance" to the ubiquitous but still- powerful flotilla of "Law & Order" shows.

17. Overall, NBC still remains in ______place among major broadcasters. a. second b. third c. first d. last Correct

Questions 18 – 23 from Money & Investing

Will Your New Toy Be Reliable? January 14, 2006; Page B1 By RON LIEBER http://online.wsj.com/article/SB113720017003146627.html

The question of whether extended warranties are worth the money is back in play. Conventional wisdom says that paying extra for a warranty is usually a bad idea. But recently, companies such as Dell, Whirlpool and General Electric cut the length of their own warranties on some products -- giving buyers more incentive to buy extended coverage. Meantime, Wal-Mart Stores has started selling its own warranties, competing with Best Buy and Circuit City Stores. Then there's the huge demand for expensive televisions, which can contain technology that hasn't proven its long-term reliability. Extended warranties seem overpriced. Just 20 cents of every dollar spent on them is needed for claims, according to Safe LLC, a warranty-consulting firm. Retailers who sell them generally end up with 50 cents of that dollar. (The rest goes to administrators and insurers.) That half-dollar is almost pure profit. Do you want to subsidize that windfall? Here's how to decide. The most important question -- particularly because manufacturers are cutting their warranties -- is, how often does this stuff break? Companies won't say, though a 2004 Consumer Reports survey on the odds of an item needing a repair in the first three years offers clues. About a third of all computers needed work. Clothes dryers and electric ranges required fixing 13% and 11% of the time, respectively. If you're coveting plasma but worried about the expense of fixing the newfangled components, Eric Barnum, editor of Warranty Week, suggests any early adopter of new technology think about coverage this way: It may be worth the extra cost, if it provides not only for repairs, but also gives you someone to talk to when the device isn't broken but still doesn't seem to work as expected. When shopping, start by asking how much hand-holding comes with a warranty. And will someone come to your house to fix a broken item? If not, nail down who pays to get

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 17 of 29 it to the repair center. A laptop-specific question: Does the extended warranty cover damage from dropping the thing or spilling coffee on it? Also, try not to buy an extended warranty the day you purchase the product. Go home, read the manufacturer's warranty (and see if the company offers its own supplemental coverage), then read the extended-warranty brochure. Also, call your card company: various Visas, MasterCards and American Expresses will extend many warranties. If you still want to pay more for peace of mind, you aren't alone: at least one in four Sears appliance customers do. But compare warranties the way you would evaluate prices. A spot check on plasma TVs just under $2,000 at Best Buy, Circuit City and Wal-Mart in the New York City area revealed pricing for extended warranties that was roughly comparable, ranging from $70 to $107 a year. But terms varied: Circuit City requires you to buy at least three years of protection; Best Buy requires four. Both run concurrently with the manufacturer's warranty, which seems redundant, but the chains note that they cover things that manufacturers' plans may not, such as batteries and expensive TV bulbs. Wal-Mart's plans don't cover those details -- but they wait to kick in until after the manufacturer's warranty expires.

18. Some of the issues to consider before buying an extended warranty include a. coverage of newer, high-end technology for peace of mind b. companies such as Dell, Whirlpool and GE have cut the length of their warranties c. check to see if your credit card will extend a warranty d. All of the above Correct

European Telecoms Vie For Emerging Markets Companies Face Stiff Competition Amid Bid for Future Expansion By CASSELL BRYAN-LOW January 16, 2006; Page C1 http://online.wsj.com/article/SB113737459207447328.html

LONDON -- Facing saturated home markets, many European telecommunications companies have set their sights on emerging markets for future expansion. But they are running into stiff competition from emerging-market players flush with cash for acquisitions of their own. That competition includes local providers, such as Emirates Telecommunications Corp. of the United Arab Emirates and Egypt's Orascom Telecom Holding SAE, as well as large industrial conglomerates such as Saudi Arabia's Saudi Oger Ltd. that are expanding into telecommunications. With expansion proving tougher -- and more expensive -- than many of Europe's largest telecom companies originally thought, some investors are concerned. "The burden of proof" is with the European players to show they can make more money than shareholders could if they invested directly in the emerging market, says Philippe Kiewiet de Jonge, an analyst at ABN Amro Asset Management. "That is very much a question mark." Mr. Kiewiet de Jonge, whose company holds about 110 million shares of Vodafone Group PLC of the United Kingdom, has been recommending shifting money out of shares of developed-market telecoms and into their emerging-market rivals.

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 18 of 29 Such moves are an added blow to Europe's telecommunications sector, which, despite cleaning up balance sheets and reducing debt in recent years, has had a lackluster past 12 months as investors wonder where new expansion will come from. The Dow Jones Euro Stoxx telecoms index slid 19% last year, and shares of Vodafone, the world's largest cellphone-service provider by sales, fell 11%. The Dow Jones U.S. telecoms index, by comparison, decreased 7% in 2005. Developing markets, such as Turkey and the Middle East, offer potential for the likes of Vodafone and Spain's Telefónica SA, among others. The number of cellphone subscribers in Western Europe increased about 8% in the fourth quarter from a year earlier, according to Wireless Intelligence, which tracks cellphone-industry data. That compares to an increase of about 34% in the Middle East and 55% in Africa. The Western European companies say their experience operating in competitive markets makes them well positioned to reap the benefits as those markets open up. Middle Eastern and Russian companies see that potential, too. Many of them are flush with cash as a result of high oil prices. Those high prices have bolstered broad-based investments in local stock markets, giving telecom companies elevated share prices that provide financial ammunition to pursue acquisitions. The "petrodollars are being recycled" by government and investors into local capital markets, says Henrik Aslaksen, a banker at Deutsche Bank AG. China also is starting to show some interest, says Tim Schwarz, a telecom lawyer at Linklaters. He notes that China Mobile Ltd. unsuccessfully bid in the privatization of Pakistan Telecommunications Ltd.

19. The number of cellphone subscribers in Western Europe increased about ______in the fourth quarter from a year earlier, according to Wireless Intelligence, which tracks cellphone-industry data. a. 8% Correct b. 34% c. 55% d. 75%

Computer Capacity By JUSTIN LAHART January 17, 2006; Page C1 http://online.wsj.com/article/SB113746299352748183.html

Two of the technology sector's biggest players -- International Business Machines and Intel -- report their financial results after the stock market closes today. But an economic report due out just before the open may offer a better insight into the tech business than those two companies. Each month, the Federal Reserve releases figures on industrial production and capacity utilization. Industrial production helps economists determine how quickly the economy is growing, and capacity utilization measures how close U.S. factories are to running at full capacity -- a figure that also offers clues on where inflation is heading. The closer manufacturers are running to full throttle, the easier it is for them to raise prices.

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 19 of 29 The Fed also tallies up these figures for different industries, including computer, communications-equipment and semiconductor makers. Taken together, these companies have been running at about 75% of capacity over the past year. That's up from the immediate post-bubble years, when tech companies' capacity-utilization rate fell as low as 57%, but it's well below the 81% it averaged in the 1980s and 1990s. In 2000 it was above 90%. Today's lower utilization rate could be reflective of the fact that, during the boom years, tech companies overexpanded and still haven't caught up. But more likely it's a sign of how the industry has aged and matured. Tech equipment, from personal computers to telecommunications gear, takes longer to become obsolete these days, and those longer product cycles make it easier for more competitors to enter the fray. Indeed, much of the low capacity utilization at tech-hardware manufacturers in the U.S. is because upstart Asian competitors are entering the market. And remember that IBM sold its personal-computer business to China's Lenovo Group last year. This maturing market is changing how investors view tech companies. A key focus today in Big Blue's earnings will be on its services business. Not only is it the largest division of the company, in terms of sales, but more important, it doesn't directly depend on sales of hardware. Intel, of course, is still a manufacturer -- it makes chips. A key concern among investors is how much of that business it may be losing to rival Advanced Micro Devices and that together both companies are building too many new facilities. In other words, that they're adding more capacity than they can utilize.

20. Capacity utilization is defined as______. a. the length of a product cycle b. a measurement of how close U.S. factories are to running at full capacity Correct c. an overexpansion of new manufacturing facilities d. a measurement of how well outdated facilities continue to produce

Martha Might Be Worth a Look Growth in Ad Pages at Living And Cooking-Crafts TV Show Could Help Stock Bounce Back By BROOKS BARNES January 18, 2006; Page C1 http://online.wsj.com/article/SB113755359531549357.html

Martha Stewart Living is finally starting to look good. Just before the homemaking entrepreneur emerged from prison last March, investors drove shares to a near-record price of $37.45, betting that Martha Stewart's media and merchandising empire was poised for a rebound. The optimism didn't last: Hefty third- quarter charges by Martha Stewart Living Omnimedia Inc., as well as Ms. Stewart's rocky return to television, sent shares plunging nearly 50% to a low of $16.28 in November. The stock yesterday fetched $18.06, up six cents, in 4 p.m. composite trading on the New York Stock Exchange. Now, some investors and analysts are sensing an opportunity, seeing evidence of a turnaround at the company, which has a market value of about $930 million. A host of low-risk initiatives put in place by newly installed Chief Executive Susan Lyne will soon

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 20 of 29 start generating meaningful revenue and lessen the company's heavy reliance on Kmart stores for merchandising sales, analysts note. "The company is now poised for significant year-over-year improvement," says Robert Routh, an analyst at Jefferies & Co., which recently initiated coverage with a "buy" rating. Mr. Routh doesn't own any shares, and Jefferies doesn't do business with Martha Stewart Living. To be sure, even at the current prices, the stock is expensive. It trades at a lofty price-to- earnings multiple of 450. Analysts expect the company to post a loss for 2005 but to return to the black this year with earnings per share of four cents, according to average estimates from Thomson Financial. In contrast, other diversified publishers have recently traded at multiples ranging from 15.4 to 42, according to a report by Morgan Stanley. Analysts expect Martha Stewart Living to post sharply higher earnings in 2007. One recent estimate projected EPS next year of 30 cents. Underlying the bullish sentiment is improvement at both old and new businesses. Amid a publishing-industry slump, ad pages at Living, the company's flagship magazine, were up 48% in the third quarter from a year earlier, while ad pages at "Everyday Food" doubled. The company raised advertising rates on Jan. 1. And Ms. Stewart's new syndicated cooking and crafts show is perking up. "Martha" is attracting about 2.2 million viewers a day, according to Nielsen Media Research, an 11% increase since October. The show, which the company owns, also is luring a younger audience than it had been, making it more attractive to advertisers. Among women ages 18 to 34, "Martha" is up 21%. While the stock has lifted from the lows hit in November, some investors think the stock could rise further. "We're giving it another look," says Michael Smedley, chief executive of Toronto-based Morgan, Meighen & Associates Ltd., an investment firm that manages about $700 million. Mr. Smedley's firm has twice held Martha Stewart Living shares, selling most recently when the stock started its steep slide over the summer. But now, he says, shares are "looking cheap, compared with potential growth." Part of the reason Martha Stewart Living has had a rocky ride over the past year is that the stock has traded more on perceptions of Ms. Stewart than on what is actually going on at the company, says Michael Meltz, a Bear Stearns media analyst. Shares tumbled, for example, when "The Apprentice: Martha Stewart" opened to lackluster ratings on General Electric Co.'s NBC in September. Several prominent TV critics heaped blame for the poor results on Ms. Stewart, calling the show "nauseating" and "bumbling." But Martha Stewart Living had no financial stake in the series. Ms. Stewart was simply paid talent for NBC. "There was a misperception in the marketplace that the low ratings somehow hurt her bottom line," says Mr. Meltz, who has an "underperform" rating on the stock. Bear Stearns doesn't do business with the company, and Mr. Meltz doesn't own any shares. The company stands to gain more from some newer ventures, particularly a deal with KB Home, one of the nation's largest home builders, to sell houses carrying Ms. Stewart's name. Martha Stewart Living will reap licensing fees from sales of the homes, whose designs are based on Ms. Stewart's own properties. But the effort is primarily designed as a way for the company to boost sales of furnishings and household products.

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 21 of 29 21. Martha Stewart’s Living magazine has increased its advertising pages in the third quarter by _____ over last year a. 25% b. 34% c. 48% Correct d. 65%

Google Stock-Sharing Plan May Bite Investors By GREGORY ZUCKERMAN January 19, 2006; Page C1 http://online.wsj.com/article/SB113763917137950549.html

Google Inc.'s profits are climbing, its stock price has been soaring and analysts are upbeat on the Internet-search company's future. But few investors are focusing on the growing number of restricted shares and options that Google is handing out to employees, which will emerge as a sizable expense in the next few years. That expense added up to a hefty $600 million or so as of Sept. 30 of last year, all of which will be charged against future earnings. As Google's business grows and it courts employees in a competitive marketplace, it is picking up the pace of its issuance of "performance-based stock units," according to securities filings, a form of compensation that many investors overlook. Between March 31 and Sept. 30 of last year, Google gave out 498,000 units, a close cousin of stock options, which likely will convert into Google shares over a four-year period. The units are valued at the price of Google shares at the time they are granted. Since the average stock price was about $300, the units represent an expense of about $150 million. Because the units vest over four years, accounting rules require the company to count one-quarter of their cost as an expense each year. So, Google took just $8.9 million of expense for the units during the second and third quarters. The remaining cost will hit earnings over the next few years. Google handed out virtually no stock units in the first quarter of 2005. But it gave out 154,000 stock units in the second quarter and 344,000 in the third period. The total outstanding grants, including those given out in the fourth quarter, will be disclosed when Google files its annual report in March. Google is on pace to give out more than one million of these share units a year. With the stock around $450, that means Google will be on the hook for an expense of about $450 million at this rate, most of it to be booked in future years. It all comes on top of other looming employment-related expenses. Google handed out new stock options -- a form of compensation that has received much greater attention over the past year or so -- with a cost of approximately $300 million in the first nine months of 2005. And it reported $143 million in deferred stock-based compensation as of Sept. 30, stemming from options, restricted shares and other units issued to employees.

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 22 of 29 All in all, Google faced almost $600 million of the stock- and option-related employment expenses as of the end of the third quarter of last year. "These are expenses yet to be recognized, and unless the employees who are incentivized generate more than enough revenue to cover the cost, there could be some earnings shortfall down the road," says Robert Willens, Lehman Brothers's tax and accounting analyst. "It's not an unusual method of compensation, but it's something investors need to be cognizant of." To be sure, the cost will be spread out over a period in which Google's earnings likely will surge, though it likely still will represent a significant cost. Analysts estimate that Google earned about $1.5 billion in 2005, and will earn about $2.6 billion in 2006, according to Reuters Research. "As we hire rapidly to scale up the company, it is natural to issue a larger number of stock awards than we would otherwise," says Steve Langdon, a Google spokesman. "The cost to the company of these stock awards occurs only over the periods the awards vest, which is when the employees earn the related benefit." Google also notes that it incurred an expense of $143 million through the first nine months of 2005 from old options and restricted shares, so the mounting expense from the units and options won't be the first time it has faced charges due to prior awards.

22. Google has handed out stock options and restricted shares to employees, that when added up equal ______or so as of Sept. 30 of last year, all of which will be charged against future earnings. a. $60 million b. $600 million Correct c. $60 billion d. $600 billion

Tokyo's Bulls Stay in the Ring By CRAIG KARMIN January 20, 2006; Page C1 http://online.wsj.com/article/SB113772432496551574.html

For many global investors, this week's shakeout in the Tokyo stock market was almost welcome. A rush of sell orders forced the Tokyo Stock Exchange to shorten its sessions Wednesday and yesterday. This mass selling, sparked by scandal surrounding the Japanese Internet company Livedoor, sent the blue-chip Nikkei Stock Average skidding nearly 7% in three days, though there was a partial rebound yesterday that continued early Friday, Tokyo time. Japan's bears seized on these events as an early sign that the market was due for another painful correction. But the Nikkei's 2.3% gain yesterday was testimony to what many international fund managers think: Tokyo remains the most attractive of the developed world's stock markets. After last year's 40% stock-market gain, these investors say, the market is due for a consolidation period -- not major decline -- and that once prices come down a bit, they will be right back in.

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 23 of 29 Some money managers thought this week's selloff offered enough of an opening. "This really has nothing to do with positive things going on in Japan," says Chip Perrone, senior international equity analyst at DuPont Capital Management in Wilmington, Del. He says his firm bought shares in Japanese consumer-electronics companies Wednesday. The technological glitch that closed the market early "doesn't affect the fundamentals of these companies," he says. Kathy Matsui, Goldman Sachs chief strategist in Japan, sent out a client note yesterday arguing that these corporate fundamentals remain in place and that the market experienced a "healthy correction." This confidence in Japanese stocks among market professionals offers a sharp contrast to the other major participants in the Tokyo market last year: day traders. The big rally attracted an army of young, computer-savvy individual investors who bet on the upstart technology companies that were listed on Tokyo's Mothers Index and who may be too shell-shocked by this week's meltdown to return soon. While the Nikkei is still less than half its peak level of 1989, the Mothers Index -- the market of high-growth and emerging stocks -- hit an all-time high Monday before crashing 22% in the two days following news that Livedoor may have concealed massive losses.

23. Many international fund managers think: ______remains the most attractive of the developed world's stock markets. a. Mexico City b. Paris c. London d. Tokyo Correct

Questions 24 – 26 from Personal Journal, Section D

More Employers Try Limited Health Plans Cheap 'Mini-Medical' Policies Cover Drugs And Doctor Visits, But Little Hospitalization By VANESSA FUHRMANS January 17, 2006; Page D1 http://online.wsj.com/article/SB113745963230248086.html

Employers are increasingly turning to an affordable type of health insurance that has a big catch: If you get really sick, it won't cover your major expenses. These low-cost offerings, called "mini-medical" or "limited-benefit" plans, are catching on as employers struggle to restrain the rising cost of health insurance. Available as group plans or individual policies, they typically cover four to 10 doctor visits a year, a certain amount of prescription drugs and some lab work or other tests. Premiums can cost as little as $40 a month -- far less than the $148 average for a major-medical plan bought on the market or the $335 average cost of someone on a company health plan, according to the Kaiser Family Foundation, a health-care policy research group. Nearly one million people have mini-medical plans, insurers estimate, and some of the plans' biggest sellers say business is growing 20% a year.

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 24 of 29 Mini-medical plans have been around since the '80s, and until recently were sold mostly to temp-agency, fast-food and chain-store workers. But they're becoming more commonplace as employers cut back on full benefits, or turn more to part-time and contract workers. Mini plans are also starting to appeal to a wider array of individuals who might otherwise not be able to afford insurance, including the self-employed or freelancers. Sometimes individuals buy these plans through professional associations. This spring a coalition of 10 large employers so far, including Avon Products, International Business Machines, General Electric and Sears Holdings, will make a number of low-cost options, including limited-benefit plans, available to independent contractors and part-time and temporary workers not eligible for regular company benefits -- about 900,000 people, including dependents. Three levels of limited plans will be offered via the coalition, from insurer UnitedHealth Group Inc. and, to a lesser extent, Cigna Corp. and Humana Inc. Some of the biggest names in health insurance are pushing into the market, in addition to UnitedHealth, reflecting the growing interest in mini-medical benefits. Aetna Inc. jumped into the limited-benefit plan business last year after buying one of the market's bigger players, Strategic Resource Co. of Columbia, S.C. WellPoint Inc., Nationwide Mutual Insurance Co. and Coventry Health Care have also recently developed or are expanding into limited benefit plans. Critics say that consumers don't always understand the limitations of these policies. Most hospital care isn't covered, or the benefits may be doled out in small increments, requiring consumers to contribute big chunks along the way. Annual payouts are often capped at $10,000 or less, so policyholders are largely on their own if catastrophic illness, such as a heart attack or cancer, strikes. "People have to be aware this isn't providing them the key purpose of health insurance, and that's protection from catastrophic or chronic disease," says Robert Fahlman, chief operating officer of eHealthInsurance, an online health insurance broker that stopped selling limited-benefit plans because they weren't big sellers and triggered confusion among customers. In a sense, the plans are the inverse of the "consumer-driven" health plans that many employers and policy makers are pushing today, which require patients to pay out of pocket for routine care but provide coverage for catastrophic needs. Insurance brokers say that some mini plans are being sold to people who have high-deductible, consumer- driven plans to cover catastrophic care and are looking for some coverage for everyday expenses. Layering the two types of plans together can still be cheaper than a traditional major-medical policy. For group plans, employers can, but often don't, subsidize the premiums. Instead they'll contract with an insurance company to sell directly to employees, much like some supplemental life-insurance policies. This allows them to tout jobs that come with some health benefits in the bid to recruit employees. The policies are typically designed as preferred-provider organizations, with a broad number of doctors and facilities in the plans' networks. Mini-medical plans cause more than their share of consumer complaints, say some brokers and state insurance regulators. Some critics worry that many customers are young people who might not fully grasp the plans' limitations, or individuals who are buying policies on their own without the guidance of an employer's human-resource department.

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 25 of 29 Overeager brokers may also gloss over them to promote their "upfront" benefits, say consumer groups, and some brokers and state regulators. But proponents of the plans say they provide access to the types of preventive care people use most often, such as check-ups and medications, at a price they can afford. "If the alternative is nothing, than something is better than that," says David Sherman, president of Preferred Benefit Solutions, a New Jersey-based employee-benefit management firm. Phoenix-based Star HRG, a unit of UICI and one of the biggest providers of limited- benefit plans, offers a range of policies. One of its core Starbridge plans costs employees $15.85 a week, or $38.65 to $58.25 for family coverage (mini-policies are commonly priced in weekly premiums, rather than monthly). For that, policyholders get up to $1,500 paid for outpatient medical expenses, though they pay a $20 co-payment for each doctor visit, 20% of other outpatient medical bills, and a $50 deductible along the way. The plan also covers up to $25,000 for hospital stays a year. But that's doled out in $250 parcels a day -- a fraction of the cost of a typical day in a hospital, which easily can run to several thousand dollars.

24. A major draw-back to “mini-medical” healthcare plans is a. it does not cover catastrophic or chronic disease Correct b. only fast-food restaurant employees are eligible c. annual pay-outs are capped at $100,000 d. they do not provide preventative medical care

The iMac Gets a Brain Transplant We Test New Apple Desktop To Gauge Impact of Intel Chip By WALTER S. MOSSBERG AND KATHERINE BOEHRET January 18, 2006; Page D1 http://online.wsj.com/article/SB113754130122449024.html

Just a couple of months ago, in this column, we proclaimed that Apple Computer's iMac G5, then the company's flagship Macintosh desktop computer for consumers, was the best consumer desktop PC on the market. In fact, we called it the "gold standard" of desktop PCs and said no desktop from the major makers of Windows-based computers could match it. Last week, in a surprise move, Apple gave the iMac a brain transplant. It chose the iMac as the first Macintosh model to be converted to work on the same Intel processors used by makers of Windows PCs, rather than the PowerPC processors from IBM that have powered Macs for many years. This was serious surgery to perform on the company's star product and launched the planned transition to Intel much sooner than originally expected. Apple says it changed chips because Intel's latest processors are faster and run cooler, and allow for more flexible and creative computer designs in the future. It says the new iMac is two to three times as fast as the old one, mainly because the Intel Core Duo chip it uses packs in the equivalent of two processors. But there's a downside. Nearly all existing third-party software for the Mac, including major programs like Microsoft Office, will have to be rewritten to run on the Intel

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 26 of 29 processor -- a process that is under way but will take months to complete. Apple had to build into the new model special, invisible, translator software that allows the older programs to run on the new chip in the meantime. This translator software, however, doesn't work with every program and can slow down the ones it does work with. So, how did the brain transplant go? Is the new Intel iMac as good as its predecessor? Does the machine's raw power offset the translation slowdown? To find out, we've been testing an Intel-based iMac against an iMac G5 only about a month old. The two machines look identical and sport nearly identical features. The major differences are hidden under the hood. For days, we ran a wide variety of software on the two iMacs, and performed all of the common tasks mainstream consumers do -- surfing the Web, emailing, instant messaging, word processing, using spreadsheets, editing photos, playing music, managing personal finances, playing simple games.

25. Last week, Apple chose the iMac as the first model to be converted to work on the same ______processors used by makers of Windows PCs. a. Intel Correct b. Win-Tel c. Power PC d. Wi-Fi

FDA Issues New Rules For Drug Labels By ANNA WILDE MATHEWS January 19, 2006; Page D1 http://online.wsj.com/article/SB113763259268850376.html

For the first time in more than 25 years, the Food and Drug Administration is revamping the format of prescription-drug labels, a move designed to make it easier for physicians and consumers to get clear information about medications. Drug labels -- sometimes called the package inserts -- are notoriously complicated documents, printed in tiny script that can stretch on for dozens of pages. Written primarily for doctors, they contain FDA-approved information on dosage and side effects. But patients and doctors alike have complained that the inserts are confusing, and there is evidence that physicians don't always follow the labels' recommendations. The new label rule, which has been in the works for several years, reorganizes the inserts into a more easy-to-follow, standardized format. The plan also includes a government database that will ultimately allow people to search for the information online at dailymed.nlm.nih.gov1. The changes come as the $250 billion pharmaceutical industry is facing a number of challenges regarding the dissemination of information about drugs, from side effects to clinical-trial data. The industry has closely monitored the development of the new labeling rule. Labels often play a key role in lawsuits brought by people claiming to be injured by a medication. Product-liability suits, such as the high-profile cases brought against Merck & Co. over its withdrawn painkiller Vioxx, have become a huge problem for drug makers.

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 27 of 29 The drug industry had warned that the new labeling might pose risks to manufacturers facing litigation from plaintiffs claiming they weren't warned about side effects of medicines, because not all risks would be equally emphasized in the new format. The FDA said that in response to the companies' complaint, the rule includes a statement that the content of labels should pre-empt state liability laws. The biggest change to the labels will be a new summary at the beginning called "Highlights." Like the nutrition box that appears on food packages, the new highlights section is designed to telegraph the most important information at a glance, using a standardized format. It will summarize the major uses and side effects of the drug, as well as dosing. The new label format will add some navigational tools, such as a table of contents. It will have the date when the drug won FDA approval, an important piece of information for doctors who are often more comfortable with medicines that have been on the market for several years. The change takes effect in 120 days for all new drugs and new approved uses, and phases in over seven years for medicines approved in the past five years. The changes will be voluntary for older drugs. The new label layout will also affect advertising, because the string of safety warnings that drug makers must include in print and broadcast ads is based on what's in the medicine's label. Drug makers will now be allowed to use the sometimes-shorter list of risks from the highlights section as a basis for their ads. Physicians say the label changes are important, because the inserts are meant to be the main source for doctors to get information about how to use a drug, as well as potential safety problems. But the old format was often difficult to read and -- perhaps because safety information was too easily missed -- warnings haven't always had an effect. A number of drugs, including the diabetes treatment Rezulin, have had to be pulled from the market after physicians didn't follow label recommendations. One study, published last year and based on patient prescription databases, found that even when drug labels had very strong "black box" warnings and recommended tests for patients starting the medicine, those tests were done only about half the time. The old layout is "terrible," says Rebecca Jaffe, a family physician in Wilmington, Del. "The science behind it comes first, and the clinical comes at the very end, but most of us are looking for the clinical information." FDA officials said that one goal with the new layout was to ensure that doctors wouldn't overlook the most important safety information, which now can be buried deep in the document. The new format will "alleviate much of the clutter" on labels and make them "more concise and coherent," said Andrew von Eschenbach, acting FDA commissioner. Whether individual consumers get copies of drug labels often depends on if the drug they get comes in its original packaging. If so, it will include the insert. But if the pharmacist has put the pills into a new bottle, as is typical, a consumer won't always see the official label. Some pharmacies staple summaries based on the labels to customers' bags. Patients who don't get drug labels from their pharmacist will eventually be able to look up the documents in a new DailyMed online library being developed by the government. It is available now but doesn't yet include all drugs. The labels also can be found at drug makers' own Web sites. The FDA's current Web site also features drug labels, though it may turn up an older version of the label.

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 28 of 29 Doctors say that the new format should make it easier for patients to glean some important facts. One key thing is the medicine's major potential risks, to be featured in the highlights section. Patients should check these "so they know what they should be looking for while they're on that medication," says Ruth Murphey Parker, a professor at Emory University whose research focuses on health communications. Drug labels also detail another serious safety issue: potentially dangerous side effects that can occur if a drug is taken at the same time as a different medicine. These so-called interactions are also noted in the new highlights section of the label. Less-important and less-frequent risks are also listed farther down in the label, but doctors say that patients shouldn't overreact to them. Just as important to patients is information about a medicine's FDA-approved uses, which are listed in highlights under "Indications and Usage." Doctors can prescribe drugs "off- label," or for uses that the agency hasn't approved. Patients who don't see their condition under the approved uses section may want to quiz a doctor about such prescriptions. "The evidence is often rather thin" for off-label uses, says Peter Neumann, director of the Center for the Evaluation of Value and Risk in Health at Tufts University. Labels also lay out the evidence for a drug's efficacy, typically in the "Clinical Studies" section. Consumers may want to examine the data that got the drug approved, which will help the patient have realistic expectations for "the magnitude of the benefit," says Steven Woloshin, a researcher at a Department of Veterans Affairs medical center.

26. The Food and Drug Administration’s change in drug labeling format a. will have a highlights section similar to food nutrition labels b. will include the date when the drug won FDA approval c. will list the drugs major side effects d. All of the above Correct