Question 1

A shareholder of one-third of all the stock in a corporation would be entitled to one-third of all corporate assets of an ongoing company.

Accepted Answer

A) True 
 B)False

Question 2

Redemption is not permitted if the corporation:

Accepted Answer

A)  asks for an injunction. 
B)  would reduce its total assets below the stated capital amount by the redemption. 
C)  has outstanding treasury shares. 
D)  is likely to be rendered insolvent by the redemption. 
A)  asks for an injunction. 
B)  would reduce its total assets below the stated capital amount by the redemption. 
C)  has outstanding treasury shares. 
D)  is likely to be rendered insolvent by the redemption.

Question 3

Markell Inc.issued stock options.Which of the following is not true?

Accepted Answer

A)  The shareholders determine the terms upon which the stock options are issued,their form and content,and the consideration for which the shares are to be issued. 
B)  A stock warrant is a type of stock option that is freely transferable and that typically has a longer term than a stock right. 
C)  Markell Inc.may use stock options or warrants in its incentive compensation plans for the directors and officers of the company. 
D)  Markell Inc.may use stock options to help in raising capital for the business by making one class of securities more attractive by including in it the right to purchase shares in another class. 
A)  The shareholders determine the terms upon which the stock options are issued,their form and content,and the consideration for which the shares are to be issued. 
B)  A stock warrant is a type of stock option that is freely transferable and that typically has a longer term than a stock right. 
C)  Markell Inc.may use stock options or warrants in its incentive compensation plans for the directors and officers of the company. 
D)  Markell Inc.may use stock options to help in raising capital for the business by making one class of securities more attractive by including in it the right to purchase shares in another class.

Question 4

Once the amount of shares that a corporation is authorized to issue has been specified in the charter,it cannot be changed,so the charter commonly specifies more shares than are to be issued initially.

Accepted Answer

A) True 
 B)False

Question 5

Earned surplus would include undistributed net profits,income,gains and losses from the date of incorporation.

Accepted Answer

A) True 
 B)False

Question 6

A company may not initially issue all the shares authorized by the corporate charter.It can hold back shares.

Accepted Answer

A) True 
 B)False

Question 7

What are the two major issues regarding payment for shares?

Accepted Answer

Two major issues arise regarding payment

Question 8

Bonds subject to a redemption provision which permits the corporation to redeem or pay off all,or a part,of the issue before maturity at a specified redemption price are known as ____ bonds.

Accepted Answer

A)  secured 
B)  income 
C)  callable 
D)  convertible 
A)  secured 
B)  income 
C)  callable 
D)  convertible

Question 9

If dividends are not declared for five years,but the company has accumulated earnings each year,the shareholders may:

Accepted Answer

A)  petition the court of law for redress. 
B)  override the board with a two-thirds vote. 
C)  ask for an injunction requiring a dividend to be declared. 
D)  do nothing but sell their stock. 
A)  petition the court of law for redress. 
B)  override the board with a two-thirds vote. 
C)  ask for an injunction requiring a dividend to be declared. 
D)  do nothing but sell their stock.

Question 10

A shareholder's obligation to repay an illegally declared dividend depends on:

Accepted Answer

A)  the shareholder's good or bad faith in accepting the dividend. 
B)  the solvency or insolvency of the corporation and,in some instances,special statutory provisions. 
C)  the shareholder's knowledge of the facts. 
D)  All of these. 
A)  the shareholder's good or bad faith in accepting the dividend. 
B)  the solvency or insolvency of the corporation and,in some instances,special statutory provisions. 
C)  the shareholder's knowledge of the facts. 
D)  All of these.

Question 11

If Class A preferred shares provide only for a cumulative dividend of $3 per share,upon liquidation Class A Preferred will:

Accepted Answer

A)  receive $3 per share more than common shares. 
B)  receive 103% of common shares. 
C)  share equally with common shares. 
D)  be subordinated to the rights of common shares. 
A)  receive $3 per share more than common shares. 
B)  receive 103% of common shares. 
C)  share equally with common shares. 
D)  be subordinated to the rights of common shares.

Question 12

Income bonds bear a fixed interest rate.

Accepted Answer

A) True 
 B)False

Question 13

A director who is a member of the board that declares an illegal dividend is not personally liable to the company for the amount that is illegal.

Accepted Answer

A) True 
 B)False

Question 14

"Capital surplus" would be credited with the excess received over par value for par value shares issued by the corporation.

Accepted Answer

A) True 
 B)False

Question 15

A secured bond is enforceable by a lien upon specific property rather than against the general assets of the corporation.

Accepted Answer

A) True 
 B)False

Question 16

The most restrictive test for the issuance of dividends by a corporation is the net assets test.

Accepted Answer

A) True 
 B)False

Question 17

Treasury shares are shares that have been authorized but have not yet been issued.

Accepted Answer

A) True 
 B)False

Question 18

Max buys shares of newly issued Zamex Corporation stock for $10 per share and pays $1,000 cash,a car worth $2,000,and a promissory note for $5,000.Under traditional corporate law,followed in about half of the states,how many shares of stock could Max validly buy?

Accepted Answer

A)  100 
B)  300 
C)  800 
D)  600 
A)  100 
B)  300 
C)  800 
D)  600

Question 19

Two principal sources for corporate financing are debt and equity investment securities.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is incorrect with regard to treasury shares?

Accepted Answer

A)  No dividends may be paid on treasury shares. 
B)  They are issued but not outstanding. 
C)  A corporation may sell treasury shares for any amount the board of directors determines,even if the shares have a par value that is more than the sale price. 
D)  The concept of treasury stock was created by the MBCA and is carried forward in the RMBCA. 
A)  No dividends may be paid on treasury shares. 
B)  They are issued but not outstanding. 
C)  A corporation may sell treasury shares for any amount the board of directors determines,even if the shares have a par value that is more than the sale price. 
D)  The concept of treasury stock was created by the MBCA and is carried forward in the RMBCA.

Exam 34: Financial Structure

A shareholder of one-third of all the stock in a corporation would be entitled to one-third of all corporate assets of an ongoing company.

Redemption is not permitted if the corporation:

Markell Inc.issued stock options.Which of the following is not true?

Once the amount of shares that a corporation is authorized to issue has been specified in the charter,it cannot be changed,so the charter commonly specifies more shares than are to be issued initially.

Earned surplus would include undistributed net profits,income,gains and losses from the date of incorporation.

A company may not initially issue all the shares authorized by the corporate charter.It can hold back shares.

What are the two major issues regarding payment for shares?

Bonds subject to a redemption provision which permits the corporation to redeem or pay off all,or a part,of the issue before maturity at a specified redemption price are known as ____ bonds.

If dividends are not declared for five years,but the company has accumulated earnings each year,the shareholders may:

A shareholder's obligation to repay an illegally declared dividend depends on:

If Class A preferred shares provide only for a cumulative dividend of $3 per share,upon liquidation Class A Preferred will:

Income bonds bear a fixed interest rate.

A director who is a member of the board that declares an illegal dividend is not personally liable to the company for the amount that is illegal.

"Capital surplus" would be credited with the excess received over par value for par value shares issued by the corporation.

A secured bond is enforceable by a lien upon specific property rather than against the general assets of the corporation.

The most restrictive test for the issuance of dividends by a corporation is the net assets test.

Treasury shares are shares that have been authorized but have not yet been issued.

Max buys shares of newly issued Zamex Corporation stock for $10 per share and pays $1,000 cash,a car worth $2,000,and a promissory note for $5,000.Under traditional corporate law,followed in about half of the states,how many shares of stock could Max validly buy?

Two principal sources for corporate financing are debt and equity investment securities.

Which of the following is incorrect with regard to treasury shares?

Introduction to Law

Business Ethics and the Social Responsibility of Business

Civil Dispute Resolution

Constitutional Law

Administrative Law

A: Administrative Law

Criminal Law

Intentional Torts

Negligence and Strict Liability

Introduction to Contracts

Mutual Assent

Conduct Invalidating Assent

Consideration

Illegal Bargains

Contractual Capacity

Contracts in Writing

Third Parties to Contracts

Performance,breach,and Discharge

Contract Remedies

Relationship of Principal and Agent

Relationship With Third Parties

Introduction to Sales and Leases

Performance

Transfer of Title and Risk of Loss

Products Liability: Warranties and Strict Liability in Tort

Sales Remedies

Form and Content

Transfer and Holder in Due Course

Liability of Parties

Bank Deposits,collections,and Funds Transfers

Formation and Internal Relations of General Partnerships

Operation and Dissolution of General Partnerships

Limited Partnerships and Limited Liability Companies

Nature,formation,and Powers

Management Structure

Fundamental Changes

Secured Transactions and Suretyship

Bankruptcy

Protection of Intellectual Property

Antitrust

Consumer Protection Double

Employment Law

Securities Regulation

Accountants Legal Liability

Environmental Law

International Business Law

Introduction to Property,property Insurance,bailments,and Documents of Title

Interests in Real Property

Transfer and Control of Real Property

Trusts and Decedents Estates

Legal Terminology: Understanding Criminal and Civil Law Systems

Contract Law Terminology

Exploring the Legal Concepts of Agency and Fiduciary Duty

Understanding Key Legal Concepts in Sales and Contracts

Understanding the Terminology of Banking and Finance: Key Concepts and Definitions

Exploring Legal Concepts and Processes in Business Partnerships

Understanding Corporate Law: A Guide to Ultra Vires Acts, Subscribers, Debt Securities, and More

Understanding Key Terms in Secured Transactions and Bankruptcy Law

Legal Topics and Terms