Question 1

Participating stock will:

Accepted Answer

A)  share with common stock any additional dividends after preferred and common stockholders receive their normal dividends. 
B)  accumulate dividends that will be paid later. 
C)  participate in earnings only to the extent that all other classes do. 
D)  participate in earnings to the same extent as common stock. 
A)  share with common stock any additional dividends after preferred and common stockholders receive their normal dividends. 
B)  accumulate dividends that will be paid later. 
C)  participate in earnings only to the extent that all other classes do. 
D)  participate in earnings to the same extent as common stock.

Question 2

"Blue sky laws" are federal laws that regulate corporate stock issuance and sale.

Accepted Answer

A) True 
 B)False

Question 3

Discuss how the RMBCA defines the term "distribution."

Accepted Answer

A distribution is "a direct or indirect

Question 4

The difference between common and preferred stock is that the latter is a debt instrument,whereas the former represents an equity interest in the company.

Accepted Answer

A) True 
 B)False

Question 5

An investor has the right to transfer investment securities by sale,but not by gift or pledge.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is correct regarding a two-for-one stock split?

Accepted Answer

A)  The purpose of the split may be to increase the number of potential stockholders. 
B)  The purpose of the split is to make a distribution to the stockholders. 
C)  After the split,each stockholder will have greater ownership interest in the corporation. 
D)  The value of each share of stock will increase as a result of the split. 
A)  The purpose of the split may be to increase the number of potential stockholders. 
B)  The purpose of the split is to make a distribution to the stockholders. 
C)  After the split,each stockholder will have greater ownership interest in the corporation. 
D)  The value of each share of stock will increase as a result of the split.

Question 7

All states impose the equity insolvency test,which prohibits the payment of any dividend or other distribution when the corporation is insolvent or would become so through the payment of the dividend or distribution.

Accepted Answer

A) True 
 B)False

Question 8

The board of directors may issue bonds without the authorization or consent of the shareholders.

Accepted Answer

A) True 
 B)False

Question 9

A bondholder generally takes more of a risk than a shareholder of a corporation.

Accepted Answer

A) True 
 B)False

Question 10

If shares are issued with no par value,the entire price must be allocated to stated capital.

Accepted Answer

A) True 
 B)False

Question 11

Redemption of shares generally results in an increase of treasury stock.

Accepted Answer

A) True 
 B)False

Question 12

Juliet transfers property to Balcony,Inc.that she claims is valued at $5,000.The directors determine that the property is adequate to be exchanged for $5,000 worth of Balcony,Inc.stock.Later it is discovered that the property's true value is $2,000.Under the RMBCA,which is true regarding Juliet's liability?

Accepted Answer

A)  She has none,since the directors' determination of adequacy of consideration was conclusive. 
B)  She is liable to the creditors of the corporation for the $3,000. 
C)  She is liable to the corporation for $3,000. 
D)  She is liable to both the corporation and its creditors for $3,000. 
A)  She has none,since the directors' determination of adequacy of consideration was conclusive. 
B)  She is liable to the creditors of the corporation for the $3,000. 
C)  She is liable to the corporation for $3,000. 
D)  She is liable to both the corporation and its creditors for $3,000.

Question 13

Winstead Co.is authorized by its articles of incorporation to sell 50,000 shares of stock.The company:

Accepted Answer

A)  may not sell 55,000 shares under any circumstances. 
B)  must sell the number of shares authorized by its articles of incorporation. 
C)  would issue void securities for any shares the company purports to sell over the 50,000. 
D)  must repay,with interest from the date of purchase,any purchaser of shares over 50,000. 
A)  may not sell 55,000 shares under any circumstances. 
B)  must sell the number of shares authorized by its articles of incorporation. 
C)  would issue void securities for any shares the company purports to sell over the 50,000. 
D)  must repay,with interest from the date of purchase,any purchaser of shares over 50,000.

Question 14

The shareholders normally determine the price for which shares will be issued.

Accepted Answer

A) True 
 B)False

Question 15

If a "liquidation preference" is provided,preferred stock usually has priority over common stock.

Accepted Answer

A) True 
 B)False

Question 16

Under the RMBCA,if the charter states that "the corporation elects to have preemptive rights," shareholders have preemptive rights with respect to:

Accepted Answer

A)  shares issued as compensation to directors,officers,and employees. 
B)  shares issued within six months of incorporation. 
C)  shares issued for consideration other than money. 
D)  unissued shares. 
A)  shares issued as compensation to directors,officers,and employees. 
B)  shares issued within six months of incorporation. 
C)  shares issued for consideration other than money. 
D)  unissued shares.

Question 17

Dunbar Corp.is a debtor in relation to Martina,who is the holder of an income bond issued by Dunbar.

Accepted Answer

A) True 
 B)False

Question 18

Percy buys stock in Kinollo Corporation that pays dividends of $5 per share before dividends are paid on other stock of Kinollo.If the dividends are not paid in any given year,the dividends for that year must be paid when the company next declares dividends,until fully paid.Percy's dividends per year will not exceed $5 per share.Percy's stock is:

Accepted Answer

A)  cumulative common stock. 
B)  noncumulative preferred stock. 
C)  cumulative preferred stock. 
D)  participating preferred stock. 
A)  cumulative common stock. 
B)  noncumulative preferred stock. 
C)  cumulative preferred stock. 
D)  participating preferred stock.

Exam 34: Financial Structure

Participating stock will:

"Blue sky laws" are federal laws that regulate corporate stock issuance and sale.

Discuss how the RMBCA defines the term "distribution."

The difference between common and preferred stock is that the latter is a debt instrument,whereas the former represents an equity interest in the company.

An investor has the right to transfer investment securities by sale,but not by gift or pledge.

Which of the following is correct regarding a two-for-one stock split?

All states impose the equity insolvency test,which prohibits the payment of any dividend or other distribution when the corporation is insolvent or would become so through the payment of the dividend or distribution.

The board of directors may issue bonds without the authorization or consent of the shareholders.

A bondholder generally takes more of a risk than a shareholder of a corporation.

If shares are issued with no par value,the entire price must be allocated to stated capital.

Redemption of shares generally results in an increase of treasury stock.

Winstead Co.is authorized by its articles of incorporation to sell 50,000 shares of stock.The company:

The shareholders normally determine the price for which shares will be issued.

If a "liquidation preference" is provided,preferred stock usually has priority over common stock.

Under the RMBCA,if the charter states that "the corporation elects to have preemptive rights," shareholders have preemptive rights with respect to:

Dunbar Corp.is a debtor in relation to Martina,who is the holder of an income bond issued by Dunbar.

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

Legal Topics in Property Ownership and Management

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