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

Discuss the use and types of stock options.

Accepted Answer

Stock options entitle their holders to p

Question 3

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 4

The statute which contains the rules applicable to investment securities transfers is:

Accepted Answer

A)  the Securities and Exchange Commission Act. 
B)  Article 2 of the UCC. 
C)  Article 8 of the UCC. 
D)  the Model Business Corporation Act. 
A)  the Securities and Exchange Commission Act. 
B)  Article 2 of the UCC. 
C)  Article 8 of the UCC. 
D)  the Model Business Corporation Act.

Question 5

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 6

Which of the following is correct with regard to common stock?

Accepted Answer

A)  The Revised Act has eliminated the terms "preferred" and "common." 
B)  Common stock does not have any special contract rights or preferences. 
C)  Common stock generally bears the greatest risk of loss in the event of the failure of the enterprise. 
D)  All of these are correct with regard to common stock. 
A)  The Revised Act has eliminated the terms "preferred" and "common." 
B)  Common stock does not have any special contract rights or preferences. 
C)  Common stock generally bears the greatest risk of loss in the event of the failure of the enterprise. 
D)  All of these are correct with regard to common stock.

Question 7

In the majority of states, even non-voting shares may vote on fundamental changes that affect that class of shares as a class.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

The federal government leaves corporate stock regulation to the states, since corporations are state-created entities.

Accepted Answer

A) True 
 B)False

Question 10

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 11

Gail transfers property to Tel Ko Corp. that she claims is valued at $5,000. The directors determine that the property is adequate to be exchanged for $5,000 worth of Tel Ko Corp. stock. Later it is discovered that the property's true value is $2,000. Under the RMBCA, which is true regarding Gail'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 12

A stock split results in a larger proportion of corporate ownership by the shareholder.

Accepted Answer

A) True 
 B)False

Question 13

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 14

If the issued and outstanding shares are broken up into a greater number of shares, each representing a proportionately smaller interest in the corporation, this is known as a:

Accepted Answer

A)  property dividend. 
B)  stock split. 
C)  stock dividend. 
D)  liquidating dividend. 
A)  property dividend. 
B)  stock split. 
C)  stock dividend. 
D)  liquidating dividend.

Question 15

Blighs, Inc. would like to pay a dividend to its shareholders. It has only been in business a few years and does not yet have any retained earnings. However, it has a new product which is breaking all sales records. This quarter, Blighs anticipates about $3 million in earned surplus. It should be able to pay all of its bills as they become due. Under
which of the following tests would Blighs be able to pay a dividend? Explain.
a. Earned surplus test
b. Surplus test
c.  Net assets test

Accepted Answer

_a_.Preemptive rights are shareholders' righ

Question 16

A distribution may be in the form of:

Accepted Answer

A)  declaration or payment of a dividend. 
B)  a purchase, redemption, or other acquisition of shares. 
C)  a distribution of indebtedness. 
D)  All of these. 
A)  declaration or payment of a dividend. 
B)  a purchase, redemption, or other acquisition of shares. 
C)  a distribution of indebtedness. 
D)  All of these.

Question 17

A share dividend:

Accepted Answer

A)  is a type of distribution. 
B)  makes no difference in the assets of the corporation or in the shareholder's relative interest in the net worth of the corporation. 
C)  is also known as a property dividend. 
D)  All of these. 
A)  is a type of distribution. 
B)  makes no difference in the assets of the corporation or in the shareholder's relative interest in the net worth of the corporation. 
C)  is also known as a property dividend. 
D)  All of these.

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

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 20

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

Exam 34: Financial Structure

Participating stock will:

Discuss the use and types of stock options.

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.

The statute which contains the rules applicable to investment securities transfers is:

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

Which of the following is correct with regard to common stock?

In the majority of states, even non-voting shares may vote on fundamental changes that affect that class of shares as a class.

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

The federal government leaves corporate stock regulation to the states, since corporations are state-created entities.

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

A stock split results in a larger proportion of corporate ownership by the shareholder.

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.

If the issued and outstanding shares are broken up into a greater number of shares, each representing a proportionately smaller interest in the corporation, this is known as a:

A distribution may be in the form of:

A share dividend:

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

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

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

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

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

the Legal Environment of Business

Contracts

Agency

Sales

Negotiable Instruments

Unincorporated Business Associations

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Debtor and Creditor Relations

Regulation of Business

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