Question 1

In some states, preemptive rights do not apply to:

Accepted Answer

A)  the reissue of previously issued shares. 
B)  shares issued for noncash consideration. 
C)  shares issued in connection with a merger. 
D)  All of these are correct. 
A)  the reissue of previously issued shares. 
B)  shares issued for noncash consideration. 
C)  shares issued in connection with a merger. 
D)  All of these are correct.

Question 2

"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 3

Which of the following determines when to declare dividends and in what amount?

Accepted Answer

A)  The stockholders 
B)  The officers of the corporation 
C)  The board of directors 
D)  The state in which the corporation was chartered 
A)  The stockholders 
B)  The officers of the corporation 
C)  The board of directors 
D)  The state in which the corporation was chartered

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

With respect to liability for improper dividends, a non-breaching director and an innocent shareholder are both protected from liability due to their good faith.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

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 8

Max buys shares of newly issued Z Corp. 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 9

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 10

ZYX Corporation purchases 1,000 shares of its own stock from Jones, a shareholder, at a price of $50 a share. These shares will be known as:

Accepted Answer

A)  treasury shares. 
B)  preemptive shares. 
C)  preferred stock. 
D)  no par stock. 
A)  treasury shares. 
B)  preemptive shares. 
C)  preferred stock. 
D)  no par stock.

Question 11

What are the two major issues regarding payment for shares?

Accepted Answer

Two major issues arise regarding payment

Question 12

Dividends paid in stock of the corporation have virtually the same legal significance as cash or property dividends.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

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 15

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.

Question 16

State laws regulating the issuance and sale of corporate shares of stock and other securities, typically with provisions prohibiting fraud in the sale of securities are called:

Accepted Answer

A)  blue-sky laws. 
B)  Securities and Exchange Commission Acts. 
C)  model investment securities acts. 
D)  stock warrant laws. 
A)  blue-sky laws. 
B)  Securities and Exchange Commission Acts. 
C)  model investment securities acts. 
D)  stock warrant laws.

Question 17

In which of the following ways do debt and equity securities necessarily differ?

Accepted Answer

A)  In their characteristic of being sources for corporate financing. 
B)  In whether they represent an ownership interest. 
C)  Voting rights. 
D)  Debt and equity securities do not differ in any of these ways. 
A)  In their characteristic of being sources for corporate financing. 
B)  In whether they represent an ownership interest. 
C)  Voting rights. 
D)  Debt and equity securities do not differ in any of these ways.

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

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

Exam 34: Financial Structure

In some states, preemptive rights do not apply to:

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

Which of the following determines when to declare dividends and in what amount?

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

With respect to liability for improper dividends, a non-breaching director and an innocent shareholder are both protected from liability due to their good faith.

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

Redemption is not permitted if the corporation:

Max buys shares of newly issued Z Corp. 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?

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

ZYX Corporation purchases 1,000 shares of its own stock from Jones, a shareholder, at a price of $50 a share. These shares will be known as:

What are the two major issues regarding payment for shares?

Dividends paid in stock of the corporation have virtually the same legal significance as cash or property dividends.

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

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.

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

State laws regulating the issuance and sale of corporate shares of stock and other securities, typically with provisions prohibiting fraud in the sale of securities are called:

In which of the following ways do debt and equity securities necessarily differ?

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

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.

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