Question 1

Discuss how the RMBCA defines the term "distribution."

Accepted Answer

A distribution is "a direct or indirect

Question 2

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 3

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 4

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 5

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

Accepted Answer

A) True 
 B)False

Question 6

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 7

Even if it has been lawfully and properly declared, a stock dividend may be revoked unless it has been actually distributed.

Accepted Answer

A) True 
 B)False

Question 8

The shareholders normally determine the price for which shares will be issued unless the charter permits the board of directors to set the price.

Accepted Answer

A) True 
 B)False

Question 9

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 10

Under the majority rule, an unsuspecting shareholder who receives an illegal dividend from a solvent corporation cannot be compelled to refund the dividend.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is not a right conferred on the owner of an equity security?

Accepted Answer

A) The right to title to a proportionate share of the corporation's property 
B) The right to participate in control of the corporation 
C) The right to participate in the earnings of the corporation 
D) The right to participate in the residual assets of the corporation upon dissolution 
A) The right to title to a proportionate share of the corporation's property 
B) The right to participate in control of the corporation 
C) The right to participate in the earnings of the corporation 
D) The right to participate in the residual assets of the corporation upon dissolution

Question 12

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 13

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 14

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 15

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 16

Allen owns 500 of the 5,000 shares outstanding of General Myopics.GM plans to issue 600 new shares.If Allen has preemptive rights, he may buy:

Accepted Answer

A) all 600 shares before anyone else. 
B) 600 shares at the same price he paid for the other stock. 
C) 6 shares at a discount of 10%. 
D) None of these. 
A) all 600 shares before anyone else. 
B) 600 shares at the same price he paid for the other stock. 
C) 6 shares at a discount of 10%. 
D) None of these.

Question 17

The earned surplus test does not permit capital surplus to be used for the payment of dividends.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is correct with regard to "par value"?

Accepted Answer

A) It indicates the worth of the stock at issue. 
B) It is the minimum price at which the corporation may sell the stock at issuance. 
C) It represents the maximum price at which the stock may be sold at issuance. 
D) It represents the amount for which the stock must be traded. 
A) It indicates the worth of the stock at issue. 
B) It is the minimum price at which the corporation may sell the stock at issuance. 
C) It represents the maximum price at which the stock may be sold at issuance. 
D) It represents the amount for which the stock must be traded.

Question 19

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 20

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.

Exam 34: Financial Structure

Discuss how the RMBCA defines the term "distribution."

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:

In some states, preemptive rights do not apply to:

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

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

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

Even if it has been lawfully and properly declared, a stock dividend may be revoked unless it has been actually distributed.

The shareholders normally determine the price for which shares will be issued unless the charter permits the board of directors to set the price.

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

Under the majority rule, an unsuspecting shareholder who receives an illegal dividend from a solvent corporation cannot be compelled to refund the dividend.

Which of the following is not a right conferred on the owner of an equity security?

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

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

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.

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.

Allen owns 500 of the 5,000 shares outstanding of General Myopics.GM plans to issue 600 new shares.If Allen has preemptive rights, he may buy:

The earned surplus test does not permit capital surplus to be used for the payment of dividends.

Which of the following is correct with regard to "par value"?

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?

Redemption is not permitted if the corporation:

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

51: The Legal Environment Of Business

52: Contracts.

53: Agency.

54: Sales

55: Negotiable Instruments

56: Unincorporated Business Association

57: Corporations

58: Debtor and Creditor Relation

59: Regulation of Business

60: Property.