Question 1

If a shareholder's derivative suit is successful, any damages recovered normally go into the corporation's treasury.

Accepted Answer

A) True 
 B)False

Question 2

Under the doctrine of respondeat superior , a corporation can be held liable for

Accepted Answer

A) acts perpetrated by its market competitors. 
B) breaches of contract by its customers and suppliers. 
C) torts committed by its agents or officers. 
D) none of the choices. 
A) acts perpetrated by its market competitors. 
B) breaches of contract by its customers and suppliers. 
C) torts committed by its agents or officers. 
D) none of the choices.

Question 3

Corporate bonds

Accepted Answer

A) represent the true ownership of a corporation. 
B) have priority over holders of common stock as to payment of dividends. 
C) require a corporation to remain profitable until maturity. 
D) provide a proportionate interest in a corporation with regard to control. 
A) represent the true ownership of a corporation. 
B) have priority over holders of common stock as to payment of dividends. 
C) require a corporation to remain profitable until maturity. 
D) provide a proportionate interest in a corporation with regard to control.

Question 4

Gil is an officer for HVAC Corporation. Due to a bad choice of supplier on Gil's part, HVAC's costs increase. Gil is most likely liable for breach of

Accepted Answer

A) breach of trust and confidence. 
B) breach of the business judgment rule. 
C) negligence or mismanagement. 
D) none of the choices. 
A) breach of trust and confidence. 
B) breach of the business judgment rule. 
C) negligence or mismanagement. 
D) none of the choices.

Question 5

Deb is a director and Erv is an officer of Fast Food Inc. Liability for the firm's intentional disregard of consumer-protection statutes may extend to

Accepted Answer

A) Deb only. 
B) Erv only. 
C) Deb and Erv 
D) none of the choices. 
A) Deb only. 
B) Erv only. 
C) Deb and Erv 
D) none of the choices.

Question 6

PrimarySource.com Corporation is a new online educational-resource business. How can PrimarySource.com obtain capital to finance its operations?

Accepted Answer

Generally, to obtain capital, a corporat

Question 7

The directors of a benefit corporation must, during the decision-making process, consider the impact of a decision on society and the environment.

Accepted Answer

A) True 
 B)False

Question 8

Because of their positions within the corporation, directors cannot be held liable for the crimes of corporate employees.

Accepted Answer

A) True 
 B)False

Question 9

Randy is a director of STEM Inc. As a director, with respect to the corporation, Randy is expected to use

Accepted Answer

A) prudent business judgment. 
B) perfect business judgment. 
C) prolonged business judgment. 
D) pluperfect business judgment. 
A) prudent business judgment. 
B) perfect business judgment. 
C) prolonged business judgment. 
D) pluperfect business judgment.

Question 10

Because corporate officers have the implied power to bind the firm in matters directly connected to its business, there is no limit to what the officer can do.

Accepted Answer

A) True 
 B)False

Question 11

A corporate officer

Accepted Answer

A) authorizes major corporate policy decisions. 
B) manages day-to-day operations of the corporation. 
C) all of the choices. 
D) makes and announces corporate financial decisions. 
A) authorizes major corporate policy decisions. 
B) manages day-to-day operations of the corporation. 
C) all of the choices. 
D) makes and announces corporate financial decisions.

Question 12

Han is a shareholder of Insulation Inc. When the directors fail to undertake an action to redress a wrong suffered by the firm, Han files a suit on its behalf. Any damages recovered by the suit will go to the firm's

Accepted Answer

A) shareholders, excluding Han. 
B) treasury. 
C) directors. 
D) shareholders, including Han. 
A) shareholders, excluding Han. 
B) treasury. 
C) directors. 
D) shareholders, including Han.

Question 13

Instead of issuing securities, Artificial Intelligence Inc. pursues other sources of funds. To obtain venture capital financing, the firm will most likely

Accepted Answer

A) borrow funds to be returned on a designated maturity date. 
B) give up a share of its ownership. 
C) pool funds to invest in a business venture. 
D) pay periodic dividends. 
A) borrow funds to be returned on a designated maturity date. 
B) give up a share of its ownership. 
C) pool funds to invest in a business venture. 
D) pay periodic dividends.

Question 14

Like the partners in a partnership, the shareholders in a corporation cannot change without affecting the continued existence of the firm.

Accepted Answer

A) True 
 B)False

Question 15

The implied powers of a corporation can be found in the state and federal constitutions.

Accepted Answer

A) True 
 B)False

Question 16

Corporate shareholders will most likely be held personally liable for the firm's debts if they

Accepted Answer

A) insist on separating their personal interests from those of the firm. 
B) refuse to transfer their shares to dilute control of the firm. 
C) encourage the firm to unsuccessfully enter a new market. 
D) use the firm to perpetrate a fraud. 
A) insist on separating their personal interests from those of the firm. 
B) refuse to transfer their shares to dilute control of the firm. 
C) encourage the firm to unsuccessfully enter a new market. 
D) use the firm to perpetrate a fraud.

Question 17

Risk Insurance Inc. has a board of five directors. Risk's bylaws do not state any quorum requirements. As in most states, a quorum for Risk's board meetings is

Accepted Answer

A) one director. 
B) three directors. 
C) four directors. 
D) all of the directors. 
A) one director. 
B) three directors. 
C) four directors. 
D) all of the directors.

Question 18

Bhat is elected as a director to the board of Crispy Treats Inc. He will most likely serve for a term of one

Accepted Answer

A) decade. 
B) four-year period. 
C) lifetime. 
D) year. 
A) decade. 
B) four-year period. 
C) lifetime. 
D) year.

Question 19

Precision Pipe Inc.'s stated purpose is to install plumbing. Precision Pipe contracts with Quality Contracting to pour a new building's foundation despite lacking the skill and license to do such work. This is most likely

Accepted Answer

A) an ultra vires act. 
B) within the corporation's express powers. 
C) within the corporation's implied powers. 
D) allowable and proper as an act to profit corporate shareholders. 
A) an ultra vires act. 
B) within the corporation's express powers. 
C) within the corporation's implied powers. 
D) allowable and proper as an act to profit corporate shareholders.

Question 20

Market Data Corporation's articles list an incorrect address for its incorporator. Under this circumstance, Market Data is most likely

Accepted Answer

A) a corporation by estoppel. 
B) a de facto corporation. 
C) a de jure corporation. 
D) ultra vires . 
A) a corporation by estoppel. 
B) a de facto corporation. 
C) a de jure corporation. 
D) ultra vires .

Exam 37: Corporate Formation and Financing

If a shareholder's derivative suit is successful, any damages recovered normally go into the corporation's treasury.

Under the doctrine of respondeat superior , a corporation can be held liable for

Corporate bonds

Gil is an officer for HVAC Corporation. Due to a bad choice of supplier on Gil's part, HVAC's costs increase. Gil is most likely liable for breach of

Deb is a director and Erv is an officer of Fast Food Inc. Liability for the firm's intentional disregard of consumer-protection statutes may extend to

PrimarySource.com Corporation is a new online educational-resource business. How can PrimarySource.com obtain capital to finance its operations?

The directors of a benefit corporation must, during the decision-making process, consider the impact of a decision on society and the environment.

Because of their positions within the corporation, directors cannot be held liable for the crimes of corporate employees.

Randy is a director of STEM Inc. As a director, with respect to the corporation, Randy is expected to use

Because corporate officers have the implied power to bind the firm in matters directly connected to its business, there is no limit to what the officer can do.

A corporate officer

Han is a shareholder of Insulation Inc. When the directors fail to undertake an action to redress a wrong suffered by the firm, Han files a suit on its behalf. Any damages recovered by the suit will go to the firm's

Instead of issuing securities, Artificial Intelligence Inc. pursues other sources of funds. To obtain venture capital financing, the firm will most likely

Like the partners in a partnership, the shareholders in a corporation cannot change without affecting the continued existence of the firm.

The implied powers of a corporation can be found in the state and federal constitutions.

Corporate shareholders will most likely be held personally liable for the firm's debts if they

Risk Insurance Inc. has a board of five directors. Risk's bylaws do not state any quorum requirements. As in most states, a quorum for Risk's board meetings is

Bhat is elected as a director to the board of Crispy Treats Inc. He will most likely serve for a term of one

Precision Pipe Inc.'s stated purpose is to install plumbing. Precision Pipe contracts with Quality Contracting to pour a new building's foundation despite lacking the skill and license to do such work. This is most likely

Market Data Corporation's articles list an incorrect address for its incorporator. Under this circumstance, Market Data is most likely

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Nature and Terminology

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Consideration

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