Question 1

Article 8 of the UCC covers rules applicable to transfers of investment securities.

Accepted Answer

A) True 
 B)False

Question 2

State laws that regulate the issuance and sale of securities are known as:

Accepted Answer

A)  the Uniform Commercial Code. 
B)  the MBCA. 
C)  Blue Sky Laws. 
D)  None of these. 
A)  the Uniform Commercial Code. 
B)  the MBCA. 
C)  Blue Sky Laws. 
D)  None of these.

Question 3

Clayton Tile has a secured bond on specific property of Ceramic Creations, Inc. Clayton's claim against Ceramic is enforceable only against that specific property.

Accepted Answer

A) True 
 B)False

Question 4

If 100 shares of $50 par value stock were issued at $75 per share, how much would constitute capital surplus?

Accepted Answer

A)  $750 
B)  $7,500 
C)  $2,500 
D)  A corporation cannot issue stock for higher than the par value. 
A)  $750 
B)  $7,500 
C)  $2,500 
D)  A corporation cannot issue stock for higher than the par value.

Question 5

Discuss preemptive rights. Are preemptive rights more important in a closely held corporation or in a publicly held corporation? Explain.

Accepted Answer

Preemptive rights are a shareholder's ri

Question 6

An indenture is a debt agreement.

Accepted Answer

A) True 
 B)False

Question 7

Discuss the use of and types of stock options.

Accepted Answer

Stock options entitle their holders to p

Question 8

If The Raintree Company has accumulated earnings each year but the directors have not declared dividends for five years, the shareholders may:

Accepted Answer

A)  petition a court of law for redress. 
B)  override the board by a two-thirds vote. 
C)  ask for an injunction requiring a dividend to be declared. 
D)  do nothing but sell their stock. 
A)  petition a court of law for redress. 
B)  override the board by a two-thirds vote. 
C)  ask for an injunction requiring a dividend to be declared. 
D)  do nothing but sell their stock.

Question 9

A prospectus is a detailed explanation of how a corporation is reinvesting its profits, and its purpose is to justify a decision to not pay a dividend.

Accepted Answer

A) True 
 B)False

Question 10

The Revised Act explicitly requires a corporations's charter to authorize:

Accepted Answer

A)  one or more classes of shares that have limited voting rights. 
B)  one or more classes of shares that together are entitled to receive the net assets of the corporation upon dissolution. 
C)  Both are correct. 
D)  nothing. The Revised Act only recommends, not requires, the charter contents. 
A)  one or more classes of shares that have limited voting rights. 
B)  one or more classes of shares that together are entitled to receive the net assets of the corporation upon dissolution. 
C)  Both are correct. 
D)  nothing. The Revised Act only recommends, not requires, the charter contents.

Question 11

Dividends are ordinarily paid in cash, but may be paid in property.

Accepted Answer

A) True 
 B)False

Question 12

What are the two major issues regarding payment for shares?

Accepted Answer

Two major issues arise regarding payment

Question 13

The directors of Premier Glass Company authorize the issuance of 100 shares of common stock for $25 per share to Justin for property the directors value at $2,500. The valuation:

Accepted Answer

A)  is, in all jurisdictions, a matter of opinion on the part of the directors and their valuation is conclusive. 
B)  if incorrect, whether or not made in good faith, subjects Justin to liability for the difference between the valuation and the actual worth of the property. 
C)  under the Revised Act, depends on the directors' determination of the consideration's "adequacy." 
D)  if fraudulent, subjects the directors to liability to Premier for the difference between the fraudulent valuation and the actual worth of the property. 
A)  is, in all jurisdictions, a matter of opinion on the part of the directors and their valuation is conclusive. 
B)  if incorrect, whether or not made in good faith, subjects Justin to liability for the difference between the valuation and the actual worth of the property. 
C)  under the Revised Act, depends on the directors' determination of the consideration's "adequacy." 
D)  if fraudulent, subjects the directors to liability to Premier for the difference between the fraudulent valuation and the actual worth of the property.

Question 14

What right does a share confer on its owner in regard to an interest in the corporation?

Accepted Answer

A)  Right to participate in control. 
B)  Right to participate in earnings of the corporation. 
C)  Right to participate in residual assets of the corporation upon dissolution. 
D)  All of these are conferred. 
A)  Right to participate in control. 
B)  Right to participate in earnings of the corporation. 
C)  Right to participate in residual assets of the corporation upon dissolution. 
D)  All of these are conferred.

Question 15

Redemption of shares is not permitted if the corporation:

Accepted Answer

A)  asks for an injunction. 
B)  would, by that action, reduce total assets below the stated capital amount. 
C)  has outstanding treasury shares. 
D)  is likely to be rendered insolvent. 
A)  asks for an injunction. 
B)  would, by that action, reduce total assets below the stated capital amount. 
C)  has outstanding treasury shares. 
D)  is likely to be rendered insolvent.

Question 16

Gribold, Inc. authorized and specified in its charter 8,000 shares of stock to be issued. If it later needs to issue stock in excess of 8,000 shares, the charter will have to be amended.

Accepted Answer

A) True 
 B)False

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

Treasury stock is issued but not outstanding.

Accepted Answer

A) True 
 B)False

Question 19

What are the principal sources for corporate financing?

Accepted Answer

A)  Debt. 
B)  Equity investment securities. 
C)  Retained earnings. 
D)  All of these. 
A)  Debt. 
B)  Equity investment securities. 
C)  Retained earnings. 
D)  All of these.

Question 20

If a "liquidation preference" is provided, preferred stock usually has priority over common stock to the extent the articles of incorporation state.

Accepted Answer

A) True 
 B)False

Exam 34: Financial Structure of Corporations

Article 8 of the UCC covers rules applicable to transfers of investment securities.

State laws that regulate the issuance and sale of securities are known as:

Clayton Tile has a secured bond on specific property of Ceramic Creations, Inc. Clayton's claim against Ceramic is enforceable only against that specific property.

If 100 shares of $50 par value stock were issued at $75 per share, how much would constitute capital surplus?

Discuss preemptive rights. Are preemptive rights more important in a closely held corporation or in a publicly held corporation? Explain.

An indenture is a debt agreement.

Discuss the use of and types of stock options.

If The Raintree Company has accumulated earnings each year but the directors have not declared dividends for five years, the shareholders may:

A prospectus is a detailed explanation of how a corporation is reinvesting its profits, and its purpose is to justify a decision to not pay a dividend.

The Revised Act explicitly requires a corporations's charter to authorize:

Dividends are ordinarily paid in cash, but may be paid in property.

What are the two major issues regarding payment for shares?

The directors of Premier Glass Company authorize the issuance of 100 shares of common stock for $25 per share to Justin for property the directors value at $2,500. The valuation:

What right does a share confer on its owner in regard to an interest in the corporation?

Redemption of shares is not permitted if the corporation:

Gribold, Inc. authorized and specified in its charter 8,000 shares of stock to be issued. If it later needs to issue stock in excess of 8,000 shares, the charter will have to be amended.

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

Treasury stock is issued but not outstanding.

What are the principal sources for corporate financing?

If a "liquidation preference" is provided, preferred stock usually has priority over common stock to the extent the articles of incorporation state.

Introduction to Law

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