Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Under the Revised Act, dividends must always be paid in money.

Accepted Answer

A) True 
 B)False

Question 3

Under the Revised Act, if the charter simply states that the corporation elects to have preemptive rights, the shareholders have no preemptive rights with respect to:

Accepted Answer

A)  shares issued within six months of incorporation. 
B)  shares issued as compensation to directors, officers, and employees. 
C)  the corporation's unissued shares. 
D)  Shares issued as compensation to directors, officers, and also employees and  shares issued within six months of incorporation. 
A)  shares issued within six months of incorporation. 
B)  shares issued as compensation to directors, officers, and employees. 
C)  the corporation's unissued shares. 
D)  Shares issued as compensation to directors, officers, and also employees and  shares issued within six months of incorporation.

Question 4

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

Question 5

The difference between common and preferred stock is that the latter is a debt instrument, whereas the former represents an equity interest in the company.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Preferred stockholders do not have priority over corporate creditors in liquidation.

Accepted Answer

A) True 
 B)False

Question 8

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 9

The board of directors cannot declare dividends when the corporation:

Accepted Answer

A)  issues new stock. 
B)  is merging with another corporation. 
C)  is the subject of a takeover bid. 
D)  is insolvent. 
A)  issues new stock. 
B)  is merging with another corporation. 
C)  is the subject of a takeover bid. 
D)  is insolvent.

Question 10

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

Question 11

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

Accepted Answer

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

Question 12

The Revised Act permits a corporation to purchase, redeem, or otherwise acquire its own shares unless:

Accepted Answer

A)  the corporation's total assets after the distribution would be less than the sum of its total liabilities and the maximum amount that then would be payable for all outstanding shares having preferential rights in liquidation. 
B)  the corporation would be unable to pay its debts as they became due in the usual course of its business. 
C)  Both of these are correct. 
D)  None of these are correct. 
A)  the corporation's total assets after the distribution would be less than the sum of its total liabilities and the maximum amount that then would be payable for all outstanding shares having preferential rights in liquidation. 
B)  the corporation would be unable to pay its debts as they became due in the usual course of its business. 
C)  Both of these are correct. 
D)  None of these are correct.

Question 13

The "cash flow test" for the payment of dividends and other distributions is also known as the:

Accepted Answer

A)  equity insolvency test. 
B)  net assets test. 
C)  surplus test. 
D)  balance sheet test. 
A)  equity insolvency test. 
B)  net assets test. 
C)  surplus test. 
D)  balance sheet test.

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

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 fraudulent, subjects the directors to liability to Premier for the difference between the fraudulent 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 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. 
A)  is, in all jurisdictions, a matter of opinion on the part of the directors and their valuation is conclusive. 
B)  if fraudulent, subjects the directors to liability to Premier for the difference between the fraudulent 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 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.

Question 16

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

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

An indenture is a debt agreement.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A)  After the split, each stockholder will have greater ownership interest in the corporation. 
B)  The purpose of the split is to make a distribution to the stockholders. 
C)  The purpose of the split may be to decrease the value per share of the stock. 
D)  The value of each share of stock will increase as a result of the split. 
A)  After the split, each stockholder will have greater ownership interest in the corporation. 
B)  The purpose of the split is to make a distribution to the stockholders. 
C)  The purpose of the split may be to decrease the value per share of the stock. 
D)  The value of each share of stock will increase as a result of the split.

Question 20

Debt securities represent an ownership interest in the corporation.

Accepted Answer

A) True 
 B)False

Exam 34: Financial Structure of Corporations

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

Under the Revised Act, dividends must always be paid in money.

Under the Revised Act, if the charter simply states that the corporation elects to have preemptive rights, the shareholders have no preemptive rights with respect to:

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

The difference between common and preferred stock is that the latter is a debt instrument, whereas the former represents an equity interest in the company.

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

Preferred stockholders do not have priority over corporate creditors in liquidation.

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 board of directors cannot declare dividends when the corporation:

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

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

The Revised Act permits a corporation to purchase, redeem, or otherwise acquire its own shares unless:

The "cash flow test" for the payment of dividends and other distributions is also known as the:

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

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:

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

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

An indenture is a debt agreement.

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

Debt securities represent an ownership interest in the corporation.

Introduction to Law

Business Ethicspart Ii: the Legal Environment of Business

Civil Dispute Resolution

Constitutional Law

Administrative Law

Criminal Law

Negligence and Strict Liabilitypart Iii: Contracts

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 Remediespart Iv: Sales

Introduction to Sales and Leases

Performance

Transfer of Title and Risk of Loss

Product Liability: Warranties and Strict Liability

Sales Remediespart V: Negotiable Instruments

Form and Content

Transfer and Holder in Due Course

Liability of Parties

Bank Deposits, Collections, and Funds Transferspart Vi: Agency

Relationship of Principal and Agent

Relationship With Third Partiespart Vii: Business Associations

Formation and Internal Relations of General Partnerships

Operation and Dissolution of General Partnerships

Limited Partnerships and Limited Liability Companies

Nature and Formation of Corporations

Management Structure of Corporations

Fundamental Changes of Corporationspart Viii: Debtor and Creditor Relations

Secured Transactions and Suretyship

Bankruptcypart Ix: Regulation of Business

Securities Regulation

Intellectual Property

Employment Law

Antitrust

Accountants Legal Liability

Consumer Protection

International Business Lawpart X: Property

Introduction to Property, Property Insurance, Bailments, and Documents of Title

Interests in Real Property

Transfer and Control of Real Property

Trusts and Wills

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