Question 1

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 2

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

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is correct with regard to common stock?

Accepted Answer

A)  The Revised Act has eliminated the terms "preferred" and "common." 
B)  Common stock does not have any special contract rights or preferences. 
C)  Common stock generally bears the greatest risk of loss in the event of the failure of the enterprise. 
D)  All of these are correct with regard to common stock. 
A)  The Revised Act has eliminated the terms "preferred" and "common." 
B)  Common stock does not have any special contract rights or preferences. 
C)  Common stock generally bears the greatest risk of loss in the event of the failure of the enterprise. 
D)  All of these are correct with regard to common stock.

Question 4

The Ajax Corporation issues bonds that pay a minimum of 6% interest but that can pay more if corporate earnings reach certain specified levels. The holder of the bond may exchange it for stock of the corporation. This bond would be a:

Accepted Answer

A)  callable income bond. 
B)  convertible participating bond. 
C)  convertible unsecured bond. 
D)  convertible secured bond. 
A)  callable income bond. 
B)  convertible participating bond. 
C)  convertible unsecured bond. 
D)  convertible secured bond.

Question 5

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

Question 6

Earned surplus would include undistributed profits, income, gains, and losses from the date of incorporation.

Accepted Answer

A) True 
 B)False

Question 7

Debt securities represent an ownership interest in the corporation.

Accepted Answer

A) True 
 B)False

Question 8

Participating preferred stock will:

Accepted Answer

A)  share with common stock in excess earnings after preferred payments and specified payments to common stock. 
B)  accumulate dividends that will be paid later. 
C)  participate in earnings only to the extent that all other classes do. 
D)  participate in earnings to the same extent as common stock. 
A)  share with common stock in excess earnings after preferred payments and specified payments to common stock. 
B)  accumulate dividends that will be paid later. 
C)  participate in earnings only to the extent that all other classes do. 
D)  participate in earnings to the same extent as common stock.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

The most customary type of dividend is a:

Accepted Answer

A)  stock dividend. 
B)  cash dividend. 
C)  property dividend. 
D)  liquidating dividend. 
A)  stock dividend. 
B)  cash dividend. 
C)  property dividend. 
D)  liquidating dividend.

Question 11

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 12

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 13

A company does not have to issue all of the shares authorized by the corporate charter, but it cannot issue more shares than are authorized.

Accepted Answer

A) True 
 B)False

Question 14

A bondholder generally takes less of a financial risk than a shareholder of a corporation.

Accepted Answer

A) True 
 B)False

Question 15

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 16

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 17

The board of directors may issue bonds without the authorization or consent of the shareholders.

Accepted Answer

A) True 
 B)False

Question 18

__________, usually called debentures, have only the obligation of the corporation behind them.

Accepted Answer

A)  Secured bonds 
B)  Income bonds 
C)  Unsecured bonds 
D)  None of these are correct. 
A)  Secured bonds 
B)  Income bonds 
C)  Unsecured bonds 
D)  None of these are correct.

Question 19

The board of directors of Case Corporation declared cash dividends of $5 per share. If these dividends are not paid, a shareholder can bring suit to require payment.

Accepted Answer

A) True 
 B)False

Exam 34: Financial Structure of Corporations

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

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

Which of the following is correct with regard to common stock?

The Ajax Corporation issues bonds that pay a minimum of 6% interest but that can pay more if corporate earnings reach certain specified levels. The holder of the bond may exchange it for stock of the corporation. This bond would be a:

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

Earned surplus would include undistributed profits, income, gains, and losses from the date of incorporation.

Debt securities represent an ownership interest in the corporation.

Participating preferred stock will:

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

The most customary type of dividend is a:

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

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

A company does not have to issue all of the shares authorized by the corporate charter, but it cannot issue more shares than are authorized.

A bondholder generally takes less of a financial risk than a shareholder of a corporation.

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

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

The board of directors may issue bonds without the authorization or consent of the shareholders.

__________, usually called debentures, have only the obligation of the corporation behind them.

The board of directors of Case Corporation declared cash dividends of $5 per share. If these dividends are not paid, a shareholder can bring suit to require payment.

Introduction to Law

Business Ethics

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

Introduction to Sales and Leases

Performance

Transfer of Title and Risk of Loss

Product Liability: Warranties and Strict Liability

Sales Remedies

Form and Content

Transfer and Holder in Due Course

Liability of Parties

Bank Deposits, Collections, and Funds Transfers

Relationship of Principal and Agent

Relationship With Third Parties

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 Corporations

Secured Transactions and Suretyship

Bankruptcy

Securities Regulation

Intellectual Property

Employment Law

Antitrust

Accountants Legal Liability

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International Business Law

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

Interests in Real Property

Transfer and Control of Real Property

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