Question 1

Shareholders are personally liable for the debts of a corporation.

Accepted Answer

A) True 
 B)False

Question 2

Ron is a director of Start-Up Inc. He is also a chief corporate officer in the firm and receives compensation for both positions. He is

Accepted Answer

A)  ​an inside director. 
B)  ​an outside director. 
C)  ​a well-rounded participant. 
D)  ​in violation of the law. 
A)  ​an inside director. 
B)  ​an outside director. 
C)  ​a well-rounded participant. 
D)  ​in violation of the law.

Question 3

Adam is a shareholder of Bay Boats Inc. with preemptive rights. With these rights, he can

Accepted Answer

A)  ​buy a prorated share of a new issue of stock before other buyers. 
B)  ​choose to have the firm act exclusively in a certain area. 
C)  ​preempt managerial decisions that affect shareholders. 
D)  ​sell a prorated share of a new issue of stock before other sellers. 
A)  ​buy a prorated share of a new issue of stock before other buyers. 
B)  ​choose to have the firm act exclusively in a certain area. 
C)  ​preempt managerial decisions that affect shareholders. 
D)  ​sell a prorated share of a new issue of stock before other sellers.

Question 4

In some situations, a majority shareholder owes a fiduciary duty to minority shareholders.

Accepted Answer

A) True 
 B)False

Question 5

Ann is a corporate officer for Blooming Flora, Inc. As a corporate officer, Ann is

Accepted Answer

A)  ​the head of the board of directors. 
B)  ​an employee of the firm. 
C)  ​the employer of the firm. 
D)  ​in charge of approving the shareholders. 
A)  ​the head of the board of directors. 
B)  ​an employee of the firm. 
C)  ​the employer of the firm. 
D)  ​in charge of approving the shareholders.

Question 6

Carlo is a director of Desserts Italiano, Inc. Carlo opposes a tender offer that is in the company's best interest because its acceptance would cost his position as a director. Carlo is most likely liable for a breach of

Accepted Answer

A)  ​none of the choices. 
B)  ​the business judgment rule. 
C)  ​the duty of care. 
D)  ​the duty of loyalty. 
A)  ​none of the choices. 
B)  ​the business judgment rule. 
C)  ​the duty of care. 
D)  ​the duty of loyalty.

Question 7

The minimum number of members of a body of officials that must be present for business to be validly transacted is a quorum.

Accepted Answer

A) True 
 B)False

Question 8

When the corporation is harmed by the actions of a third party, the directors can bring a lawsuit in the name of the corporation against that party.

Accepted Answer

A) True 
 B)False

Question 9

Corporate directors and officers are insurers of business success.

Accepted Answer

A) True 
 B)False

Question 10

Brad is a shareholder of Cloud Servers Inc. He will be deemed to have a fiduciary duty to Cloud and its minority shareholders if he has a sufficient number of shares to

Accepted Answer

A)  ​assert the business judgment rule. 
B)  ​bring a shareholder's derivative suit. 
C)  ​exercise de facto control. 
D)  ​participate in a cumulative vote. 
A)  ​assert the business judgment rule. 
B)  ​bring a shareholder's derivative suit. 
C)  ​exercise de facto control. 
D)  ​participate in a cumulative vote.

Question 11

Dividends can be paid in the stock of corporations other than the corporation that is paying the dividends.

Accepted Answer

A) True 
 B)False

Question 12

Mike is a shareholder of Natural Gas, Inc. Natural Gas uses cumulative voting to elect directors. This means that the number of Mike's votes is determined by the number of

Accepted Answer

A)  ​years that he has been a shareholder. 
B)  ​members of the board to be elected multiplied by the total number of voting shares that he holds. 
C)  ​shareholders present at the shareholders' meeting. 
D)  ​shareholders' meetings that he has attended. 
A)  ​years that he has been a shareholder. 
B)  ​members of the board to be elected multiplied by the total number of voting shares that he holds. 
C)  ​shareholders present at the shareholders' meeting. 
D)  ​shareholders' meetings that he has attended.

Question 13

Lew is a director of Mines, Inc. Using information that is not available to the public, he makes a profit trading in Mines securities. Lew is most likely liable for breach of

Accepted Answer

A)  ​none of the choices. 
B)  ​the business judgment rule. 
C)  ​the duty of loyalty. 
D)  ​the duty of care. 
A)  ​none of the choices. 
B)  ​the business judgment rule. 
C)  ​the duty of loyalty. 
D)  ​the duty of care.

Question 14

Publicly held corporations typically create committees of directors and delegate certain tasks to these committees.

Accepted Answer

A) True 
 B)False

Question 15

Rosa and Sean are shareholders of Tasty Tacos, Inc. Rosa's written authorization to Sean to vote Rosa's shares at a shareholders' meeting is

Accepted Answer

A)  ​a violation of the duty of care. 
B)  ​a preemptive right. 
C)  ​a proxy. 
D)  ​a quorum. 
A)  ​a violation of the duty of care. 
B)  ​a preemptive right. 
C)  ​a proxy. 
D)  ​a quorum.

Question 16

Directors must engage in self-dealing.

Accepted Answer

A) True 
 B)False

Question 17

Cumulative voting refers to the accumulation of proposals presented annually for a shareholders' vote.

Accepted Answer

A) True 
 B)False

Question 18

Shareholders must approve fundamental changes affecting a corporation.

Accepted Answer

A) True 
 B)False

Question 19

Holly is a director of International Foods, Inc. As a director, with respect to the corporation, Holly is

Accepted Answer

A)  ​a fiduciary. 
B)  ​an incorporator. 
C)  ​an officer. 
D)  ​an employee. 
A)  ​a fiduciary. 
B)  ​an incorporator. 
C)  ​an officer. 
D)  ​an employee.

Question 20

Neil, a majority shareholder of Oil Changes Inc., effectively excludes Polly, a minority shareholder, from the benefits of stock ownership in the firm. Polly can

Accepted Answer

A)  ​assert the business judgment rule. 
B)  ​bring a suit for damages. 
C)  ​exercise de facto control. 
D)  force a cumulative vote. 
A)  ​assert the business judgment rule. 
B)  ​bring a suit for damages. 
C)  ​exercise de facto control. 
D)  force a cumulative vote.

Exam 6: Corporate Directors, Officers, and Shareholders

Shareholders are personally liable for the debts of a corporation.

Ron is a director of Start-Up Inc. He is also a chief corporate officer in the firm and receives compensation for both positions. He is

Adam is a shareholder of Bay Boats Inc. with preemptive rights. With these rights, he can

In some situations, a majority shareholder owes a fiduciary duty to minority shareholders.

Ann is a corporate officer for Blooming Flora, Inc. As a corporate officer, Ann is

Carlo is a director of Desserts Italiano, Inc. Carlo opposes a tender offer that is in the company's best interest because its acceptance would cost his position as a director. Carlo is most likely liable for a breach of

The minimum number of members of a body of officials that must be present for business to be validly transacted is a quorum.

When the corporation is harmed by the actions of a third party, the directors can bring a lawsuit in the name of the corporation against that party.

Corporate directors and officers are insurers of business success.

Brad is a shareholder of Cloud Servers Inc. He will be deemed to have a fiduciary duty to Cloud and its minority shareholders if he has a sufficient number of shares to

Dividends can be paid in the stock of corporations other than the corporation that is paying the dividends.

Mike is a shareholder of Natural Gas, Inc. Natural Gas uses cumulative voting to elect directors. This means that the number of Mike's votes is determined by the number of

Lew is a director of Mines, Inc. Using information that is not available to the public, he makes a profit trading in Mines securities. Lew is most likely liable for breach of

Publicly held corporations typically create committees of directors and delegate certain tasks to these committees.

Rosa and Sean are shareholders of Tasty Tacos, Inc. Rosa's written authorization to Sean to vote Rosa's shares at a shareholders' meeting is

Directors must engage in self-dealing.

Cumulative voting refers to the accumulation of proposals presented annually for a shareholders' vote.

Shareholders must approve fundamental changes affecting a corporation.

Holly is a director of International Foods, Inc. As a director, with respect to the corporation, Holly is

Neil, a majority shareholder of Oil Changes Inc., effectively excludes Polly, a minority shareholder, from the benefits of stock ownership in the firm. Polly can

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