Question 1

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 as compensation to directors, officers, and employees. 
B) shares issued within one year of incorporation. 
C) the corporation's unissued shares. 
D) All of the above 
A) shares issued as compensation to directors, officers, and employees. 
B) shares issued within one year of incorporation. 
C) the corporation's unissued shares. 
D) All of the above

Question 2

A majority of the shareholders would have to approve the issuance of corporate bonds.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

What are the two major issues regarding payment for shares?

Accepted Answer

Two major issues arise regarding payment

Question 6

The Revised Act does not consider a transfer of its own stock by ZYX Corporation to its stockholders a distribution.

Accepted Answer

A) True 
 B)False

Question 7

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

Question 8

The earned surplus test for the issuance of dividends by a corporation is less restrictive than the surplus test.

Accepted Answer

A) True 
 B)False

Question 9

__________, 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 the above. 
A) Secured bonds 
B) Income bonds 
C) Unsecured bonds 
D) None of the above.

Question 10

An investor has the right to transfer his investment securities by sale, gift, or pledge.

Accepted Answer

A) True 
 B)False

Question 11

With respect to liability for improper dividends, a non-breaching director and an innocent shareholder are both fully protected from any liability for repayment due to their good faith.

Accepted Answer

A) True 
 B)False

Question 12

Even if it has been lawfully and properly declared, a stock dividend may be revoked unless it has been actually distributed.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is correct with regard to treasury shares?

Accepted Answer

A) The acquisition of such shares by the corporation is a distribution to shareholders with an effect similar to that of a dividend. 
B) Under the Revised Act, treasury shares are unauthorized but issued. 
C) The 1980 amendments to the MBCA eliminated the concept of treasury shares. 
D) Treasury shares are issued and outstanding. 
A) The acquisition of such shares by the corporation is a distribution to shareholders with an effect similar to that of a dividend. 
B) Under the Revised Act, treasury shares are unauthorized but issued. 
C) The 1980 amendments to the MBCA eliminated the concept of treasury shares. 
D) Treasury shares are issued and outstanding.

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

Under the Revised Act, a director who is a member of the board that declares an illegal dividend is not personally liable to the company for the amount that is illegal.

Accepted Answer

A) True 
 B)False

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

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

Question 18

A distribution may be in the form of:

Accepted Answer

A) declaration of a dividend. 
B) a purchase, redemption, or other acquisition of shares. 
C) a distribution of indebtedness. 
D) All of the above. 
A) declaration of a dividend. 
B) a purchase, redemption, or other acquisition of shares. 
C) a distribution of indebtedness. 
D) All of the above.

Question 19

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 the above. 
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 the above.

Question 20

Bonds subject to a redemption provision, which permits the corporation to redeem, or pay off, all or a part of the issue before maturity at a specified redemption price are known as:

Accepted Answer

A) secured bonds. 
B) income bonds. 
C) callable bonds. 
D) convertible bonds. 
A) secured bonds. 
B) income bonds. 
C) callable bonds. 
D) convertible bonds.

Exam 35: Financial Structure of Corporations

If the charter simply states that the corporation elects to have preemptive rights, the shareholders have no preemptive rights with respect to:

A majority of the shareholders would have to approve the issuance of corporate bonds.

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

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

What are the two major issues regarding payment for shares?

The Revised Act does not consider a transfer of its own stock by ZYX Corporation to its stockholders a distribution.

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

The earned surplus test for the issuance of dividends by a corporation is less restrictive than the surplus test.

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

An investor has the right to transfer his investment securities by sale, gift, or pledge.

With respect to liability for improper dividends, a non-breaching director and an innocent shareholder are both fully protected from any liability for repayment due to their good faith.

Even if it has been lawfully and properly declared, a stock dividend may be revoked unless it has been actually distributed.

Which of the following is correct with regard to treasury shares?

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

Under the Revised Act, a director who is a member of the board that declares an illegal dividend is not personally liable to the company for the amount that is illegal.

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

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

A distribution may be in the form of:

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

Bonds subject to a redemption provision, which permits the corporation to redeem, or pay off, all or a part of the issue before maturity at a specified redemption price are known as:

Introduction to Law

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Nature and Formation of Corporations

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