Exam 34: Financial Structure of Corporations

Myrick owns 50 shares of stock in Richley Corp.,which has a total of one thousand shares outstanding.If Richley decides to issue one thousand additional shares of stock and Myrick has preemtive rights,Myrick will be offered one hundred shares of the newly issued stock.

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

Participating preferred stock will:

Debentures are the same as indentures.

A prospectus is an offer a corporation makes to interest people in buying securities.

Debt securities represent an ownership interest in the corporation.

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.

The most customary type of dividend is a:

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.

"Investment grade" refers to the top-ten bond ratings and is a term meant to help potential investors judge the probability that the bond issuer will repay the principal at maturity and make scheduled interest payments.

What are the two major issues regarding payment for shares?

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

Max buys shares of newly issued Z Corp.stock for $30 per share and pays $1,000 cash,a car worth $2,000,and a promissory note for $3,000.Under the Revised Act,how many shares of stock could validly be sold?

Once properly declared,the effect of a cash dividend is:

Jerry received a check from McGregory Corporation as a dividend on his preferred shares.Two days later,one of the corporate directors called him and said he would have to return the check since it was erroneously declared and the company would not be able to pay its day-to-day expenses.Jerry would:

A corporation may purchase its own shares only out of earned surplus unless the articles of incorporation or the shareholders permit purchase out of capital surplus.

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

An investor has the right to transfer his investment securities by sale,but not by gift or pledge.

The board of directors cannot declare dividends when the corporation:

The shareholders normally determine the price for which shares will be issued unless the charter permits the board of directors to set the price.