Question 1

Treasury shares are shares that have been authorized but have not yet been issued.

Accepted Answer

A) True 
 B)False

Question 2

Fyloff,Inc.would like to pay a dividend to its shareholders.It has only been in business a few years and does not yet have any retained earnings.However,it has a new product,which is breaking all sales records.This quarter,it anticipates about $3 million in earned surplus.It should be able to pay all of its bills as they become due.Under which of the following tests would Fyloff be able to pay a dividend? Explain each test.
a.Earned surplus test
b.Surplus test
c.Net asset test

Accepted Answer

a.No dividend could be paid under this t

Question 3

Dividends are ordinarily paid in cash,but may be paid in property.

Accepted Answer

A) True 
 B)False

Question 4

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 5

The Revised Act,the 1980 Amendments to the MBCA,and over half of the states have eliminated the concept of:

Accepted Answer

A) par value. 
B) stated capital. 
C) capital surplus. 
D) All of the above. 
A) par value. 
B) stated capital. 
C) capital surplus. 
D) All of the above.

Question 6

If Class A preferred shares provide only for a cumulative dividend of $3 per share,what will be the consequence on liquidation?

Accepted Answer

A) Class A Preferred will receive $3 per share more than common shares. 
B) Class A Preferred will receive 103% of common shares. 
C) Class A Preferred will share equally with common shares. 
D) Class A Preferred will be subordinated to the rights of common shares. 
A) Class A Preferred will receive $3 per share more than common shares. 
B) Class A Preferred will receive 103% of common shares. 
C) Class A Preferred will share equally with common shares. 
D) Class A Preferred will be subordinated to the rights of common shares.

Question 7

Redemption of shares is not permitted if the corporation:

Accepted Answer

A) asks for an injunction. 
B) would, by that action, reduce total assets below the stated capital amount. 
C) has outstanding treasury shares. 
D) is likely to be rendered insolvent. 
A) asks for an injunction. 
B) would, by that action, reduce total assets below the stated capital amount. 
C) has outstanding treasury shares. 
D) is likely to be rendered insolvent.

Question 8

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 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

Discuss the use of and types of stock options.

Accepted Answer

Stock options entitle their holders to p

Question 11

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

Question 12

In which of the following ways do debt and equity securities necessarily differ?

Accepted Answer

A) Ownership interest. 
B) Voting rights. 
C) Redeemability. 
D) Convertibility. 
A) Ownership interest. 
B) Voting rights. 
C) Redeemability. 
D) Convertibility.

Question 13

In Klang v.Smith's Food & Drug Centers,Inc.,the court found:

Accepted Answer

A) that the balance sheets of a corporation constitute conclusive evidence of capital impairment regarding a corporation's repurchase of shares. 
B) the corporation's repurchase of shares violated a statutory prohibition against impairment of capital. 
C) the directors may appropriately revalue corporate assets to reflect current value. 
D) criminal negligence existed. 
A) that the balance sheets of a corporation constitute conclusive evidence of capital impairment regarding a corporation's repurchase of shares. 
B) the corporation's repurchase of shares violated a statutory prohibition against impairment of capital. 
C) the directors may appropriately revalue corporate assets to reflect current value. 
D) criminal negligence existed.

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Ready Equipment,Inc.authorized and specified in its charter 5,000 shares of stock to be issued.If it later needs to issue stock in excess of 5,000 shares,the charter will have to be amended.

Accepted Answer

A) True 
 B)False

Question 16

The MBCA as amended in 1980 and the Revised Act have adopted a net asset test for the issuance of dividends.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Yields on "junk bonds" are higher than the rate of safe government bonds.

Accepted Answer

A) True 
 B)False

Question 20

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.

Exam 34: Financial Structure of Corporations

Treasury shares are shares that have been authorized but have not yet been issued.

Dividends are ordinarily paid in cash,but may be paid in property.

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,the 1980 Amendments to the MBCA,and over half of the states have eliminated the concept of:

If Class A preferred shares provide only for a cumulative dividend of $3 per share,what will be the consequence on liquidation?

Redemption of shares is not permitted if the corporation:

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

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

Discuss the use of and types of stock options.

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.

In which of the following ways do debt and equity securities necessarily differ?

In Klang v.Smith's Food & Drug Centers,Inc.,the court found:

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

Ready Equipment,Inc.authorized and specified in its charter 5,000 shares of stock to be issued.If it later needs to issue stock in excess of 5,000 shares,the charter will have to be amended.

The MBCA as amended in 1980 and the Revised Act have adopted a net asset test for the issuance of dividends.

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

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

Yields on "junk bonds" are higher than the rate of safe government bonds.

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:

Introduction to Law

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Intentional Torts

Negligence and Strict Liability

Introduction to Contracts

Mutual Assent

Conduct Invalidating Assent

Consideration

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Third Parties to Contracts

Performance, Breach, and Discharge

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Introduction to Sales and Leases

Performance

Transfer of Title and Risk of Loss

Product Liability: Warranties and Strict Liability

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Form and Content

Transfer and Holder in Due Course

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Relationship of Principal and Agent

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Formation and Internal Relations of General Partnerships

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Nature and Formation of Corporations

Management Structure of Corporations

Fundamental Changes of Corporations

Secured Transactions and Suretyship

Bankruptcy

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