Question 1

What is the conversion right for preferred stocks?

Accepted Answer

Convertible preferred stock permits the preferred stockholders to convert their shares into common stock. The terms and exchange rate of the conversion are established when the shares are issued. The holders of convertible preferred stock usually exercise this option if the corporation's common stock significantly increases in value. Preferred stock that does not have a conversion feature is called nonconvertible preferred stock. Nonconvertible stock is more common than convertible stock.

Question 2

________ is a type of equity security that represents the value of a corporation.

Accepted Answer

A)  Common stock 
B)  Preferred stock 
C)  Cumulative preferred stock 
D)  Participating preferred stock 
A)  Common stock 
B)  Preferred stock 
C)  Cumulative preferred stock 
D)  Participating preferred stock A

Question 3

Judicial dissolution of a corporation can be instituted by the attorney general of the state of incorporation if the corporation ________.

Accepted Answer

A)  procured its articles of incorporation through fraud 
B)  did not pay its franchise fee 
C)  failed to file an annual report 
D)  failed for 60 days to maintain a registered agent in the state 
A)  procured its articles of incorporation through fraud 
B)  did not pay its franchise fee 
C)  failed to file an annual report 
D)  failed for 60 days to maintain a registered agent in the state A

Question 4

Which of the following is the special court that hears and decides business cases in Delaware?

Accepted Answer

A)  court of chancery 
B)  Delaware supreme court 
C)  superior court of Delaware 
D)  court of common pleas 
A)  court of chancery 
B)  Delaware supreme court 
C)  superior court of Delaware 
D)  court of common pleas

Question 5

A corporation reimbursing its employees for expenses would fall under its implied powers.

Accepted Answer

A) True 
 B)False

Question 6

Even if a corporation does no business in Delaware, it can obtain the benefits of Delaware corporation law by incorporating in Delaware.

Accepted Answer

A) True 
 B)False

Question 7

According to priority, which of the following claimants is the last to be paid after assets have been liquidated of a corporation?

Accepted Answer

A)  creditors 
B)  common stockholders 
C)  preferred shareholders 
D)  bond holders 
A)  creditors 
B)  common stockholders 
C)  preferred shareholders 
D)  bond holders

Question 8

The registered office in the articles of incorporation must be the same as the corporation's place of business.

Accepted Answer

A) True 
 B)False

Question 9

Shareholders of a closely held corporation play a minor role in its management.

Accepted Answer

A) True 
 B)False

Question 10

The Revised Model Business Corporation ACT (RMBCA) provides that corporate existence begins when the articles of incorporation are filed.

Accepted Answer

A) True 
 B)False

Question 11

Owners of a corporation who elect the board of directors and vote on fundamental changes in the corporation are known as ________.

Accepted Answer

A)  spectators 
B)  shareholders 
C)  electors 
D)  associates 
A)  spectators 
B)  shareholders 
C)  electors 
D)  associates

Question 12

Publicly held corporations are corporations run by the government.

Accepted Answer

A) True 
 B)False

Question 13

Authorized shares that have been sold by the corporation are called issued shares.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is a long-term debt security?

Accepted Answer

A)  a bond 
B)  stocks 
C)  preferred stock 
D)  a note 
A)  a bond 
B)  stocks 
C)  preferred stock 
D)  a note

Question 15

The ________ is the basic governing document of a corporation which must be filed with the secretary of state of the state of incorporation.

Accepted Answer

A)  debt security 
B)  redeemable stock 
C)  certificate of authority 
D)  articles of incorporation 
A)  debt security 
B)  redeemable stock 
C)  certificate of authority 
D)  articles of incorporation

Question 16

A(n) ________ is a debt security with a maturity of five years or less.

Accepted Answer

A)  bond 
B)  debenture 
C)  indenture 
D)  note 
A)  bond 
B)  debenture 
C)  indenture 
D)  note

Question 17

A person or corporation that is empowered to accept service of process on behalf of a corporation is referred to as a(n) ________.

Accepted Answer

A)  promoter 
B)  authorized shareholder 
C)  registered agent 
D)  incorporator 
A)  promoter 
B)  authorized shareholder 
C)  registered agent 
D)  incorporator

Question 18

Which of the following elects members of the board of directors for a corporation?

Accepted Answer

A)  the CEO 
B)  corporate officers 
C)  shareholders 
D)  employees 
A)  the CEO 
B)  corporate officers 
C)  shareholders 
D)  employees

Question 19

Preferred stockholders are given the right to vote for the board of directors of the corporation.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following can end the existence of a corporation?

Accepted Answer

A)  voluntary termination by shareholder 
B)  death of a shareholder 
C)  bankruptcy of a shareholder 
D)  voluntary termination by the corporation's creditors 
A)  voluntary termination by shareholder 
B)  death of a shareholder 
C)  bankruptcy of a shareholder 
D)  voluntary termination by the corporation's creditors

Exam 36: Corporate Formation and Financing

What is the conversion right for preferred stocks?

________ is a type of equity security that represents the value of a corporation.

Judicial dissolution of a corporation can be instituted by the attorney general of the state of incorporation if the corporation ________.

Which of the following is the special court that hears and decides business cases in Delaware?

A corporation reimbursing its employees for expenses would fall under its implied powers.

Even if a corporation does no business in Delaware, it can obtain the benefits of Delaware corporation law by incorporating in Delaware.

According to priority, which of the following claimants is the last to be paid after assets have been liquidated of a corporation?

The registered office in the articles of incorporation must be the same as the corporation's place of business.

Shareholders of a closely held corporation play a minor role in its management.

The Revised Model Business Corporation ACT (RMBCA) provides that corporate existence begins when the articles of incorporation are filed.

Owners of a corporation who elect the board of directors and vote on fundamental changes in the corporation are known as ________.

Publicly held corporations are corporations run by the government.

Authorized shares that have been sold by the corporation are called issued shares.

Which of the following is a long-term debt security?

The ________ is the basic governing document of a corporation which must be filed with the secretary of state of the state of incorporation.

A(n) ________ is a debt security with a maturity of five years or less.

A person or corporation that is empowered to accept service of process on behalf of a corporation is referred to as a(n) ________.

Which of the following elects members of the board of directors for a corporation?

Preferred stockholders are given the right to vote for the board of directors of the corporation.

Which of the following can end the existence of a corporation?

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