Question 1

Genna is a director of Fab Stuff Corporation.Without informing Fab,Genna starts up Evertrendy,Inc. ,to compete with Fab.Genna is li?able for breach of

Accepted Answer

A) no duty or rule 
B) the business judgment rule. 
C) the duty of loyalty. 
D) the right of participation.

Question 2

Roth and Starr are shareholders of Triumph Hotel Corporation.Triumph's directors fail to declare a dividend.Roth and Starr could succeed in asking a court to order the directors to meet and declare a dividend

Accepted Answer

A) if Triumph has sufficient earnings available to pay a dividend. 
B) if Triumph has cash reserves earmarked for a different purpose. 
C) if withholding a dividend is an abuse of the directors' discretion. 
D) under no circumstances.

Question 3

Rocco is a director of Spa Lids & Tubs,Inc.Under the standard of due care owed by di?rectors of a corporation,Rocco's decisions must be

Accepted Answer

A) unwavering and unquestionable. 
B) arguable and defensible. 
C) informed and reasonable. 
D) perfect and unassailable.

Question 4

Sophie and Tiny incorporate their beverage-container business as U-Twist Products,Inc.The first board of directors may be appointed by the firm's

Accepted Answer

A) board of directors. 
B) incorporators. 
C) officers. 
D) shareholders.

Question 5

Viola is a director of Water Pure Corporation.With respect to Water Pure,Viola's most important right is the right of

Accepted Answer

A) compensation. 
B) indemnification. 
C) participation. 
D) certification.

Question 6

Shareholders must approve fundamental changes affecting the corporation before the changes can be implemented.

Accepted Answer

A) True 
 B)False

Question 7

In certain instances of fraud,a court may "pierce the corporate veil" to hold the shareholders individually liable.

Accepted Answer

A) True 
 B)False

Question 8

If a stock certificate is lost or destroyed,ownership is not destroyed with it.

Accepted Answer

A) True 
 B)False

Question 9

Raul is chairman of the board of Swif-Vac Corporation.Pinky,a con?sumer,is injured while using a Swif-Vac product.Pinky sues Swif-Vac,and Raul individu?ally.Swif-Vac may pay Raul's legal fees under

Accepted Answer

A) the director's right to certification. 
B) the director's right to compensation. 
C) the director's right to indemnification. 
D) no circumstances.

Question 10

A director does not need to disclose any conflict of interest before voting on a proposed transaction.

Accepted Answer

A) True 
 B)False

Question 11

Ogilvie,a director of Pitstop Service Station Corporation,does not attend a board meet?ing for three years.During that time,Noreen,Pitstop's president,makes improper loans that cost the company $100,000.Ogilvie is most likely

Accepted Answer

A) liable for negligence or mismanagement. 
B) liable for violation of the business judgment rule. 
C) not liable because missing meetings is an honest mistake. 
D) not liable because missing meetings is only poor judgment.

Question 12

Darla is a shareholder of Candy Confection Corporation.The right to inspect corporate books and records is

Accepted Answer

A) held by Darla only if she is a director. 
B) held by Darla,without restrictions. 
C) held by Darla,with some restrictions. 
D) not held by Darla.

Question 13

A director or officer is not liable to the corporation for a bad business decision.

Accepted Answer

A) True 
 B)False

Question 14

Ida,Jerzy,and Kit are the directors of Liberty Convenience Stores,Inc.Liberty has nine officers and forty-six shareholders.Dividends are ordered by the firm's

Accepted Answer

A) board of directors. 
B) incorporators. 
C) officers. 
D) shareholders.

Question 15

Bret and Courtney form Delite Day Care,Inc.Ultimate responsibility for pol?icy decisions necessary to the management of corporate affairs rests with Delite's

Accepted Answer

A) board of directors. 
B) incorporators. 
C) officers. 
D) shareholders.

Question 16

Before shareholders can bring a derivative suit,they must submit a written demand to the corporation,asking the board of directors to take action.

Accepted Answer

A) True 
 B)False

Question 17

Niche Stores,Inc. ,must hold a shareholders' meeting

Accepted Answer

A) monthly. 
B) annually. 
C) biannually. 
D) only when it is called by the board of directors.

Question 18

Naomi and Ogden are shareholders of MediCare Residences,Inc.As shareholders,they must approve

Accepted Answer

A) conducting a merger. 
B) deciding to pursue new business opportunities. 
C) terminating a managerial employee. 
D) negotiating a contract between management and labor.

Question 19

Corporate directors are rarely compensated for their work,effort,and especially the risk involved.

Accepted Answer

A) True 
 B)False

Question 20

Committees of the board of directors increase the efficiency of the board.

Accepted Answer

A) True 
 B)False

Exam 40: A: Corporate Directors,officers, Shareholders

Genna is a director of Fab Stuff Corporation.Without informing Fab,Genna starts up Evertrendy,Inc. ,to compete with Fab.Genna is li?able for breach of

Roth and Starr are shareholders of Triumph Hotel Corporation.Triumph's directors fail to declare a dividend.Roth and Starr could succeed in asking a court to order the directors to meet and declare a dividend

Rocco is a director of Spa Lids & Tubs,Inc.Under the standard of due care owed by di?rectors of a corporation,Rocco's decisions must be

Sophie and Tiny incorporate their beverage-container business as U-Twist Products,Inc.The first board of directors may be appointed by the firm's

Viola is a director of Water Pure Corporation.With respect to Water Pure,Viola's most important right is the right of

Shareholders must approve fundamental changes affecting the corporation before the changes can be implemented.

In certain instances of fraud,a court may "pierce the corporate veil" to hold the shareholders individually liable.

If a stock certificate is lost or destroyed,ownership is not destroyed with it.

Raul is chairman of the board of Swif-Vac Corporation.Pinky,a con?sumer,is injured while using a Swif-Vac product.Pinky sues Swif-Vac,and Raul individu?ally.Swif-Vac may pay Raul's legal fees under

A director does not need to disclose any conflict of interest before voting on a proposed transaction.

Ogilvie,a director of Pitstop Service Station Corporation,does not attend a board meet?ing for three years.During that time,Noreen,Pitstop's president,makes improper loans that cost the company $100,000.Ogilvie is most likely

Darla is a shareholder of Candy Confection Corporation.The right to inspect corporate books and records is

A director or officer is not liable to the corporation for a bad business decision.

Ida,Jerzy,and Kit are the directors of Liberty Convenience Stores,Inc.Liberty has nine officers and forty-six shareholders.Dividends are ordered by the firm's

Bret and Courtney form Delite Day Care,Inc.Ultimate responsibility for pol?icy decisions necessary to the management of corporate affairs rests with Delite's

Before shareholders can bring a derivative suit,they must submit a written demand to the corporation,asking the board of directors to take action.

Niche Stores,Inc. ,must hold a shareholders' meeting

Naomi and Ogden are shareholders of MediCare Residences,Inc.As shareholders,they must approve

Corporate directors are rarely compensated for their work,effort,and especially the risk involved.

Committees of the board of directors increase the efficiency of the board.