Deck 27: Corporations and Franchising

Question 1

Stockholders may inspect the corporate records at any time and for any purpose.

Answer 1

False

Question 2

Words such as "Inc." and "Corp." indicate that a business is a corporation.

Answer 2

True

Question 3

The powers of a corporation are found in

A) the corporation's bylaws.
B) the state statutes.
C) the corporation's charter.
D) all of these.

Answer 3

D

Question 4

Only the directors of a corporation may invalidate an ultra vires act.

Question 5

Franchising is regulated by both state and federal governments.

Question 6

Corporations receive permission to operate from the state or the federal government.

Question 7

A corporation comes into existence when the

A) application for a charter is filed.
B) state issues the charter.
C) bylaws are adopted.
D) first meeting of stockholders is held.

Question 8

The board of directors of a corporation is responsible for its day-to-day operations.

Question 9

Directors and officers are liable to third parties only if they commit an intentional tort such as fraud.

Question 10

A court's holding that a corporation was organized solely to avoid liability is known as "piercing the corporate veil".

Question 11

Tender offers are regulated by both federal and state securities laws.

Question 12

One method used by corporations to resist a takeover attempt is called

A) a golden ladder.
B) a black knight
C) a poison pill.
D) a blockbuster effect.

Question 13

A corporation organized to operate a college is an example of a

A) Subchapter S corporation.
B) professional corporation.
C) business corporation.
D) nonprofit corporation.

Question 14

It is usually more costly to set up a corporation than a partnership.

Question 15

Preferred stockholders have first claim on the assets of a corporation if the corporation dissolves.

Question 16

Stockholders who cannot attend stockholders' meetings may allow others to vote for them by issuing proxies.

Question 17

When a corporation issues new stock, current stockholders may purchase additional shares before these shares are offered to the public.

Question 18

For federal income tax purposes, a Chapter S corporation is treated as

A) sole proprietorship.
B) partnership.
C) limited partnership.
D) corporation.

Question 19

A state may dissolve a corporation for failure to pay corporate taxes.

Question 20

A stockholder can never be held liable for debts of the corporation.

Question 21

The rules for managing the affairs of the corporation are called the

A) corporate charter.
B) articles of incorporation.
C) corporate bylaws.
D) corporate minutes.

Question 22

Double taxation means that the

A) government taxes both salaries and dividends.
B) government taxes both earnings to corporations and dividends to individuals.
C) tax rate for corporations is double that of individuals.
D) government taxes both stocks and bonds.

Question 23

A corporation terminates

A) if stockholders agree that it should.
B) if the corporate term ends.
C) if there is a consolidation.
D) all of these.

Question 24

Major corporate policy is determined by

A) stockholders.
B) officers.
C) directors.
D) managers.

Question 25

Stockholders have the power to

A) elect directors.
B) amend the by-laws.
C) approve of a merger.
D) all of these.

Question 26

An income tax preparation service franchise is an example of a

A) product franchise.
B) business plan franchise.
C) state franchise.
D) federal franchise.

Question 27

Preferred stockholders are

A) usually unable to vote at stockholders' meetings.
B) entitled to receive dividends before common stockholders do.
C) entitled to receive stock certificates.
D) all of these.

Question 28

____________________ is evidence of ownership interest in a corporation.

Question 29

A corporation owned by very few stockholders is called a(n) ____________________ corporation.

Question 30

A(n) ____________________ corporation, one organized to make money, is the usual form of organization for manufacturing, financial, and service businesses.

Question 31

If two corporations join to form an entirely new corporation, the action is known as

A) a merger.
B) an ultra vires act.
C) dissolution.
D) a consolidation.

Question 32

A disadvantage of the corporate form of business organization is

A) limited life.
B) unlimited liability for debts.
C) double taxation.
D) difficulty of transferring ownership interest.

Question 33

Stock with no printed value is known as ____________________ stock.

Question 34

The liability of stockholders for the debts of the corporation is

A) limited to the amount invested.
B) determined by the number of shares owned.
C) unlimited.
D) nonexistent.

Question 35

Acts of a corporation that exceed its express or implied authority are

A) ultra vires.
B) derivative.
C) pre-emptive.
D) criminal.

Question 36

A technique for enabling large stockholders to exercise control in a corporation is

A) voting trusts.
B) cumulative voting.
C) quorum control.
D) pre-emptive rights.

Question 37

The terms of a franchise relationship are found primarily in

A) FTC regulations.
B) federal law.
C) state statutes.
D) the franchise agreement.

Question 38

Day-to-day management is the responsibility of the

A) officers.
B) directors.
C) stockholders.
D) incorporators.

Question 39

A corporation may obtain financing by means of

A) common stock.
B) preferred stock.
C) bonds.
D) all of these.

Question 40

A corporation organized to practice accounting is an example of a(n) ____________________ corporation.

Question 41

Blue, a stockholder in Ajax Corporation, asked to inspect the corporate records so that he could solicit all stockholders to support certain political candidates. Is he entitled to do this?

Question 42

A(n) ____________________ occurs when a group of investors buy all the stock of a public corporation and convert it into a private corporation.

Question 43

Blair, who owned 60 percent of the common stock of the Arc Corporation, died. Did Blair's death terminate the corporation?

Question 44

The ____________________ of a corporation delegates power for day-to-day operations to an executive committee and to corporate officers.

Question 45

A gas station is an example of ____________________ franchising.

Question 46

Abel Toys, Inc. did not pay a dividend because it suffered a loss for that year. Jones, a stockholder, claimed that as an owner of the business, he was entitled to receive a dividend. Is Jones correct?

Question 47

The portion of corporate profits returned to stockholders is called a(n) ____________________.

Question 48

Vernon, Carey, and Perry were partners in Capstone Clothiers, a retail clothing store. They decided to change the organization of the business to a corporation. They changed the business name to Capstone Clothing, Inc. and notified creditors of the change. Have they formed a valid corporation?

Question 49

Eastern Realty Corp. was organized to purchase, renovate, and sell office buildings. The officers of the corporation authorized the purchase of two buildings, which resulted in a substantial loss to the corporation. Can the stockholders legally hold the officers personally liable for the loss?

Question 50

The ordinary stock of a corporation is called ____________________.