Deck 16: Corporations and Corporate Governance

Question 1

A corporation is referred to as a(n)________ corporation in the state in which it was formed.

A)foreign
B)domestic
C)alien
D)multinational

Answer 1

B

Question 2

Corporation codes regulate the formation,operation,and dissolution of corporations.

Answer 2

True

Question 3

Which of the following must be included in the articles of incorporation?

A)the minutes of the first organizational meeting of the board of directors
B)the number of shares the corporation is authorized to issue
C)the terms warranting corporate dissolution
D)the corporate seal used in the articles of incorporation

Answer 3

B

Question 4

Which of the following is a definition of a foreign corporation?

A)a corporation with incorporations in multiple states
B)a corporation in the state in which it was incorporated
C)a corporation in states other than the one in which it was incorporated
D)a corporation in the United States which has been incorporated in another country

Question 5

The ________ is a general rule of corporate law that provides that generally,shareholders are liable only to the extent of their capital contributions for the debts and obligations of their corporation and are not personally liable for the debts and obligations of the corporation.

A)limited-purpose clause
B)limited liability of shareholders
C)preferred shareholder rule
D)nonparticipating shareholder rule

Question 6

________ are the basic governing documents of a corporation which must be drafted and filed with,and approved by,the state before the corporation can be officially incorporated.

A)Debt securities
B)Debentures
C)Certificates of authority
D)Articles of incorporation

Question 7

Which of the following is true of a corporation's incorporation in a state?

A)Domestic corporations can incorporate in only one state.
B)Domestic corporations can incorporate in all states in which they conduct business.
C)Alien corporations can only incorporate in one state.
D)Foreign corporations can incorporate in more than one state.

Question 8

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

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

Question 9

Shareholders have unlimited liability for the debts and obligations of a corporation.

Question 10

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

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

Question 11

The board of directors makes policy decisions concerning the operation of a corporation.

Question 12

________ corporations are corporations that have many shareholders and whose securities are often traded on organized securities markets.

A)Closely held
B)Nonprofit
C)Publicly held
D)Professional

Question 13

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

A)corporate officers
B)shareholders
C)registered agents
D)managing directors

Question 14

The ________ own(s)a corporation.

A)shareholders
B)board of directors
C)CEO
D)corporate officers

Question 15

A panel of persons who are elected by shareholders that make policy decisions concerning the operation of a corporation is known as the ________.

Question 16

The ________ Act of 2002 is a federal statute enacted by Congress to improve corporate governance.

A)Brown-Kaufmann
B)Lanham
C)Glass-Steagall
D)Sarbanes-Oxley

Question 17

Corporations are not allowed to enter into contracts in their own name.

Question 18

________ are a panel of decision makers who are elected by the shareholders.

A)Registered agents
B)Corporate officers
C)Stakeholders
D)Board of directors

Question 19

A corporation in the United States that has been incorporated in another country is referred to as a(n)________ corporation.

A)foreign
B)domestic
C)onshore
D)alien

Question 20

Shareholders are owners of a corporation who elect the board of directors and vote on fundamental changes in the corporation.

Question 21

The articles of incorporation must contain the name and address of every incorporator.

Question 22

Which of the following criteria must be satisfied for a corporation to be treated as an S corporation?

A)The corporation's shareholders must be other corporations or partnerships.
B)The corporation's shareholders must be citizens or residents of the United States.
C)The corporation must have more than 100 shareholders.
D)The corporation must have more than one class of stock.

Question 23

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

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

Question 24

Private corporations range from small one-owner corporations to large multinational corporations such as Microsoft Corporation.

Question 25

Issued shares that have been repurchased by the corporation are referred to as ________ shares.

A)outstanding
B)liquidated
C)unissued
D)treasury

Question 26

A ________ is a preferred stockholder's right to be paid a stated dollar amount if a corporation is dissolved and its assets redistributed.

A)noncumulative preference
B)cumulative dividend preference
C)dividend preference
D)liquidation preference

Question 27

Which of the following is true of a note?

A)It is a long-term unsecured debt instrument that is based on a corporation's general credit standing.
B)It is a long-term debt security that is secured by some form of collateral.
C)It can be either unsecured or secured.
D)It contains a conversion feature.

Question 28

A long-term debt security that is secured by some form of collateral is referred to as a ________.

A)treasury share
B)bond
C)note
D)debenture

Question 29

A corporation can be incorporated in several states.

Question 30

Which of the following is true of corporate bylaws?

A)They only contain rules addressing how the corporation can interact with the government.
B)They are only adopted by the shareholders of the corporation.
C)They are not binding on the directors or shareholders of the corporation.
D)They do not have to be filed with any government official.

Question 31

A corporation is a foreign corporation in states other than the one in which it is incorporated.

Question 32

Which of the following is true of a C Corporation?

A)It does not pay taxes at the corporate level.
B)Shareholders of such a corporation are not required to pay taxes on their dividends.
C)Any corporation with more than 100 shareholders is automatically a C corporation for federal income tax purposes.
D)Nonresident aliens cannot be shareholders unless they demonstrate due diligence in meeting federal requirements for residency status.

Question 33

Which of the following is true of an S corporation?

A)It can have no more than 100 shareholders.
B)Only a foreign corporation can become an S corporation.
C)It is taxed at the corporate level.
D)It must be a member of an affiliated group of corporations.

Question 34

Securities that establish a debtor-creditor relationship in which the corporation borrows money from the investor to whom a debt security is issued are known as ________.

A)authorized shares
B)preferred stocks
C)common stocks
D)fixed income securities

Question 35

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

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

Question 36

Which of the following shares have the right to vote?

A)unissued shares
B)treasury shares
C)outstanding shares
D)liquidated shares

Question 37

Stock for which any missed dividend payments must be paid in the future to the preferred shareholders before the common shareholders can receive any dividends is known as ________ stock.

A)cumulative preferred
B)noncumulative preferred
C)common
D)participating preferred

Question 38

A detailed set of rules adopted by the board of directors after a corporation is incorporated that contains provisions for managing the business and the affairs of the corporation are referred to as ________.

A)ultra vires rules
B)articles of incorporation
C)bylaws
D)corporation codes

Question 39

A contract between a corporation and a holder that contains the terms of a debt security is known as a(n)________.

A)option contract
B)right of first refusal
C)indenture
D)shareholder voting agreement

Question 40

Which of the following is true of treasury shares?

A)They cannot be issued by the corporation.
B)They cannot be voted by the corporation.
C)They are owned by shareholders.
D)They are entitled to receive dividends.

Question 41

Foreign corporations can elect to be taxed as an S corporation.

Question 42

The shareholders of a corporation have the absolute right to amend the bylaws.

Question 43

Only outstanding shares have the right to vote.

Question 44

A C corporation pays taxes at the corporate level and also at the shareholder level.

Question 45

The bylaws of a corporation must be filed with a government official.

Question 46

Provisions concerning the limitation or regulation of powers of the corporation cannot be included in the articles of incorporation.

Question 47

An S corporation must pay federal income tax at the corporate level.

Question 48

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

Question 49

In debt securities,the corporation is the debtor and the holder is the creditor.

Question 50

An S corporation election is made by filing a Form 2553 with the Federal Trade Commission.

Question 51

Corporations cannot provide their articles of incorporation online.

Question 52

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

Question 53

An S corporation can have nonresident aliens as shareholders.

Question 54

Shares that are repurchased by a corporation are called unissued shares.

Question 55

Common stockholders receive dividends declared by the board of directors.

Question 56

Convertible preferred stock permits the preferred stockholders to convert their shares into common stock.

Question 57

Treasury shares cannot be reissued by a corporation.

Question 58

In case a corporation's assets are liquidated,the preferred stockholders are paid before common stockholders.

Question 59

Any corporation with more than 100 shareholders is automatically considered a C corporation for federal income tax purposes.

Question 60

An S corporation cannot have more than 100 shareholders.

Question 61

The Inkilwas Corporation has 30,000 shares outstanding.A shareholders' meeting is duly called to amend the company's articles of incorporation,and 17,501 shares are represented at the meeting.If an amendment to the articles of incorporation is put to vote at this meeting,which of the following statements is true in terms of passage of the amendment?

A)The amendment will not pass,since all 30,000 outstanding shares must be represented at the meeting in order to vote to amend the articles of incorporation.
B)The amendment will pass if all 17,501 shares represented at the meeting vote to approve it.
C)The amendment will pass if 4,376 shares represented at the meeting vote to approve it.
D)The amendment will pass if 8,751 shares represented at the meeting vote to approve it.

Question 62

According to the Revised Model Business Corporation Act (RMBCA),what establishes a quorum to hold a meeting of the shareholders?

A)a majority of the outstanding shares
B)a majority of the unissued shares
C)a majority of the treasury shares
D)a majority of the liquidated shares

Question 63

A note is a long-term debt security that is secured by some form of collateral.

Question 64

A corporation that is incorporated in another country is known as a(n)________ corporation.

Question 65

The Inkilwas Corporation has 30,000 shares outstanding.A shareholders' meeting is duly called to amend the articles of incorporation,and 17,501 shares are represented at the meeting.According to the Revised Model Business Corporation Act (RMBCA),what is the minimum number of outstanding shares that must be represented in this case to have a quorum?

A)12,001
B)18,501
C)15,001
D)17,501

Question 66

A contract between a corporation and a holder that contains the terms of a debt security is known as a(n)________.

Question 67

Authorized shares that have not been sold by the corporation are known as ________.

Question 68

Suppose Lisa owns 1,000 shares of a corporation.Assume that four directors are to be elected to the board.With ________ voting,Lisa can multiply the number of shares she owns (1,000)by the number of directors to be elected (four),and she can cast all the resulting votes (4,000)for one candidate or split them among candidates as she determines.

A)supramajority
B)noncumulative
C)cumulative
D)preemptive

Question 69

When is the annual shareholders' meeting held?

A)according to the date fixed in the bylaws
B)at the discretion of the board of directors
C)only if and when there is an organizational crisis
D)only when necessary to elect a new board of members

Question 70

Stock that permits a corporation to buy back the preferred stock at some future date is known as ________.

Question 71

Give an account of publicly held and closely held corporations.

Question 72

The Merrick and Stanley Corporation has 28,000 outstanding shares.During a proposal for a merger,the shareholders decide to increase the quorum of the vote of shareholders to 75 percent,using the supramajority voting rule.How many minimum affirmative votes would be needed to pass the supramajority voting requirement?

A)14,001
B)21,280
C)21,000
D)28,000

Question 73

A written document in which a shareholder authorizes a person to vote the shareholder's shares at the shareholders' meetings in the event of the shareholder's absence is known as a ________.

A)quorum
B)notice of shareholder's meeting
C)certificate of authority
D)proxy

Question 74

A(n)________ is a person or a corporation that is empowered to accept service of process on behalf of a corporation and is identified in the articles of incorporation.

Question 75

Secured bondholders can foreclose on the collateral in the event of nonpayment of interest or principal.

Question 76

Bilkis Brans has 20,000 outstanding shares with four shareholders.Ester owns 9,000 shares,Mendez owns 4,000 shares,Judy owns 4,000 shares,and Aaron owns 3,000 shares.Suppose that two directors of the corporation are to be elected from a potential pool of five candidates.Ester favors candidates 1 and 5,Mendez favors candidates 2 and 4,Judy favors candidates 3 and 4,and Aaron favors candidates 2 and 3.If straight voting occurs,which of the two candidates are likely to win?

A)candidates 1 and 5
B)candidates 1 and 4
C)candidates 2 and 3
D)candidates 2 and 4

Question 77

Which of the following is true of shareholders?

A)They cannot enter into contracts that bind the corporation.
B)They cannot vote to elect the board of directors.
C)They cannot take active charge in deciding fundamental changes in the corporation.
D)They are considered as agents of the corporation.

Question 78

What is common stock? What are its features?

Question 79

The articles of incorporation is also known as the ________.

Question 80

A(n)________ is a long-term unsecured debt instrument that is based on a corporation's general credit standing.