Question 1

Pat owns one share of stock in Quik Smoothies Corporation,as evidenced by a stock certificate. Because stock is intangible personal property,Pat's ownership of the stock

Accepted Answer

Ownership of stock exists independently of the stock certificate. While the physical stock certificate may be evidence of ownership and necessary for certain transactions, it is not essential for ownership to exist. Ownership can alternatively be evidenced through digital records or other means.

Question 2

Farrah and Grant are shareholders of Hong Kong Restaurants,Inc. As shareholders,they must approve

Accepted Answer

Shareholders typically have the right to approve mergers or acquisitions as it can have a significant impact on the value of their investments. Deciding to pursue new business opportunities may not necessarily require shareholder approval unless it involves a major change in the company's direction or significant financial investment. Negotiating a contract between management and labor is typically the responsibility of the company's management and does not require shareholder approval. Therefore, option A is the best choice as it aligns with the typical role of shareholders in approving major corporate decisions.

Question 3

Ernesto is a director of Fine Art Dealers,Inc. Ernesto is trained in art valuation. Fine Art makes several purchases in which it pays too much for artwork. Ernesto approves all the transactions without reading the details. Ernesto is most likely liable for breach of

Accepted Answer

Ernesto, as a director, has a duty of care towards the company and its shareholders. This duty requires him to act in good faith and with the same care that a reasonably prudent person would use in similar circumstances. By approving transactions without reading the details and allowing purchases to be made at higher prices, Ernesto breached his duty of care.

Question 4

Corporate business matters are presented at a shareholders' meeting of Hollywood Lights,Inc.,and other corporations in the form of

Accepted Answer

Resolutions are proposals put forward at a shareholders' meeting that require a vote by shareholders. These proposals can range from electing board members to approving mergers and acquisitions. Proxies are a form of voting authorization, articles of incorporation establish the legal entity of a corporation, and bylaws outline the internal rules and procedures of a corporation. While all of these may be discussed at a shareholders' meeting, the corporate business matters themselves are presented in the form of resolutions.

Question 5

Denise,Ervin,and Flem occupy the positions of directors on the board of Gallery Home Furnishings Inc. As directors,they may NOT

Accepted Answer

As directors, Denise, Ervin, and Flem have a fiduciary duty to act in the best interests of the corporation and its shareholders. Therefore, they may not subordinate the corporation's welfare to their personal interests. A, B, and C are all within the scope of a director's responsibilities and powers.

Question 6

Nora is a director of Outback Outfitters,Inc. Under the standard of due care owed by directors of a corporation,Nora's decisions must be informed and

Accepted Answer

The standard of due care requires that directors make informed and reasonable decisions, not perfect or unquestionable ones. Directors are not expected to have perfect knowledge or make infallible judgments, but they do have a duty to act with the level of care that a reasonable person would exercise in similar circumstances. Therefore, choice A is the only correct option.

Question 7

Emma is a director of Fab Styles Corporation. Without informing Fab,Emma goes into business with GR8 Trends,Inc.,in competition with Fab. Emma is li-able for breach of

Accepted Answer

Emma is in breach of her duty of loyalty as a director of Fab Styles Corporation because she is engaging in competition with her own company without informing them. A director has a fiduciary duty to act in the best interests of the corporation and not to engage in any conduct that would put her personal interests ahead of those of the corporation. Emma’s actions represent a clear conflict of interest and breach of the duty of loyalty.

Question 8

RayAnn is a corporate officer for Shady's Trees,Inc. As a corporate officer,RayAnn is

Accepted Answer

Corporate officers are typically involved in the day-to-day operations of a company, managing its affairs and implementing the policies set by the board of directors.

Question 9

Shannon is an officer for Turista Shirts Corporation. Due to a bad business decision on Shannon's part,the company's sales decrease. Shannon is most likely liable for breach of

Accepted Answer

The answer of Shannon is an officer for Turista Shirts...

Question 10

Holly is a director of International Spices,Inc. As a director,with respect to the corporation,Holly is

Accepted Answer

As a director, Holly is a fiduciary of the corporation, meaning she has a duty to act in the best interest of the corporation and its shareholders.

Question 11

Thor Power Products Corporation permits its directors to be elected by cumulative voting. This inspection rights.

Accepted Answer

Cumulative voting allows minority shareholders to have the ability to aggregate their voting power and concentrate it on one or a few candidates, increasing their chances of being represented on the board. This is an important right to ensure that all shareholders have a say in the corporate direction, rather than just the majority shareholders. The other options do not accurately describe the purpose or effect of cumulative voting.

Question 12

Coast-to-Coast Distribution,Inc.,is a national trucking company. Like most corporations,Coast-to-Coast's employees include its

Accepted Answer

Officers are employees who hold managerial positions and are responsible for running the day-to-day operations of the corporation. The board of directors is a group of individuals elected by shareholders to oversee the management of the corporation, and incorporators are individuals who signed the articles of incorporation to form the corporation. Shareholders are owners of the corporation who have a stake in its profits and losses but are not employees.

Question 13

Rafi,a director of Super Service Station Corporation,does not attend a board meeting for three years. During that time,Todd,Super's president,makes improper loans that cost the company $1 million. Rafi is most likely

Accepted Answer

Rafi, as a director, has a duty of care to attend board meetings and exercise reasonable diligence in overseeing the company's affairs. By failing to attend meetings for three years, Rafi breached this duty of care, which could make him liable for negligence if his absence contributed to Todd's improper loans.

Question 14

Karen and Laura are officers of Marketing Wizards Inc. As corporate officers,the rights of Karen and Laura are

Accepted Answer

The rights of corporate officers are typically outlined in their employment contracts, which specify their duties, responsibilities, and compensation. State corporation statutes may also provide some guidance, but employment contracts will take precedence. The rights of officers are different from those of directors and shareholders, who have distinct roles and responsibilities within the corporation.

Question 15

Rosa and Sean are shareholders of T-Rex Tacos,Inc. Rosa's written authorization to Sean to vote Rosa's shares at a shareholders' meeting is

Accepted Answer

Rosa's written authorization to Sean to vote Rosa's shares at a shareholders' meeting is known as a proxy. A proxy is a legal document that authorizes an individual to vote on behalf of the shareholder at the shareholders' meeting. Therefore, option C is the best choice. Options A, B, and D are incorrect because they are not related to the described situation.

Question 16

Lewis is a director of Mines & Refineries,Inc. Using information that is not available to the public,Lewis makes a profit trading in Mines & Refineries securities. Lewis is most likely liable for breach of

Accepted Answer

Lewis is liable for breach of the duty of loyalty. As a director, Lewis owes a fiduciary duty of loyalty to the company and its shareholders. Using insider information for personal gains is a violation of this duty. The duty of loyalty requires directors to act in good faith and in the best interest of the company and its shareholders.

Question 17

Mieko is a shareholder of Natural Gas,Inc. Natural Gas uses cumulative voting to elect directors. This means that the number of Mieko's votes is determined by the number of

Accepted Answer

Cumulative voting allows shareholders to allocate all of their votes to one candidate, or spread them among multiple candidates. The number of votes a shareholder has is based on the number of shares they have multiplied by the number of directors to be elected. This means that the size of Mieko's vote is determined by the number of board members to be elected multiplied by the total number of shares that Mieko holds.

Question 18

Rihanna owns one share of stock in SportBoards Corporation,as evidenced by a stock certificate. Rihanna loses the certificate. Her ownership of the stock is

Accepted Answer

Ownership of a stock is not affected by the loss of the physical stock certificate. The owner can request a new certificate to be issued.

Question 19

The board of Management Consultants,Inc. (MCI),can delegate work to

Accepted Answer

The board of MCI has the power to delegate work to its officers, who are responsible for the day-to-day operations of the company. Shareholders are not involved in the management of the company, and it is unlikely that incorporators would be delegated work once the company is established. Therefore, the best choice is B.

Question 20

Carlo is a director of Desserts Italiano,Inc. Carlo opposes a tender offer that is in the company's best interest because its acceptance would cost his position as a director. Carlo is most likely liable for a breach of

Accepted Answer

Carlo's opposition to a tender offer that is in the company's best interest because it would result in the loss of his position as a director shows a breach of his duty of loyalty, which requires directors to act in the best interest of the company rather than their personal interests.

Quiz 34: Corporate Directors, officers, and Shareholders