Question 1

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 ________.

Accepted Answer

Bylaws are 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. Ultra vires rules refer to limitations on the powers of corporations. Articles of incorporation are a legal document filed with the state that establishes the existence of a corporation. Corporation codes refer to the laws and regulations governing corporations in a given jurisdiction.

Question 2

________ are corporations that have many shareholders and whose securities are often traded on national stock exchanges.

Accepted Answer

Publicly held corporations have many shareholders and their securities are often traded on national stock exchanges.

Question 3

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

Accepted Answer

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

Question 4

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 are known as ________.

Accepted Answer

Cumulative preferred stocks mandate that any missed dividend payments must be paid in the future to the preferred shareholders before the common shareholders can receive any dividends. Noncumulative preferred stocks do not have this feature. Common stocks represent ownership in a company but do not have guaranteed dividend payments. Participating preferred stock allows preferred shareholders to receive additional dividends beyond their fixed rate if the company surpasses certain financial thresholds, but it does not have the feature of missed payments being paid before common shareholders.

Question 5

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

Accepted Answer

Common stock represents the ownership interest in a corporation and represents the residual value that remains after all other claims on the corporation's assets and earnings have been satisfied. This means that common stockholders have the potential for higher returns but also face greater risk than holders of preferred stock.

Question 6

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 registered agent is a person or corporation designated to receive and accept service of process on behalf of a corporation. Promoters are individuals who bring the corporation into existence and are not specifically designated to receive service of process. Shareholders are owners of the corporation and do not typically handle legal matters on its behalf. An incorporator is the person responsible for filing the articles of incorporation with the state.

Question 7

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 ________.

Accepted Answer

Fixed income securities such as bonds and debentures establish a debtor-creditor relationship between the corporation and the investor, where the corporation borrows money from the investor in exchange for regular interest payments and repayment of the principal amount at maturity. Authorized shares refer to the maximum number of shares a corporation is authorized to issue, while preferred and common stocks represent ownership in the corporation and do not establish a debtor-creditor relationship.

Question 8

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

Accepted Answer

Bonds are long-term debt securities that are often secured by collateral, such as mortgages or other assets.

Question 9

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

Accepted Answer

The answer of Which of the following is true for...

Question 10

Which of the following is true of treasury shares?

Accepted Answer

Treasury shares are shares that have been reacquired by the corporation and are held in the company's treasury. Since they are no longer outstanding, they cannot be voted upon by the corporation.

Question 11

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

Accepted Answer

The articles of incorporation are the basic governing documents of a corporation that must be filed with the secretary of state of the state of incorporation. These articles typically include the company's name, purpose, number of shares authorized, and information about the initial board of directors.

Question 12

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

Accepted Answer

A corporation incorporated in another country but doing business in the United States is referred to as an "alien" corporation. This term distinguishes such entities from domestic corporations (incorporated within the state) and foreign corporations (incorporated in another state within the U.S.).

Question 13

Which of the following is true of an S corporation?

Accepted Answer

An S corporation can have no more than 100 shareholders, according to the IRS.

Question 14

Which of the following shares have the right to vote?

Accepted Answer

Only outstanding shares have the right to vote. Unissued shares have not been sold yet, treasury shares have been bought back by the company and are no longer outstanding, and liquidated shares have been dissolved and no longer exist.

Question 15

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

Accepted Answer

Nonresident aliens cannot be shareholders in an S corporation. The other criteria listed are incorrect. S corporations can have individual shareholders, can have up to 100 shareholders, and can have only one class of stock.

Question 16

Which of the following is true of corporate bylaws?

Accepted Answer

Corporate bylaws are internal documents that outline the governance of the corporation, including the roles of directors and officers, and how decisions are made. They do not have to be filed with any government official, unlike the articles of incorporation which are a public record. Bylaws are indeed binding on the corporation, its directors, officers, and shareholders, and they cover more than just interactions with the government. They are typically adopted by the corporation's board of directors or shareholders.

Question 17

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

Accepted Answer

Treasury shares are shares that have been repurchased by the corporation and are held in the company's treasury. They are not considered outstanding shares and cannot be voted or receive dividends.

Question 18

Which of the following is true of a C Corporation?

Accepted Answer

The answer of Which of the following is true of...

Question 19

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

Accepted Answer

Liquidation preference is a preferred stockholder right to be paid a stated dollar amount if a corporation is dissolved and its assets are redistributed.

Question 20

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

Accepted Answer

The number of shares the corporation is authorized to issue is a required element to be included in the articles of incorporation. A is incorrect as it is not a required element, but rather a possible attachment to the articles of incorporation. C is incorrect as although it may be included, it is not a required element to be included. D is incorrect as the use of a corporate seal is not a requirement in modern times.

Quiz 16: Corporations and the Sarbanes-Oxley Act