Question 1

If no-par stock is issued without a stated value, then

Accepted Answer

When no-par stock is issued without a stated value, the entire proceeds received from shareholders are considered to be legal capital. It is not automatically $1 per share, there is still legal capital, and it is not a violation of the state charter.

Question 2

Which of the following statements reflects the transferability of ownership rights in a corporation?

Accepted Answer

A stockholder in a corporation may dispose of part or all of his shares, which reflects the transferability of ownership rights. The other options, such as requiring permission from the board of directors or other stockholders, do not accurately reflect the general rules of transferability in a corporation.

Question 3

If a corporation has only one class of stock, it is referred to as

Accepted Answer

If a corporation has only one class of stock, it is referred to as common stock.

Question 4

Jason Thomas has invested $200,000 in a privately held family corporation. The corporation does not do well and must declare bankruptcy. What amount does Thomas stand to lose?

Accepted Answer

As an investor in the privately held family corporation, Jason Thomas stands to lose up to his total investment of $200,000 in the event of bankruptcy. This means that the amount he stands to lose is not limited and could potentially surpass the invested amount.

Question 5

The chief accounting officer in a corporation is the

Accepted Answer

The chief accounting officer, also known as the financial controller or comptroller, is responsible for overseeing the accounting department and financial reporting of a corporation. The treasurer is responsible for managing the corporation's finances, such as cash management and investment decisions. The president is the highest-ranking executive in the corporation, responsible for the overall strategy and direction of the company. The vice-president of finance may be responsible for various financial functions, but may not necessarily be the chief accounting officer.

Question 6

The officer who is generally responsible for maintaining the cash position of the corporation is the

Accepted Answer

The treasurer is the officer responsible for maintaining the cash position of the corporation, overseeing cash management, and ensuring that there is enough cash available to meet the organization's needs. The controller focuses more on financial reporting and compliance, while the cashier handles day-to-day cash transactions, and the internal auditor ensures that the company's financial processes are functioning effectively and efficiently.

Question 7

Which of the following is not true of a corporation?

Accepted Answer

The acts of the owners (shareholders) do not bind the corporation, as it is a separate legal entity responsible for its own actions and debts.

Question 8

The ability of a corporation to obtain capital is

Accepted Answer

Limited liability and ease of share transferability make it easier for corporations to attract investors and raise capital. This is not the case for partnerships, which have unlimited liability and often restrict the transfer of ownership. The limited life of the corporation may be a factor, but it does not necessarily restrict the ability to obtain capital.

Question 9

Which of the following would not be true of a privately held corporation?

Accepted Answer

A privately held corporation, also known as a closely held corporation, does not regularly trade its shares on any stock exchange. Instead, its shares are typically held by a small group of investors or a single family. Options A, C, and D are true statements about privately held corporations.

Question 10

Which of the following statements is not considered a disadvantage of the corporate form of organization?

Accepted Answer

Limited liability of stockholders is considered an advantage of the corporate form of organization because it protects the assets of individual stockholders from being used to pay off the debts of the corporation. A disadvantage of the corporate form of organization includes additional taxes and government regulations, as well as the separation of ownership and management.

Question 11

The par value of a stock

Accepted Answer

The par value of a stock is legally significant as it is the minimum amount that a company can issue its shares for. It is determined at the time of incorporation and has no relation to the market value of the stock.

Question 12

The term residual claim refers to a stockholders' right to

Accepted Answer

The residual claim refers to the right of stockholders to share in the remaining assets upon liquidation. This means that after all the company's debts and obligations have been paid off, stockholders will receive a portion of whatever assets are left over. It does not necessarily include the right to receive dividends or acquire additional shares, nor does it relate to the exercise of proxy voting rights.

Question 13

Which of the following factors does not affect the initial market price of a stock?

Accepted Answer

The par value of a stock is a nominal value assigned to a share when it is first authorized by a company and has no effect on the initial market price. Factors such as anticipated future earnings, the state of the economy, and expected dividend rate per share can all impact the initial market price of a stock.

Question 14

Which one of the following is not an ownership right of a stockholder in a corporation?

Accepted Answer

Although stockholders have the right to share in dividends declared by the corporation, they do not have the right to declare dividends themselves. Dividends are declared by the board of directors.

Question 15

What is ordinarily the first step in the formation of a corporation?

Accepted Answer

The first step in forming a corporation is to file an application for incorporation with the appropriate Secretary of State. This application includes information about the corporation such as its name, purpose, and location, and once approved, the corporation is granted a charter to operate as a legal entity. Developing by-laws and registering with the SEC may come later in the process.

Question 16

If a stockholder cannot attend a stockholder's meeting, he may delegate his voting rights by means of

Accepted Answer

A stockholder can delegate his voting rights by appointing another person or entity to vote on his behalf to attend the meeting, known as a proxy. An absentee ballot would not allow the stockholder to delegate his voting rights to another person. A certified letter or telegram would not be appropriate means of appointing a proxy.

Question 17

A corporate board of directors does not generally

Accepted Answer

A corporate board of directors is responsible for setting the overall direction and strategy of the company, but they do not generally have executive powers to execute policy or day-to-day operations. This responsibility typically falls to the officers and managers appointed by the board. The board does have the authority to declare dividends, formulate operating policies, and select officers, but their primary role is to provide oversight and guidance to ensure the company operates in the best interests of its shareholders.

Question 18

Which of the following statements concerning taxation is accurate?

Accepted Answer

Corporations are required to pay both federal and state income taxes. Partnerships are pass-through entities, meaning that the profits and losses are passed through to the partners and are taxed at the individual level. When it comes to taxes, corporations are treated as separate entities from their owners, and are thus required to pay taxes on their income independent of their owners' taxable income.

Question 19

If an investment firm underwrites a stock issue, the

Accepted Answer

When an investment firm underwrites a stock issue, they purchase the shares from the issuing corporation and then sell them to the public. This means that the corporation obtains cash immediately from the investment firm, which is option B. The investment firm takes on the risk of being unable to sell the shares, so option A is incorrect. They also do not have guaranteed profits on the sale of the stock, so option C is incorrect. Option D is irrelevant to the underwriting of a stock issue.

Question 20

A typical organization chart showing delegation of authority would show

Accepted Answer

In a typical organizational structure, authority flows from the stockholders to the board of directors, who are elected by the stockholders to oversee the management of the company and make major decisions.

Quiz 11: Corporations: Organization, Stock Transactions, Dividends, and Retained Earnings