Question 1

Which of the following is not true?

Accepted Answer

Jurisdictional laws do not dictate the rights and obligations of the issuing firm and the investor in preferred shares. Instead, the terms of the preferred stock are outlined in the company's certificate of incorporation and the preferred stock offering document.

Question 2

Which of the following is not true regarding firms use of net assets (assets minus liabilities)?

Accepted Answer

The statement "Regardless of whether a firm has more than one class of common stock and their dividend rights differ, each common shareholder always receives the same dividend per share as all other common shareholders" is not true. In some cases, firms may have different classes of common stock with different dividend rights, and each class may receive a different dividend per share.

Question 3

Most publicly traded firms operate as corporations.Which of the following is/are not true?

Accepted Answer

EB) The transfer of ownership interests (buying and selling shares) is typically a transaction between shareholders or between a shareholder and a new buyer, not directly between the shareholder and the firm. The firm's operations and management are not directly involved in these transactions.E) Since B is not true, option E (none of the above) is also a correct choice, as it indicates that there is at least one statement that is not true.

Question 4

Which of the following is/are not true?

Accepted Answer

All of the statements are true.

Question 5

Most publicly traded firms operate as corporations.Which of the following is/are not true?

Accepted Answer

All the statements A through D are true. Statement A describes the limited liability feature of corporations, B and C accurately describe the liability in general partnerships and sole proprietorships, and D correctly notes the trend of converting to LLCs or LLPs to limit personal liability.

Question 6

Various laws and contracts govern the rights and obligations of a shareholder. Which of the following is/are not true?

Accepted Answer

The U.S. Government does not grant privileges to a firm for operating as a corporation for certain stated purposes and obtaining its capital through the issue of shares of stock. This is typically governed by state laws where the corporation is incorporated, not directly by the federal government.

Question 7

Various laws and contracts govern the rights and obligations of a shareholder. Which of the following is/are not true?

Accepted Answer

All of the statements are true.

Question 8

Most publicly traded firms operate as corporations.The corporate form has which of the following advantage(s)?

Accepted Answer

All of the above advantages are true for the corporate form. The limited liability feature protects the owner's personal assets in case of bankruptcy or legal disputes. The corporation can raise funds by issuing shares of various denominations, making it easier to attract both large and small investors. The transferability of shares allows for easy ownership changes without disrupting the business operations. Finally, the corporation has its legal status, making it a separate entity in the eyes of the law.

Question 9

Which of the following is not true?

Accepted Answer

The statement that the senior status and special rights increase the risks of preferred shareholders relative to common shareholders is not true. Preferred shareholders actually have less risk than common shareholders because they have priority in receiving dividends and assets in case of bankruptcy.

Question 10

Which of the following is/are true regarding firms use of net assets (assets minus liabilities)?

Accepted Answer

Firms use net assets to generate more net assets through the earnings. Firms typically retain some or all of the net assets generated by earnings, causing net assets to increase, along with retained earnings, which is the component of shareholders' equity showing the cause of that increase in net assets. The retention of net assets generated by earnings generally increases the market price of the firm's common shares. Some firms pay periodic dividends to the common shareholders out of net assets. Therefore, all of the above statements are true regarding firms use of net assets.

Question 11

The term capital can mean

Accepted Answer

Capital can refer to various sources of financing used to support the operations of a business, which can include cash reserves, long-term assets such as property and equipment, shareholder investments, and any other sources of funding used to finance the organization. Therefore, the best answer is E, as it covers all of these potential meanings of capital.

Question 12

All corporations issue

Accepted Answer

All corporations issue common stock as it represents ownership in a company, entitling the shareholder to vote on corporate policy and board of directors. Other types of stock, such as preferred, treasury, convertible, and putable stock, are not issued by all corporations.

Question 13

Which of the following is/are not true?

Accepted Answer

The statement that "the sale of property, plant, and equipment represents the primary source of funds for most successful businesses" is not true. While the sale of assets can generate funds for a business, successful businesses typically rely on a variety of sources to fund their operations, including revenue from sales, investments, and loans.

Question 14

Which of the following is/are not true?

Accepted Answer

All statements A, B, C, and D are true regarding callable preferred shares, making E (none of the above) the correct choice as none of the statements are untrue.

Question 15

The usual entry to record the conversion of convertible bonds or preferred stock into common shares ignores _____ and shows the swap of common shares for bonds or preferred stock at their _____.

Accepted Answer

The usual entry for converting convertible bonds or preferred stock into common shares ignores current market prices and records the transaction at the carrying value of the bonds or preferred stock, not at their market value or par value. This approach focuses on the book value (carrying value) of the instruments being converted rather than their market value or any other valuation metric.

Question 16

Which of the following is not true regarding firms use of net assets (assets minus liabilities)?

Accepted Answer

E is incorrect because retaining some or all of the net assets generated by earnings would cause net assets and retained earnings to increase, not decrease. Retained earnings is a component of shareholders' equity that reflects the accumulated net income of a company that has not been distributed to shareholders as dividends.

Question 17

Most publicly traded firms operate as corporations.Which of the following is/are not true?

Accepted Answer

The corporate form provides limited liability to the owners, meaning their liability is limited to the amount of their investment in the company. They are not personally liable for the debts and obligations of the company beyond their investment.

Question 18

Various laws and contracts govern the rights and obligations of a shareholder. Which of the following istrue?

Accepted Answer

Each type of capital stock has its own provisions on various matters, including voting, sharing in earnings, distributing assets generated by earnings, and sharing in assets in case of dissolution of the firm. These provisions are usually outlined in the company's articles of incorporation and bylaws, as well as in state and federal laws that govern corporations. Therefore, shareholders need to understand the specific rights and obligations associated with the type of stock they hold.

Question 19

Which of the following is/are not true?

Accepted Answer

Net income for a period does not increase the amounts in Common Stock and Additional Paid-In Capital. These accounts reflect the amount of capital originally invested in the company by shareholders and additional contributions made by them over time, respectively. Net income is typically added to retained earnings, which is a subcategory of shareholders' equity.

Question 20

Most publicly traded firms operate as corporations.Which of the following is/are not true?

Accepted Answer

All the statements provided are true regarding the nature of corporations and their operations. Corporations indeed facilitate the easy transfer of ownership through shares, the transfer of ownership is between shareholders and does not involve the firm directly, investors contribute capital under a contract with the corporation, and a corporation is a separate legal entity from its owners.

Quiz 15: Shareholders Equity: Capital Contributions and Distributions

Which of the following is not true?

Which of the following is not true regarding firms use of net assets (assets minus liabilities) ?

Most publicly traded firms operate as corporations.Which of the following is/are not true?

Which of the following is/are not true?

Most publicly traded firms operate as corporations.Which of the following is/are not true?

Various laws and contracts govern the rights and obligations of a shareholder. Which of the following is/are not true?

Various laws and contracts govern the rights and obligations of a shareholder. Which of the following is/are not true?

Most publicly traded firms operate as corporations.The corporate form has which of the following advantage(s) ?

Which of the following is not true?

Which of the following is/are true regarding firms use of net assets (assets minus liabilities) ?

The term capital can mean

All corporations issue

Which of the following is/are not true?

Which of the following is/are not true?

The usual entry to record the conversion of convertible bonds or preferred stock into common shares ignores _ and shows the swap of common shares for bonds or preferred stock at their _.

Which of the following is not true regarding firms use of net assets (assets minus liabilities) ?

Most publicly traded firms operate as corporations.Which of the following is/are not true?

Various laws and contracts govern the rights and obligations of a shareholder. Which of the following istrue?

Which of the following is/are not true?

Most publicly traded firms operate as corporations.Which of the following is/are not true?