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1
A corporation is one of two forms of ownership that are recognized under the law as a separate legal entity.
A)True
B)False
2
One of the advantages of the corporate form of ownership is limited personal liability.
A)True
B)False
3
A special feature of the corporation is the ease of transferability of ownership.
A)True
B)False
4
Double taxation refers to the corporation's earnings being taxable to the corporation when earned, and after-tax earnings being taxable to stockholders when distributed as dividends.
A)True
B)False
5
Corporations have limited terms, as described by the laws under which they are incorporated.
A)True
B)False
6
The ease of transferability of ownership is made possible by the issuance of transferable shares of ownership called capital stock.
A)True
B)False
7
Information that, by law, must be made available to the general public is called public information.
A)True
B)False
8
A corporation owned by a small group of stockholders, and not publicly owned, is called a closely held corporation.
A)True
B)False
9
An investment in a mutual fund provides you direct ownership of publicly held corporations.
A)True
B)False
10
The first step in organizing a corporation is to form a board of directors.
A)True
B)False
11
The stockholders of a new corporation can elect a board of directors after receiving a corporate charter.
A)True
B)False
12
The bylaws of the corporation must be approved by the state of incorporation before the board of directors of a newly formed corporation can act on them.
A)True
B)False
13
The costs to organize a corporation are amortized over a period of not greater than 10 years or fewer than 5 years.
A)True
B)False
14
A stock certificate is a document that shows evidence of the ownership of a specific number of shares.
A)True
B)False
15
The responsibility of setting corporate policies and protecting the rights and interests of the stockholders lies with the corporate officers.
A)True
B)False
16
The decision to declare and pay dividends lies solely with the stockholders.
A)True
B)False
17
The rights of stockholders include the right to share in the distribution of assets if the corporation is liquidated.
A)True
B)False
18
When a stockholder is unable to attend a stockholder meeting, that stockholder forfeits the right to cast a vote for directors or vote on other key issues.
A)True
B)False
19
A member of the board of directors, a corporate officer, and a stockholder each has the right to transact corporate business.
A)True
B)False
20
The chief financial officer (CFO) generally has custody of the company's funds and is generally responsible for planning and controlling the company's cash position.
A)True
B)False
21
The secretary of a corporation is a clerical position to the Chief Executive Officer (CEO).
A)True
B)False
22
When there are numerous stockholders, a stockholders' subsidiary ledger is maintained.
A)True
B)False
23
A stock transfer agent and a stock registrar perform separate functions.
A)True
B)False
24
A bank or trust company retained by a corporation to maintain its records of capital stock ownership and make transfers from one investor to another is called a stock registrar.
A)True
B)False
25
Another term for paid-in capital is retained capital.
A)True
B)False
26
An underwriter provides the same basic services to corporations selling stock as they do for corporations selling bonds.
A)True
B)False
27
Legal capital is equal to, and represents, the par value or stated value of the capital stock issued.
A)True
B)False
28
Legal capital is equal to the market value of the capital stock issued.
A)True
B)False
29
The Additional Paid-in Capital account shows the amounts invested in a corporation by stockholders in excess of par value or stated value.
A)True
B)False
30
Stock is exchanged only for cash.
A)True
B)False
31
Additional paid-in capital is a form of taxable income.
A)True
B)False
32
It is possible to issue stock that has no par value.
A)True
B)False
33
A type of capital stock that possesses the basic rights of ownership, including the right to vote, is called common stock.
A)True
B)False
34
Preferred stock is a class of capital stock usually having preferences as to dividends and in the distribution of assets in the event of liquidation.
A)True
B)False
35
Cumulative preferred stock is guaranteed dividends.
A)True
B)False
36
When 8%, $100 par value preferred stock, the investor's expected dividend per share of stock is $0.80.
A)True
B)False
37
When preferred stock dividends are in arrears, they must be paid in a subsequent time period before any current dividends to common stock or preferred stock can be paid.
A)True
B)False
38
Preferred stock with a conversion privilege can be exchanged at the stockholder's option for shares of common stock.
A)True
B)False
39
Most preferred stock has the cumulative feature.
A)True
B)False
40
The book value per share of common stock is unaffected by an issue of preferred stock.
A)True
B)False
41
The issuance of capital stock is reported in the statement of cash flows as an inflow of cash from an investing activity.
A)True
B)False
42
The book value per share and the market price per share are synonymous terms.
A)True
B)False
43
When the market price per share changes, the paid-in capital balances of the issuing corporation are changed.
A)True
B)False
44
The market price of preferred stock varies inversely with interest rates.
A)True
B)False
45
One of the most important factors in determining the market price for common stock is dividend yield.
A)True
B)False
46
Book value and market value can be significantly different.
A)True
B)False
47
An increase in the number of shares outstanding with a corresponding decrease in par value per share is accomplished through a stock split.
A)True
B)False
48
A stock split reduces the par value of the stock and increases the number of shares issued.
A)True
B)False
49
If you own 100 shares of $10 par value common stock, and the board of directors declares a 2-for-1 stock split, the book value of your shares has doubled.
A)True
B)False
50
Cash dividends are distributions of cash that decrease stockholders' equity and stock dividends are distributions of common stock that do not affect cash.
A)True
B)False
51
Shares of a corporation's stock that have been issued and then reacquired, but not canceled, are called treasury stock.
A)True
B)False
52
The purchase of treasury stock should be regarded as the purchase of an asset.
A)True
B)False
53
When treasury stock is reissued at a price greater than its purchase price, the gain is recorded in the income statement.
A)True
B)False
54
Treasury stock does not have voting rights.
A)True
B)False
55
If a company that has been authorized to sell 1,000,000 shares has issued 500,000 shares and holds 10,000 shares as treasury stock, the number of shares outstanding is 510,000.
A)True
B)False
56
Holding treasury stock restricts retained earnings to an amount equal to the par value of the treasury stock.
A)True
B)False
57
The purchase of treasury stock is considered to be a cash outflow from financing activities.
A)True
B)False
58
Treasury stock has become a material amount in the balance sheets of many corporations as a result of buyback programs.
A)True
B)False
59
The average common stockholders' equity is the numerator in the equation to determine the return on stockholders' equity.
A)True
B)False
60
You would use the return on equity formula to determine the amount of net income applicable to each share of common stock.
A)True
B)False
61
"Pump and dump schemes" are marketing strategies for issuing common stock that are intended to defraud investors.
A)True
B)False





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