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1 | |
A grant of authority by a shareholder allowing another individual to vote his or her shares is called a: |
| | A) | convertible feature. |
| | B) | proxy. |
| | C) | call provision. |
| | D) | cumulative voting right. |
| | E) | dual class stock. |
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2 | |
Which of the following statements about dividends are correct? I. Dividends are a liability only after they are declared.
II. Dividends provide a return to the shareholders for their investment in a firm.
III. The payment of dividends is at the discretion of the board of directors.
IV. The payment of dividends by a corporation is a tax deductible business expense. |
| | A) | I and II only |
| | B) | II and III only |
| | C) | I, II, and III only |
| | D) | II, III, and IV only |
| | E) | I, II, III, and IV |
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3 | |
Which one of the following actions violates the rights of a either a creditor or a shareholder? |
| | A) | A firm paid common dividends when preferred dividends were in arrears. |
| | B) | A firm paid preferred shareholders before common shareholders in a liquidation. |
| | C) | Preferred shareholders were given the ability to place members on the board of directors to represent their interests after dividends were missed for several consecutive quarters. |
| | D) | Common shareholders were allowed to vote by proxy even though they did not attend the shareholders' meeting in person. |
| | E) | Creditors were paid before preferred shareholders in a liquidation. |
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4 | |
There is an election being held to fill 3 seats on the board of directors of a firm in which you hold stock. There are a total of 600 shares outstanding. The election is conducted under cumulative voting and you currently own 120 shares. How many additional shares must you purchase to be assured of earning a seat on the board, assuming that no one else votes for you? |
| | A) | 0 |
| | B) | 20 |
| | C) | 31 |
| | D) | 81 |
| | E) | 201 |
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5 | |
Marcel owns 12,000 of the 30,000 outstanding shares of Abco, Inc. The shares are currently valued at $46 each. Abco will be electing 3 new members to its board of directors at the annual meeting next week. Marcel wants to be elected to the board but doubts that anyone else will help elect him to that position. How much does Marcel need to spend, if any, to ensure his election considering the fact that Abco uses straight voting procedures? |
| | A) | $0 |
| | B) | $138,000 |
| | C) | $138,046 |
| | D) | $690,000 |
| | E) | $690,046 |
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6 | |
A firm has 200,000 shares of common stock outstanding and uses cumulative voting to elect individuals to the board of directors. Given this, which one of the following statements is correct? |
| | A) | If there are 3 open seats on the board, a shareholder will need to own 66,667 shares to control one seat. |
| | B) | If there are 4 open seats, you need the same number of votes as you would under straight voting to control one seat. |
| | C) | If there are 5 open seats, and you currently own 67,000 shares, you can control 2 of those seats. |
| | D) | The fewer the number of open seats, the easier it is to get yourself elected to the board. |
| | E) | If there is only one open seat, you will need to own at least 60 percent of the shares to be elected to a seat. |
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7 | |
Your firm is converting from cumulative voting to straight voting. You currently own the minimum number of shares needed to assure yourself a seat on the board in any election under cumulative voting. How many more shares must you purchase in order to assure yourself a seat under straight voting? Assume there are a total of 500,000 shares outstanding and that 3 directors are elected each year. |
| | A) | none |
| | B) | 25,000 |
| | C) | 125,000 |
| | D) | 125,001 |
| | E) | 250,001 |
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8 | |
Preferred stock is similar to debt in that: I. both frequently carry credit ratings.
II. both can be callable.
III. both receive a stated payment amount.
IV. both are considered debt instruments. |
| | A) | I and III only |
| | B) | I and IV only |
| | C) | II and IV only |
| | D) | I, II, and III only |
| | E) | II, III, and IV only |
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9 | |
Suppose you own 500 shares of Biosphere common stock. Four directors are to be elected. Since the firm uses cumulative voting, you can cast as many as _____ votes for a single director. |
| | A) | 125 |
| | B) | 500 |
| | C) | 1,000 |
| | D) | 1,500 |
| | E) | 2,000 |
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10 | |
The risk of losing some control over a firm as a result of cumulative voting can be reduced by: |
| | A) | electing more directors at one time. |
| | B) | taking actions which lower the value of each share of outstanding stock. |
| | C) | encouraging proxy voting by minority shareholders. |
| | D) | staggering the board elections. |
| | E) | appointing directors rather than electing them. |
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