Question 1

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

Accepted Answer

The treasurer is responsible for managing the cash position, including managing the company's bank accounts, cash flow, and investments. The controller oversees the accounting and financial reporting, while the cashier is responsible for handling cash receipts and disbursements. The internal auditor monitors and reviews internal controls and processes for accuracy and compliance.

Question 2

A typical organization chart showing delegation of authority would show

Accepted Answer

The answer of A typical organization chart showing delegation of...

Question 3

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

Accepted Answer

The first step in forming a corporation in the United States is to file an application for incorporation with the appropriate Secretary of State. This process typically involves submitting articles of incorporation, which outline the basic details of the corporation such as its name, purpose, and initial directors. Once the application is approved, the corporation is issued a charter and can begin to develop its by-laws and register with relevant government agencies.

Question 4

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

Accepted Answer

The transferability of ownership rights in a corporation allows shareholders to dispose of part or all of their shares without obtaining permission from the board of directors or other shareholders. They have the right to sell, gift, or bequeath their shares as they see fit, subject to any restrictions outlined in the corporation's bylaws or shareholder agreements. Option A is incorrect because shareholders can sell any number of shares; they do not have to transfer all of them. Options C and D are also incorrect because shareholders do not need permission from anyone else to transfer their shares.

Question 5

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

Accepted Answer

Limited liability of shareholders is considered an advantage of the corporate form of organization as it protects the personal assets of the shareholders from the liabilities of the corporation. A, B, and D are all considered disadvantages of the corporate form, as additional taxes, government regulations, and separation of ownership and management can limit the flexibility and autonomy of the corporation.

Question 6

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

Accepted Answer

If a corporation has only one class of shares, it is referred to as ordinary shares.

Question 7

If an investment banking firm underwrites a share issue, the

Accepted Answer

When an investment banking firm underwrites a share issue, it purchases the shares from the issuing corporation and then resells them to the public. This means that the corporation obtains cash immediately from the investment firm for the shares sold, reducing its financing costs. The investment firm assumes the risk of being unable to sell the shares and profits by the difference between the purchase price of the shares and the price at which they are sold. However, there is no guarantee of profits, as the investment firm may have to sell the shares at a loss if market conditions change. The issuance of shares is not likely to be directly to creditors, as creditors generally hold debt instruments such as bonds rather than equity in a corporation. Therefore, choice B is the best answer.

Question 8

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

Accepted Answer

A privately held corporation does not have its shares traded on a national securities exchange.

Question 9

The two ways that a corporation can be classified by ownership are

Accepted Answer

A corporation can be classified as publicly held if its shares of stock are traded on a public stock exchange and owned by many individuals. It can be classified as privately held if its shares of stock are owned by a small group of people, often the company's founders, and are not traded on a public stock exchange.

Question 10

The two ways that a corporation can be classified by purpose are

Accepted Answer

Corporations can be classified by purpose as either for-profit or not-for-profit. For-profit corporations are focused on generating profits for their shareholders, while not-for-profit corporations are focused on a specific mission or goal, such as providing charitable services or advancing a particular cause.

Question 11

A factor which distinguishes the corporate form of organization from a sole proprietorship or partnership is that a

Accepted Answer

The answer of A factor which distinguishes the corporate form...

Question 12

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

Accepted Answer

The par value of the shares is a nominal value assigned to the shares at the time of issuance and does not affect the initial market price of the shares. The initial market price is determined by supply and demand factors such as the company's anticipated future earnings, the current state of the economy, and the expected dividend rate per share.

Question 13

Which of the following is not true of a corporation?

Accepted Answer

The acts of its owners do not bind the corporation because the corporation is a separate legal entity from its owners. This limited liability is one of the main benefits of forming a corporation.

Question 14

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

Accepted Answer

The declaration of dividends is a decision made by the board of directors, not the shareholders. While shareholders may have the right to receive dividends, they do not have the right to declare or determine the amount of dividends paid out.

Question 15

The term residual claim refers to a shareholders' right to

Accepted Answer

Residual claim refers to the right of shareholders to receive any remaining assets after all creditors and debt holders have been paid in the event of liquidation. They have a claim on the company's residual assets, hence the term "residual claim". A shareholder's right to receive dividends is not necessarily a residual claim, as dividends are paid out of profits and not necessarily from the company's remaining assets. Acquiring additional shares and exercising a proxy vote are not related to the concept of residual claim.

Question 16

A corporate board of directors does not generally

Accepted Answer

A corporate board of directors is responsible for setting policies and strategic goals for the company, but they do not have a role in the day-to-day operations or executing policy. This responsibility falls to the officers and employees of the company. The board also has the authority to declare dividends, but they do not generally select officers.

Question 17

The ability of a corporation to obtain capital is

Accepted Answer

Limited liability means that shareholders' personal assets are protected from being seized to pay the corporation's debts. This is a significant advantage when seeking capital because investors are more willing to contribute funds if their personal assets are not at risk. Additionally, ease of share transferability means that investors can easily buy and sell shares, increasing the liquidity of the investment, which also makes it easier for corporations to obtain capital.

Question 18

Which one of the following would not be considered an advantage of the corporate form of organization?

Accepted Answer

Government regulations are not considered an advantage of the corporate form of organization since they can be a burden on the company in terms of compliance costs and paperwork. However, limited liability of owners, separate legal existence, and continuous life are all advantages of the corporate form.

Question 19

Ed Tresh has invested $400,000 in a privately held family corporation. The corporation does not do well and must declare bankruptcy. What amount does Tresh stand to lose?

Accepted Answer

The answer of Ed Tresh has invested $400,000 in a...

Question 20

The concept of an "artificial being" refers to which form of business organization?

Accepted Answer

A corporation is considered an artificial being because it is a legal entity separate from its owners. It can own property, enter into contracts, and sue or be sued in its own name. The other options (partnership, sole proprietorship, and limited partnership) are not considered artificial beings as they are not separate legal entities from their owners.

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