Question 1

Which of the following is true of stock?

Accepted Answer

A)   An unregistered owner of stock is not entitled to dividends.
B)   Stock cannot be bought before incorporation.
C)   Preference stock cannot be sold by the owner without the company's permission.
D)   An owner is not allowed to present his stock as a gift to another.

Question 2

Which of the following best describes a share?

Accepted Answer

A)   It is the unit value of a company's total stock.
B)   It the unit value of a company's liabilities.
C)   It is the total value of a company's assets.
D)   It is total value of a company's liabilities.

Question 3

A stock option is a contract entered between a corporation and an individual.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following best describes watered stock?

Accepted Answer

A)   It is stock on which all dividends must be paid before the common stock receives any dividend.
B)   It is stock to which no face value has been assigned.
C)   It is stock issued and reacquired by the corporation.
D)   It is stock issued as fully paid up, but paid with property of inflated values. D

Question 5

Which of the following is true of dividends paid to shareholders?

Accepted Answer

A)   Dividends can be paid in the form of property manufactured by another organization.
B)   Cash dividends can be declared and then rescinded by the directors.
C)   Dividends can be paid with stock a corporation owns in another company.
D)   Stock dividends cannot be rescinded once declared.

Question 6

If a corporation's broker holds the stock before issuance of certificates, the broker must transfer the stock according to the written direction of the owner.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following best describes a prospectus?

Accepted Answer

A)   It is a document relating to purchase and subsequent resale of company assets and intellectual property.
B)   It is a document containing specified information about the stock offering and the corporation.
C)   It is a document pertaining to the conduct regulations of the company.
D)   It is a document containing information relating to the bylaws of the company.

Question 8

The _____ of a corporation is the declared money value of its outstanding stock.

Accepted Answer

A)   preferred stock
B)   inventory stock
C)   unit stock
D)   capital stock

Question 9

A stock owner can use a blank form on the back of the certificate while making a transfer.

Accepted Answer

A) True 
 B)False  True

Question 10

Common stockholders do not possess the right to a share of the assets of a corporation on dissolution.

Accepted Answer

A) True 
 B)False

Question 11

A certificate of stock is written evidence of ownership of stock.

Accepted Answer

A) True 
 B)False

Question 12

Cumulative preferred stock is preferred stock on which dividends have to be paid only for the current year before common stock dividends are paid.

Accepted Answer

A) True 
 B)False

Question 13

_____ is preferred stock on which all dividends must be paid before the common stock receives any dividend.

Accepted Answer

A)   Treasury stock
B)   Participating preferred stock
C)   Cumulative preferred stock
D)   Noncumulative preferred stock

Question 14

Once the directors of a corporation declare a cash dividend, it cannot later be rescinded.

Accepted Answer

A) True 
 B)False

Question 15

What is the purpose of blue-sky laws? Explain.

Accepted Answer

The purpose of blue-sky laws is to prevent fraud through the sale of worthless stocks and bonds. State blue-sky laws apply only to intrastate transactions. These security laws vary from state to state. Some prescribe criminal penalties for engaging in prohibited transactions. Others require that dealers be licensed and that a state commission approve sales of securities before a corporation offers them to the public.

Question 16

A corporation does not have the duty to furnish a prospectus to each purchaser of securities.

Accepted Answer

A) True 
 B)False

Question 17

State laws which prevent the sale of worthless stock are known as _____.

Accepted Answer

A)   bylaws
B)   unit laws
C)   stock laws
D)   blue-sky laws

Question 18

The federal Securities Act regulates the sale of securities in interstate commerce.

Accepted Answer

A) True 
 B)False

Question 19

A cash dividend may be paid out of paid-in surplus.

Accepted Answer

A) True 
 B)False

Question 20

Common stockholders receive their proportionate share of the corporation's assets prior to any share going to preferred shareholders.

Accepted Answer

A) True 
 B)False

Exam 35: Ownership of a Corporation

Which of the following is true of stock?

Correct Answer
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Which of the following best describes a share?

Correct Answer
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A stock option is a contract entered between a corporation and an individual.

Correct Answer
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Which of the following best describes watered stock?

Correct Answer
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D

Which of the following is true of dividends paid to shareholders?

Correct Answer
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If a corporation's broker holds the stock before issuance of certificates, the broker must transfer the stock according to the written direction of the owner.

Correct Answer
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Which of the following best describes a prospectus?

Correct Answer
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The _____ of a corporation is the declared money value of its outstanding stock.

Correct Answer
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A stock owner can use a blank form on the back of the certificate while making a transfer.

Correct Answer
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True

Common stockholders do not possess the right to a share of the assets of a corporation on dissolution.

Correct Answer
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A certificate of stock is written evidence of ownership of stock.

Correct Answer
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Cumulative preferred stock is preferred stock on which dividends have to be paid only for the current year before common stock dividends are paid.

Correct Answer
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_____ is preferred stock on which all dividends must be paid before the common stock receives any dividend.

Correct Answer
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Once the directors of a corporation declare a cash dividend, it cannot later be rescinded.

Correct Answer
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What is the purpose of blue-sky laws? Explain.

A corporation does not have the duty to furnish a prospectus to each purchaser of securities.

Correct Answer
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State laws which prevent the sale of worthless stock are known as _____.

Correct Answer
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The federal Securities Act regulates the sale of securities in interstate commerce.

Correct Answer
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A cash dividend may be paid out of paid-in surplus.

Correct Answer
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Common stockholders receive their proportionate share of the corporation's assets prior to any share going to preferred shareholders.

Correct Answer
verified

Exam 35: Ownership of a Corporation

Which of the following is true of stock?

Correct AnswerverifiedShow Answer

Which of the following best describes a share?

Correct AnswerverifiedShow Answer

A stock option is a contract entered between a corporation and an individual.

Correct AnswerverifiedShow Answer

Which of the following best describes watered stock?

Correct AnswerverifiedD

Which of the following is true of dividends paid to shareholders?

Correct AnswerverifiedShow Answer

If a corporation's broker holds the stock before issuance of certificates, the broker must transfer the stock according to the written direction of the owner.

Correct AnswerverifiedShow Answer

Which of the following best describes a prospectus?

Correct AnswerverifiedShow Answer

The _____ of a corporation is the declared money value of its outstanding stock.

Correct AnswerverifiedShow Answer

A stock owner can use a blank form on the back of the certificate while making a transfer.

Correct AnswerverifiedTrue

Common stockholders do not possess the right to a share of the assets of a corporation on dissolution.

Correct AnswerverifiedShow Answer

A certificate of stock is written evidence of ownership of stock.

Correct AnswerverifiedShow Answer

Cumulative preferred stock is preferred stock on which dividends have to be paid only for the current year before common stock dividends are paid.

Correct AnswerverifiedShow Answer

_____ is preferred stock on which all dividends must be paid before the common stock receives any dividend.

Correct AnswerverifiedShow Answer

Once the directors of a corporation declare a cash dividend, it cannot later be rescinded.

Correct AnswerverifiedShow Answer

What is the purpose of blue-sky laws? Explain.

A corporation does not have the duty to furnish a prospectus to each purchaser of securities.

Correct AnswerverifiedShow Answer

State laws which prevent the sale of worthless stock are known as _____.

Correct AnswerverifiedShow Answer

The federal Securities Act regulates the sale of securities in interstate commerce.

Correct AnswerverifiedShow Answer

A cash dividend may be paid out of paid-in surplus.

Correct AnswerverifiedShow Answer

Common stockholders receive their proportionate share of the corporation's assets prior to any share going to preferred shareholders.

Correct AnswerverifiedShow Answer

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D

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True

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