Question 1

Which of the following is false regarding a nonprofit corporation?

Accepted Answer

A)   A nonprofit corporation may not earn profits.
B)   Nonprofit corporations do not have shareholders.
C)   An objective of a nonprofit corporation is not to earn profit.
D)   Nonprofit corporations do not issue stock.
E)   Churches and charitable organizations are examples of nonprofit corporations.F) A) and B)
G) A) and C)

Question 2

Which of the following is a right of corporate directors?

Accepted Answer

A)   The right of compensation
B)   The right of participation
C)   The right of inspection
D)   The right of indemnification
E)   All of theseF) C) and D)
G) None of the above

Question 3

Reference - Self-Centered President. Tina is the new president of "We ManageYou," a corporation set up to manage physician practices. Tina has never been very concerned with minority shareholders because she does not believe that they have any influence over the company because they cannot even elect a director. She is told, however, that the corporation has a practice of cumulative voting. An election is coming up in which 10 directors will be elected. Minority shareholders own 2,000 shares while majority shareholders own 8,000 shares. Tina tells her vice president, George, that she wants to ignore minority shareholders and focus her interests on majority shareholders and the directors. She also tells George that she wants to be particularly conscientious toward directors because the directors appoint officers, and she does not believe that she owes any actual duties to shareholders. She further orders George to destroy some documents subpoenaed in a criminal investigation against the company for illegal tax evasion. When George protests, Tina tells him not to worry because officers cannot be held responsible for criminal actions so long as the actions are done as part of the duties of an officer. She explains to him that only the corporation can be charged with liability in such cases. Is Tina correct in that officers cannot be held criminally responsible for their actions on behalf of a corporation?

Accepted Answer

A)   Yes, she is correct.
B)   She is correct only so long as the corporation is solvent.
C)   She is correct only if the board of directors has accepted all liability for acts of officers.
D)   She is correct only if environmental or employment matters are involved.
E)   She is incorrect.F) A) and C)
G) B) and D)

Question 4

Which of the following is generally true regarding management of a corporation?

Accepted Answer

A)   Shareholders do not participate in corporate management.
B)   Shareholders elect a board of directors.
C)   The board of directors selects officers to manage the day-to-day business of the corporation.
D)   Shareholders do not participate in corporate management, shareholders elect a board of directors, and the board of directors selects officers to manage the day-to-day business of the corporation.
E)   Shareholders do not participate in corporate management and shareholders elect a board of directors, but shareholders select officers to manage the day-to-day business of the corporation.F) A) and D)
G) A) and C)

Question 5

Which of the following may be redeemed for a certain number of shares at a specified price within a given time period?

Accepted Answer

A)   Preemptive shares
B)   Share allowances
C)   Allocated shares
D)   Stock warrants
E)   None of these because such a practice is illegal under federal securities lawsF) B) and E)
G) C) and D)

Question 6

Which of the following in the corporate formation process provides basic information about the corporation?

Accepted Answer

A)   The articles of subscription
B)   The agreement to promote
C)   The agreement to subscribe
D)   The agreement to incorporate
E)   The articles of incorporationF) A) and B)
G) D) and E)

Question 7

Generally, a quorum of shareholders exists when shareholders holding more than _______________ percent of the outstanding shares are present.

Accepted Answer

A)   80
B)   70
C)   60
D)   50
E)   25F) B) and E)
G) B) and D)

Question 8

Consolidations today are rare.

Accepted Answer

A) True 
 B)False

Question 9

While ordinary decisions made by directors require a _______________ vote, more important decisions sometimes require a _______________ vote.

Accepted Answer

A)   Majority; two-thirds
B)   Majority; three-fourths
C)   Two-thirds; three fourths
D)   One-third; majority
E)   Majority; unanimousF) A) and D)
G) A) and E)

Question 10

Reference - Kite Sales. Wendy is president of a business that manufactures kites. The kites of her company, ABC Kites, are sold to large toy stores. After Wendy learned a great deal about kites, she started to make kites at home and to promote them to large toy stores. She also started selling kites to friends. Some of the directors learned about her kite sales and accused her of wrongdoing. Wendy denied any wrongdoing. What duty, if any, did Wendy violate?

Accepted Answer

A)   She did not commit any violation.
B)   She violated the duty of loyalty.
C)   She violated the duty of care.
D)   She violated the duty of understanding.
E)   She violated the duty of profit maximization.F) A) and D)
G) A) and C)

Question 11

Which of the following is a corporation that has not substantially met the requirements of the state incorporation statute, but courts recognize it as a corporation for most purposes to avoid unfairness to third parties who believed it was properly incorporated?

Accepted Answer

A)   A de jure corporation
B)   A de facto corporation
C)   A corporation by estoppel
D)   A corporation by reservation
E)   None of these because an alleged corporation that has not substantially complied with state requirements for incorporation is not considered a corporation at all although it may be considered a partnership in order to protect innocent parties.F) A) and C)
G) C) and E)

Question 12

Which of the following is a form of self-dealing?

Accepted Answer

A)   Business self-dealing
B)   Personal self-dealing
C)   Corporate self-dealing
D)   Business self-dealing, personal self-dealing, and corporate self-dealing
E)   Business self-dealing and personal self-dealing, but not corporate self-dealingF) B) and C)
G) B) and D)

Question 13

A shareholder may not be held personally liable to a corporation for receiving watered stock.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following occurs when a target corporation offers to buy its shareholders' stock?

Accepted Answer

A)   A self-tender offer
B)   A leveraged buyout
C)   A cross-tender offer
D)   A challenge-tender offer
E)   An illegal tender offerF) A) and B)
G) All of the above

Question 15

Owners of which of the following types of stock enjoy preferences with respect to assets and dividends?

Accepted Answer

A)   Acknowledged
B)   Complex
C)   Simple
D)   Preferred
E)   CommonF) A) and B)
G) A) and C)

Question 16

A corporation is a[n] _______________ corporation in states in which it conducts business but is not incorporated.

Accepted Answer

A)   Visiting
B)   Foreign
C)   Interstate
D)   Intrastate
E)   ApprovedF) A) and B)
G) A) and C)

Question 17

When do corporations commit ultra vires acts most frequently?

Accepted Answer

A)   When they create contracts outside the scope of their powers.
B)   When they hire incompetent managers.
C)   When they hire employees with criminal backgrounds.
D)   When they refuse to declare dividends.
E)   When they refuse to declare a stock split.F) C) and D)
G) A) and D)

Question 18

Set forth the ways discussed in the text in which the directors and officers of Enron failed in their duty of care.

Accepted Answer

The directors and officers failed in the...

Question 19

Federal securities law does not require that target corporations assist aggressors in any way.

Accepted Answer

A) True 
 B)False

Question 20

If corporate directors fail to sue when the corporation has been harmed by an individual, another corporation, or a director, individual shareholders can file a[n] _______________ on behalf of the corporation.

Accepted Answer

A)   Investigative action
B)   Shareholder action suit
C)   Shareholder's direct suit
D)   Shareholder's derivative suit
E)   Active allocation suitF) All of the above
G) D) and E)

Exam 22: Corporations: Formation and Organization

If corporate directors fail to sue when the corporation has been harmed by an individual, another corporation, or a director, individual shareholders can file a[n] _______________ on behalf of the corporation.

Correct Answer
verified

A corporation is a[n] _______________ corporation in states in which it conducts business but is not incorporated.

Correct Answer
verified

Correct Answer
verified

A shareholder may not be held personally liable to a corporation for receiving watered stock.

Correct Answer
verified

Generally, a quorum of shareholders exists when shareholders holding more than _______________ percent of the outstanding shares are present.

Correct Answer
verified

While ordinary decisions made by directors require a _ vote, more important decisions sometimes require a _ vote.

Correct Answer
verified

Which of the following is false regarding a nonprofit corporation?

Correct Answer
verified

Which of the following occurs when a target corporation offers to buy its shareholders' stock?

Correct Answer
verified

Federal securities law does not require that target corporations assist aggressors in any way.

Correct Answer
verified

Which of the following in the corporate formation process provides basic information about the corporation?

Correct Answer
verified

Which of the following is a right of corporate directors?

Correct Answer
verified

Which of the following is a corporation that has not substantially met the requirements of the state incorporation statute, but courts recognize it as a corporation for most purposes to avoid unfairness to third parties who believed it was properly incorporated?

Correct Answer
verified

Which of the following is a form of self-dealing?

Correct Answer
verified

Which of the following may be redeemed for a certain number of shares at a specified price within a given time period?

Correct Answer
verified

Consolidations today are rare.

Correct Answer
verified

Which of the following is generally true regarding management of a corporation?

Correct Answer
verified

Owners of which of the following types of stock enjoy preferences with respect to assets and dividends?

Correct Answer
verified

When do corporations commit ultra vires acts most frequently?

Correct Answer
verified

Correct Answer
verified

Set forth the ways discussed in the text in which the directors and officers of Enron failed in their duty of care.

Correct Answer
verified
The directors and officers failed in the...
View Answer

Exam 22: Corporations: Formation and Organization

If corporate directors fail to sue when the corporation has been harmed by an individual, another corporation, or a director, individual shareholders can file a[n] _______________ on behalf of the corporation.

Correct AnswerverifiedShow Answer

A corporation is a[n] _______________ corporation in states in which it conducts business but is not incorporated.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A shareholder may not be held personally liable to a corporation for receiving watered stock.

Correct AnswerverifiedShow Answer

Generally, a quorum of shareholders exists when shareholders holding more than _______________ percent of the outstanding shares are present.

Correct AnswerverifiedShow Answer

While ordinary decisions made by directors require a _______________ vote, more important decisions sometimes require a _______________ vote.

Correct AnswerverifiedShow Answer

Which of the following is false regarding a nonprofit corporation?

Correct AnswerverifiedShow Answer

Which of the following occurs when a target corporation offers to buy its shareholders' stock?

Correct AnswerverifiedShow Answer

Federal securities law does not require that target corporations assist aggressors in any way.

Correct AnswerverifiedShow Answer

Which of the following in the corporate formation process provides basic information about the corporation?

Correct AnswerverifiedShow Answer

Which of the following is a right of corporate directors?

Correct AnswerverifiedShow Answer

Which of the following is a corporation that has not substantially met the requirements of the state incorporation statute, but courts recognize it as a corporation for most purposes to avoid unfairness to third parties who believed it was properly incorporated?

Correct AnswerverifiedShow Answer

Which of the following is a form of self-dealing?

Correct AnswerverifiedShow Answer

Which of the following may be redeemed for a certain number of shares at a specified price within a given time period?

Correct AnswerverifiedShow Answer

Consolidations today are rare.

Correct AnswerverifiedShow Answer

Which of the following is generally true regarding management of a corporation?

Correct AnswerverifiedShow Answer

Owners of which of the following types of stock enjoy preferences with respect to assets and dividends?

Correct AnswerverifiedShow Answer

When do corporations commit ultra vires acts most frequently?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Set forth the ways discussed in the text in which the directors and officers of Enron failed in their duty of care.

Correct AnswerverifiedThe directors and officers failed in the...View AnswerShow Answer

Correct Answer
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While ordinary decisions made by directors require a _ vote, more important decisions sometimes require a _ vote.

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
The directors and officers failed in the...
View Answer