Question 1

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 2

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 3

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. 
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 4

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

Question 5

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. 
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 6

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B)  Cash dividends can be declared and then rescinded by the directors.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D)  Stock dividends cannot be rescinded once declared. 
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 7

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

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) True 
 B)False

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

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. 
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 12

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

Accepted Answer

A) True 
 B)False

Question 13

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 14

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

Accepted Answer

A) True 
 B)False

Question 15

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

Question 16

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

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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. 
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 19

Once the directors of a corporation declare a cash dividend, it cannot later be rescinded.

Accepted Answer

A) True 
 B)False

Question 20

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

Exam 35: Ownership of a Corporation

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

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

Which of the following best describes watered stock?

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

Which of the following best describes a share?

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

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

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

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

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

Which of the following best describes a prospectus?

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

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.

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

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

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

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

Which of the following is true of stock?

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

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

Introduction to Law

Courts and Court Procedure

Business Torts and Crimes

Government Regulation of Business

Nature and Classes of Contracts

Offer and Acceptance

Capacity to Contract

Consideration

Defective Agreements

Illegal Agreements

Written Contracts

Third Parties and Contracts

Termination of Contracts

Nature of Personal Property

Special Bailments

Sales of Personal Property

Formalities of a Sale

Transfer of Title and Risk in Sales Con

Warranties, Product Liability, and Cons

Nature of Negotiable Instruments

Essentials of Negotiability

Promissory Notes and Drafts

Negotiation and Discharge

Liabilities of Parties and Holders in Due Course

Defenses

Nature and Creation of an Agency

Operation and Termination of an Agency

Employer and Employee Relations

Employees Rights

Labor Legislation

Introduction to Business Organization

Creation and Operation of a Partnership

Dissolution of a Partnership

Nature of a Corporation

Management and Dissolution of a Corpora

Principles of Insurance

Types of Insurance

Security Devices

Bankruptcy

Nature of Real Property

Transfer of Real Property

Real Estate Mortgages

Landlord and Tenant

Wills, Inheritances, and Trusts

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