Question 1

Persons whose names appear in a corporation's stock book are ordinarily entitled to notice of shareholders' meetings and the right to vote.

Accepted Answer

A) True 
 B)False  True

Question 2

Rusty and Sylvia are shareholders of Triad Hotel Corporation.Triad's directors fail to declare a dividend.Rusty and Sylvia could succeed in asking a court to order the directors to meet and declare a dividend

Accepted Answer

A)  if Triad has sufficient earnings available to pay a dividend. 
B)  if Triad has cash reserves, even if earmarked for a different purpose. 
C)  if withholding a dividend is an abuse of the directors' discretion. 
D)  under no circumstances. 
A)  if Triad has sufficient earnings available to pay a dividend. 
B)  if Triad has cash reserves, even if earmarked for a different purpose. 
C)  if withholding a dividend is an abuse of the directors' discretion. 
D)  under no circumstances. C

Question 3

Bea is a shareholder of Candy Confections Corporation.The right to inspect corporate books and records is

Accepted Answer

A)  held by Bea only if she is a director. 
B)  held by Bea, without restrictions. 
C)  held by Bea, with some restrictions. 
D)  not held by Bea. 
A)  held by Bea only if she is a director. 
B)  held by Bea, without restrictions. 
C)  held by Bea, with some restrictions. 
D)  not held by Bea. C

Question 4

Chip is a director of Diners Restaurants,Inc.Chip would breach his duty of loyalty if he

Accepted Answer

A)  becomes a director of Fluffy Mattresses, Inc., a noncompeting firm. 
B)  buys a controlling interest in Gulpin' Foods Corporation, a competing firm. 
C)  votes for Diners to buy a controlling interest in Eateries, Inc., which causes Diners to suffer a loss. 
D)  votes against Diners' purchase of a controlling interest in Eateries, Inc., which causes Diners to suffer a loss. 
A)  becomes a director of Fluffy Mattresses, Inc., a noncompeting firm. 
B)  buys a controlling interest in Gulpin' Foods Corporation, a competing firm. 
C)  votes for Diners to buy a controlling interest in Eateries, Inc., which causes Diners to suffer a loss. 
D)  votes against Diners' purchase of a controlling interest in Eateries, Inc., which causes Diners to suffer a loss.

Question 5

Fact Pattern 30-1 (Questions 32-33 apply)
Ray is a shareholder of Small Biz Company (SBC). When the direc¬tors fail to undertake an action to redress a wrong suffered by SBC, Ray files a suit on the firm's behalf.
-Refer to Fact Pattern 30-1.Ray's suit is a shareholder's

Accepted Answer

A)  business-judgment rule suit. 
B)  derivative suit. 
C)  duty-of-care suit. 
D)  duty-of-loyalty suit. 
A)  business-judgment rule suit. 
B)  derivative suit. 
C)  duty-of-care suit. 
D)  duty-of-loyalty suit.

Question 6

A preemptive right is a preference over other shareholders to cast the determining vote on fundamental changes affecting the corporation.

Accepted Answer

A) True 
 B)False

Question 7

Lovey is a shareholder of Matchless Corporation with preemptive rights.With these rights,Lovey can

Accepted Answer

A)  buy a prorated share of a new issue of stock before other buyers. 
B)  choose to have Matchless act exclusively in a certain area. 
C)  "preempt" managerial decisions that affect shareholders. 
D)  sell a prorated share of a new issue of stock before other sellers. 
A)  buy a prorated share of a new issue of stock before other buyers. 
B)  choose to have Matchless act exclusively in a certain area. 
C)  "preempt" managerial decisions that affect shareholders. 
D)  sell a prorated share of a new issue of stock before other sellers.

Question 8

Luke is a director of Motor Parts Corporation.Luke makes decisions with respect to Motor Parts in good faith,in what he believes is the firm's best interest,and without violating any duties owed to it.If,despite these circumstances,Luke exercises poor business judgment,under the business judgment rule Luke is

Accepted Answer

A)  immune from liability. 
B)  liable only to the extent that he gains as a result. 
C)  liable only to the extent that Motor Parts suffers as a result. 
D)  wholly liable. 
A)  immune from liability. 
B)  liable only to the extent that he gains as a result. 
C)  liable only to the extent that Motor Parts suffers as a result. 
D)  wholly liable.

Question 9

Frawsty Corporation distributes beverages in the greater Northwest.Frawsty's board of directors can delegate some of its functions to

Accepted Answer

A)  Frawsty's incorporators. 
B)  Frawsty's officers. 
C)  Frawsty's shareholders. 
D)  no one. 
A)  Frawsty's incorporators. 
B)  Frawsty's officers. 
C)  Frawsty's shareholders. 
D)  no one.

Question 10

A dividend may be paid from undistributed net corporate profits.

Accepted Answer

A) True 
 B)False

Question 11

Fiona owns one share of stock in GR8 Boards Corporation,as evidenced by a stock certificate.Fiona loses the certificate.Her ownership of the stock is

Accepted Answer

A)  forfeited immediately. 
B)  forfeited within ten days of a third party's claim to ownership. 
C)  forfeited within thirty days if she cannot find the certificate. 
D)  not affected. 
A)  forfeited immediately. 
B)  forfeited within ten days of a third party's claim to ownership. 
C)  forfeited within thirty days if she cannot find the certificate. 
D)  not affected.

Question 12

Corporate directors and officers are insurers of business success.

Accepted Answer

A) True 
 B)False

Question 13

Ida,Jerzy,and Kit are the directors of Liberty Convenience Stores,Inc.Liberty has nine officers and forty-six shareholders.Dividends are ordered by the firm's

Accepted Answer

A)  board of directors. 
B)  incorporators. 
C)  officers. 
D)  shareholders. 
A)  board of directors. 
B)  incorporators. 
C)  officers. 
D)  shareholders.

Question 14

Sophie and Tiny incorporate their beverage-container business as U-Twist Products,Inc.The first board of directors may be appointed by the firm's

Accepted Answer

A)  employees. 
B)  incorporators. 
C)  officers. 
D)  shareholders. 
A)  employees. 
B)  incorporators. 
C)  officers. 
D)  shareholders.

Question 15

To vote their shares,shareholders must attend a meeting and vote in person.

Accepted Answer

A) True 
 B)False

Question 16

A stock warrant is a distribution of corporate profits or income.

Accepted Answer

A) True 
 B)False

Question 17

A board of directors can delegate some functions to corporate officers.

Accepted Answer

A) True 
 B)False

Question 18

Cole is a shareholder of Donut Holes,Inc.Cole will be deemed to have a fiduciary duty to Donut Holes and its minority shareholders if he has

Accepted Answer

A)  a restriction on the transferability of his shares. 
B)  a right of first refusal. 
C)  a sufficient number of shares to exercise de facto control. 
D)  watered stock. 
A)  a restriction on the transferability of his shares. 
B)  a right of first refusal. 
C)  a sufficient number of shares to exercise de facto control. 
D)  watered stock.

Question 19

A director cannot be elected by the other members of the board.

Accepted Answer

A) True 
 B)False

Question 20

Shares issued for more than their fair market value are known as watered stock.

Accepted Answer

A) True 
 B)False

Exam 30: Corporate Directors, officers, Shareholders

Persons whose names appear in a corporation's stock book are ordinarily entitled to notice of shareholders' meetings and the right to vote.

Rusty and Sylvia are shareholders of Triad Hotel Corporation.Triad's directors fail to declare a dividend.Rusty and Sylvia could succeed in asking a court to order the directors to meet and declare a dividend

Bea is a shareholder of Candy Confections Corporation.The right to inspect corporate books and records is

Chip is a director of Diners Restaurants,Inc.Chip would breach his duty of loyalty if he

Fact Pattern 30-1 (Questions 32-33 apply) Ray is a shareholder of Small Biz Company (SBC). When the direc¬tors fail to undertake an action to redress a wrong suffered by SBC, Ray files a suit on the firm's behalf. -Refer to Fact Pattern 30-1.Ray's suit is a shareholder's

A preemptive right is a preference over other shareholders to cast the determining vote on fundamental changes affecting the corporation.

Lovey is a shareholder of Matchless Corporation with preemptive rights.With these rights,Lovey can

Frawsty Corporation distributes beverages in the greater Northwest.Frawsty's board of directors can delegate some of its functions to

A dividend may be paid from undistributed net corporate profits.

Fiona owns one share of stock in GR8 Boards Corporation,as evidenced by a stock certificate.Fiona loses the certificate.Her ownership of the stock is

Corporate directors and officers are insurers of business success.

Ida,Jerzy,and Kit are the directors of Liberty Convenience Stores,Inc.Liberty has nine officers and forty-six shareholders.Dividends are ordered by the firm's

Sophie and Tiny incorporate their beverage-container business as U-Twist Products,Inc.The first board of directors may be appointed by the firm's

To vote their shares,shareholders must attend a meeting and vote in person.

A stock warrant is a distribution of corporate profits or income.

A board of directors can delegate some functions to corporate officers.

Cole is a shareholder of Donut Holes,Inc.Cole will be deemed to have a fiduciary duty to Donut Holes and its minority shareholders if he has

A director cannot be elected by the other members of the board.

Shares issued for more than their fair market value are known as watered stock.

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