1.Under the , the courts generally avoid second-guessing corporate executives and let stand any business decisions made in good faith that are uninfluenced by personal considerations.
a. business judgment rule
b. corporate opportunity doctrine
c. conflict of interest rule
d. expense item rule
2. Which of the following is true of a proxy election for the board of directors of a corporation?
a. Shareholders must vote for a candidate but do not have the option to allow the proxy committee to vote the shares in any way it sees fit.
b. A biographical sketch of each of the candidates for the board of directors is sent to all shareholders.
c. Under the National Stock Exchange rules, the proxy committee must use a ballot form to solicit proxies.
d. The proxy committee sends only preferred shareholders a statement of resolutions on which the shareholders are to vote.
3. Which of the following is true of officers of a corporation?
a. They are not agents of the corporation.
b. They are appointed and supervised by the shareholders.
c. They are responsible for the actual management of corporate affairs.
d. They do not control the proxy election of the board of directors of the corporation.
4. Which of the following is the difference between a stock warrant and a stock option?
a. A stock warrant can be freely traded, whereas a stock option cannot be traded.
b. A stock warrant can only be issued to employees, whereas a stock option can be issued to anyone.
c. A stock warrant authorizes its holder to purchase a stated number of shares at a stated price, whereas a stock option allows its holder to purchase any number of shares at any price.
d. Shares bought through a stock warrant can be bought back by the company issuing the shares, whereas shares bought through a stock option cannot be bought back.
5. Which of the following statements is true of a multinational corporation?
a. It is declining in importance around the world because it is increasingly being replaced by private corporations.
b. Its stock is generally traded on the securities exchanges of several nations.
c. It restricts its production to a single nation but maintains worldwide distribution sites.
d. Its managers should be citizens of the same country in which its corporate headquarters is located.
6. Which of the following is a difference between a note and a bond?
a. A note is a form of equity financing, whereas a bond is a form of debt financing.
b. A note is a form of debt financing, whereas a bond is a form of equity financing.
c. A note is a long-term loan, whereas a bond is a short-term loan.
d. A note is a short-term loan, whereas a bond is a long-term loan.
7. Which of the following statements is true about a corporation's boards of directors?
a. They typically abdicate their policy-making function and, being agents of the corporation, serve as proxies for shareholders.
b. They are actively involved in daily corporate affairs.
c. They actively manage the policies of the corporation but leave day-to-day affairs to the shareholders.
d. They are considered as agents of a corporation.
8. Patricia holds stock in Avitrep Drugs, a leading pharmaceutical company. In 2005, Patricia traded her stock for another type of stock that granted her the right to vote and the right to participate in income through dividends. Which class of stock did Patricia own initially?
a. Cumulative preferred stock
b. Participating preferred stock
c. Convertible stock
d. Common stock
9. In order to be issued, the number of shares of stock must be:
a. authorized in the corporation's articles of incorporation.
b. purchased by the directors of the corporation.
c. registered under the incorporation statute of Delaware.
d. approved by the U.S. Secretary of Treasury.
10. The Revised Model Business Corporations Act states that a director is entitled to rely on information and reports provided or prepared by:
a. a committee of directors of which the director is a part, if the committee merits confidence.
b. legal counsel or accountants in regard to matters that the director believes are within that professional's competence.
c. officers of a competing corporation who, the director reasonably believes, are reliable and competent.
d. employees of the Securities and Exchange Commission who are responsible for creating the proxy rules.
11. Which class of stock entitles its owner to special options relating either to dividends or to the distribution of assets?
a. Preferred stock
b. Privileged stock
c. Common stock
d. Limited stock
12. Which court is considered the most influential court in the U.S. with regard to corporate governance and the chief arbiter of conflicts between corporations?
a. The New York State Supreme Court
b. The Supreme Court of California
c. The Supreme Court of Illinois
d. The Delaware Supreme Court
13. Which of the following usually occurs at a corporation's first board meeting?
a. The articles of incorporation are filed.
b. Bylaws are enacted.
c. The face value of the stock to be issued is decided.
d. A certificate of incorporation is issued.
14. Which class of stock entitles its owner to vote for a corporation's board of directors, receive dividends, and participate in the net assets upon liquidation of the corporation?
a. Preferred stock
b. Privileged stock
c. Common stock
d. Convertible stock
15 The day-to-day management of a corporation is carried out by .
a. the shareholders
b. the board of directors
c. the corporate officers
d. the financial investors
16. Owners of receive either the par value of their stock or a specified monetary amount before the common shareholders share pro rata in the remainder of the assets.
a. cumulative preferred stock
b. common stock
c. convertible stock
d. liquidation preferred stock
17. Which of the following is true of the Greek bailout in 2010?
a. The exposure of foreign banks and other institutions was the smallest in France, Germany, Britain, the Netherlands, Italy, and Belgium.
b. The European Central Bank (ECB) joined with the International Monetary Fund (IMF) to offer $1 trillion in loan guarantees to Europe's banks.
c. The private- and public-sector banks and other institutions of Europe and the United States lent money only to one another.
d. The U.S. dollar fell dramatically, and the euro became a safe haven.
18. Which of the following statements is true of closely held corporations?
a. The stock of these corporations is traded on national securities exchanges.
b. The stock of these corporations is usually held by a small number of people.
c. The shareholders of these corporations are considered to be limited partners.
d. The shareholders of these corporations are not permitted to serve as directors.