Chapter 35_SmithandRoberson14ed_tb

Chapter 35_SmithandRoberson14ed_tb - Chapter 35Financial...

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Chapter 35—Financial Structure TRUE/FALSE 1. Warrick makes a $10,000 investment in a debenture issued by F & M Company. Warrick is now a se- ANS: F PTS: 1 2. A majority of the shareholders would have to approve the issuance of corporate bonds. ANS: F PTS: 1 3. An indenture is not a debt agreement. ANS: F PTS: 1 4. Debentures are the same as indentures. ANS: F PTS: 1 5. If no exemption is available, a corporation offering shares of stock for sale is subject to court injunc- tion and civil liability in damages to persons to whom securities are sold in violation of the regulatory statute, but there is no potential criminal liability. ANS: F PTS: 1 6. A bondholder generally takes less of a risk than a shareholder of a corporation. ANS: T PTS: 1 7. A shareholder of one-third of all the stock in a corporation would be entitled to one-third of all corpor- ate assets of an ongoing company. ANS: F PTS: 1 8. A company may not initially issue all the shares authorized by the corporate charter. It can hold back shares. ANS: T PTS: 1 9. "Blue Sky Laws" are state laws that regulate corporate stock issuance and sale. ANS: T PTS: 1 10. The federal government leaves corporate stock regulation to the states, since corporations are state-cre- ated entities. ANS: F PTS: 1 11. If shares are issued with no par value, the entire price must be allocated to stated capital.
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ANS: F PTS: 1 12. Treasury shares are shares that have been authorized but have not yet been issued. ANS: F PTS: 1 13. Two principal sources for corporate financing are debt and equity investment securities. ANS: T PTS: 1 14. An investor has the right to transfer investment securities by sale, but not by gift or pledge. ANS: F PTS: 1 15. The difference between common and preferred stock is that the latter is a debt instrument, whereas the former represents an equity interest in the company. ANS: F PTS: 1 16. A secured bond is enforceable by a lien upon specific property rather than against the general assets of the corporation. ANS: F PTS: 1 17. If a "liquidation preference" is provided, preferred stock usually has priority over common stock. ANS: T PTS: 1 18. Article 8 of the UCC contains rules applicable to transfers of investment securities. ANS: T PTS: 1 19. Under the majority rule, an unsuspecting shareholder who receives an illegal dividend from a solvent corporation cannot be compelled to refund the dividend. ANS: T PTS: 1 20. Dividends paid in stock of the corporation have virtually the same legal significance as cash or prop- erty dividends. ANS: F PTS: 1 21. The Revised Act does not consider a stock dividend issued by ZYX Corporation to its stockholders a distribution.
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Chapter 35_SmithandRoberson14ed_tb - Chapter 35Financial...

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