ACCOUNTING CH 10 BOIIIII

b. common stockholders.

A corporation's capacity to pay dividends may be restricted by agreements with all of the following except: a. lenders. b. common stockholders. c. the corporation's board of directors.

c. (Net Income less Preferred Dividends)/Avg. Common Shares Outstanding

A primary driver of an increase in stock price is profitability. Profitability refers to the return that the company earns. Investors are interested in how much Net Income was earned by each share of common stock. How is earnings per share (EPS) calculated? a. (Net Income less Preferred Dividends)/Avg. Common Stockholders' Equity b. Avg. Common Stockholders' Equity/Net Income c. (Net Income less Preferred Dividends)/Avg. Common Shares Outstanding d. Net Income per Common Share/Common Stock Price

b. decreasing the per-share par value of the common stock.

A stock split, like a stock dividend, increases the number of outstanding shares without altering the proportionate ownership of a corporation. In addition, a stock split involves: a. enhancing the total market value of a corporation's outstanding common stock. b. decreasing the per-share par value of the common stock. c. decreasing the number of a corporation's outstanding common stock. d. increasing the earnings per share of the common stock.

a. When they issue preferred stock or bonds.

A stock warrant is the right granted by a corporation to purchase a specified number of shares of its common stock at a stated price and within a stated period of time. When would a corporation issue stock warrants? a. When they issue preferred stock or bonds. b. When they issue treasury stock. c. When they purchase treasury stock. d. When they issue long-term notes.

a. It gives a voting right to the preferred stockholders.

All classes of stock are designated as either common stock or preferred stock. These come with different financial benefits and provide different rights regarding the governance of the corporation. Which of the following is not true of preferred stock? a. It gives a voting right to the preferred stockholders. b. It gives preferred shareholders priority over common shareholders in the distribution of assets in the event of liquidation. c. It is less risky than common stock. d. Its value is most closely tied to interest rate levels and the company's overall creditworthiness.

c. The commitment date

Cash dividends are by far the most common form of dividend. The payment of cash dividends is preceded by an official announcement or declaration. There are three important dates regarding the payment of dividends. Which of the following is not an important date for the payment of dividends in the current year? a. The declaration date b. The payment date c. The commitment date d. The date of record

c. the total amount of par plus total additional paid-in capital.

Contributed capital is: a. the total amount of par plus total additional paid-in capital plus total retained earnings. b. total additional paid-in capital plus total retained earnings. c. the total amount of par plus total additional paid-in capital. d. total additional paid-in capital.

b. the number of partners allowed.

Corporations are authorized, or chartered, in accordance with the provisions of state laws that govern the structure and operation of corporations. All states require persons who wish to form a corporation to apply to a prescribed state official for the issuance of the corporate charter. The corporate charter authorizes all of the following except: a. the creation of the corporation. b. the number of partners allowed. c. the corporate name and purpose. d. the names of the incorporators.

d. 10%

If Big Co. had Net Income of $1,000,000 and paid dividends of $100,000 to its common stockholders, what would be the dividend payout? a. 1000% b. $10 c. 100% d. 10%

a. Paid-in capital is increased.

If a company pays a liquidating dividend, which of these statements is not true? a. Paid-in capital is increased. b. Retained earnings has been reduced to zero. c. The dividend is not taxed as income to the recipients.

d. The company's total net losses exceed its total Net Income over the life of the company.

If dividends cannot reduce retained earnings below zero, how can a corporation have a debit balance in its retained earnings? a. The company has set aside all of its cash for non-equity activities. b. The company's retained earnings is less than its accumulated other comprehensive income. c. The company has restricted its retained earnings. d. The company's total net losses exceed its total Net Income over the life of the company.

d. Employees and executives

Stock options are similar to stock warrants in that they grant the right to buy stock at a set price for a certain period of time. Who do corporations grant these rights to? a. Common stockholders b. Creditors c. Preferred stockholders d. Employees and executives

d. Long-term notes payable

Stockholder's equity, which is also called equity, represents the owners' claim against the assets of a corporation after all liabilities have been satisfied. There are various elements of stockholder's equity. Which of the following accounts is not a part of stockholder's equity? a. Capital stock b. Treasury stock c. Retained earnings d. Long-term notes payable

d. Dividend Yield

Stockholders not only experience an increase in wealth through an increasing stock price, they also may receive cash, or a payout, from the company. The most common stockholder payout ratios relate to dividends. Which of the following ratios considers dividends paid to common stockholders to the common stock price? a. Total Payout Ratio b. Earnings per Share c. Dividend Payout Ratio d. Dividend Yield

a. involves only preferred stock.

The call provision of a stock: a. involves only preferred stock. b. gives those select stockholders a dedicated call line for contacting the corporation's investor relations department. c. is a characteristic of both preferred and common stock. d. allows the stockholder to force the corporation to buy back the stock at a set price.

d. To increase the number of outstanding shares of stock in an attempt to increase earnings per share.

When a corporation purchases its own previously issued stock, the stock that it buys back is called treasury stock. What is one reason that a corporation would not want to buy treasury stock? a. To buy out the ownership of one or more stockholders b. To reduce vulnerability to an unfriendly takeover. c. To reduce the size of corporate operations d. To increase the number of outstanding shares of stock in an attempt to increase earnings per share.

b. They represent the maximum number of shares the business may issue in a particular class of stock.

Which of the following is true of shares of stock that are identified as being authorized? a. They represent the total number of shares that are being sold in the market. b. They represent the maximum number of shares the business may issue in a particular class of stock. c. They represent the total number of share the business has issued minus the total number of share of treasury stock the company holds. d. They represent the total number of shares the business has issued.