Unit 1

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For a profitable and rapidly growing firm, holders of preference shares are least likely to benefit from the firm's growth if the preference shares are: A) participating. B) cumulative. C) convertible. D) common.

B- Cumulative

KAPCO common stock is listed on the New York Stock Exchange, Inc. (NYSE). If an executive vice president of the company buys 400 shares of the company's stock on the NYSE, she... A) may sell immediately without restriction. B) may sell under Rule 144 only after a six-month holding period. C) may sell immediately subject to Rule 144 volume limitations. D) may not sell until she leaves the company.

C- may sell immediately subject to Rule 144 volume limitations.

In a portfolio containing common stock, straight preferred stock, convertible preferred stock, and adjustable-rate preferred stock, changes in interest rates would be most likely to affect the market price of the: A) adjustable-rate preferred stock. B) straight preferred stock. C) common stock. D) convertible preferred stock.

B) straight preferred stock.

Which of the following statements regarding nonqualified stock options (NQSOs) is correct? A) Unlike incentive stock options, NQSOs are publicly traded. B) The NQSO is taxable to the recipient at the time of grant to the extent of the difference between the fair market value of the stock and the grant price. C) The exercise of NQSOs does not create taxable income. D) The NQSO is taxable to the recipient at the time of exercise to the extent of the difference between the fair market value of the stock and the exercise price.

D) The NQSO is taxable to the recipient at the time of exercise to the extent of the difference between the fair market value of the stock and the exercise price.

The residual right of common shareholders refers to their right to: A) vote in elections for the board of directors and in other important business decisions, such as changes to the charter. B) examine the corporation's annual reports and other reports, and take legal action if irregularities are found. C) receive all announced dividends in accordance with the number of shares held. D) claim company assets in bankruptcy after wages, taxes, creditors, and preferred shareholders have been paid.

D) claim company assets in bankruptcy after wages, taxes, creditors, and preferred shareholders have been paid.


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