Chapter 40 - Corporate Directors, Officers, & Shareholders (Final Exam)

b) gross profits.

1. The board of directors of Orion, Inc., announces a cash dividend. A cash dividend may not be paid from: a) accumulated surplus. b) gross profits. c) net profits. d) retained earnings.

c) the duty of loyalty.

10. Perla is a director of Quik Purchasing Corporation. Without informing Quik, Perla goes into business with Rapid Buys, Inc., to compete with Quik. This violates: a) the business judgment rule. b) the duty of care. c) the duty of loyalty. d) none of the choices.

a) compensation.

2. Joeli is a shareholder of Agro Implement Company. As a shareholder, Joeli does not have a right to: a) compensation. b) dividends. c) inspect corporate books and records. d) transfer shares.

d) the officers' employment contracts.

3. Dylan and Evette are officers of Fullfit Clothing Corporation. As officers, their rights are set out in: a) international agreements. b) state corporation statutes. c) the firm's certificate of authority. d) the officers' employment contracts.

a) care and loyalty.

4. Federico is a director of Green Energy Corporation. As a director, Federico owes Green a duty of: a) care and loyalty. b) care only. c) loyalty only. d) neither care nor loyalty.

True

True or False? 1. The business judgment rule immunizes officers from liability for poor decisions made in good faith.

True

True or False? 10. At a shareholders' meeting, a quorum must be present to vote on resolutions.

True

True or False? 2. An officer is a fiduciary of a corporation.

False

True or False? 3. Preemptive rights entitle shareholders to bring a derivative suit against the corporation.

True

True or False? 4. Only certain funds are legally available for paying dividends.

False

True or False? 5. Damages recovered in a shareholder's derivative suit are paid to the shareholder who filed the suit.

True

True or False? 6. Generally, shareholders are not personally responsible for the debts of the corporation.

False

True or False? 7. Directors, but not officers, owe a duty of loyalty to the corporation.

False

True or False? 8. The business judgment rule makes a director liable for losses to the firm in most cases.

True

True or False? 9. Shareholders may vote to remove members of the board of directors.

d) recover damages from the management for an ultra vires act.

5. **The management of Orchards & Vines, Inc., is at odds with the shareholders over some recent decisions. The shareholders may file a shareholders' derivative suit to: a) compel dissolution of Orchards & Vines. b) compel payment of a properly declared dividend. c) enforce a right to inspect corporate records. d) recover damages from the management for an ultra vires act.

c) 9,000 votes.

6. Jeans & Sweats Corporation uses cumulative voting in its elections of directors. Kyla owns 3,000 share. At an annual meeting at which 3 directors are to be elected, Kyla may cast for any one candidate: a) 1,000 votes. b) 3,000 votes. c) 9,000 votes. d) 27,000 votes.

b) a majority of the number authorized in the articles or bylaws.

7. HomeBase Corporation invests in intrastate businesses. In HomeBase's state, as in most states, the minimum number of directors that must be present before its board can transact business is: a) all of the directors authorized in the articles. b) a majority of the number authorized in the articles or bylaws. c) any odd number. d) one.

a) directors.

8. Nanobyte Company makes and sells computer chips. Like most corporations, Nanobyte's officers are hired by its: a) directors. b) incorporators. c) officers. d) shareholders.

c) participation.

9. Robin is a director of Sherwood Forest Company. Robin has a right to: a) compensation. b) first refusal. c) participation. d) preemption.

but ownership is not; can

A stock certificate may be lost or destroyed, ___________ (and ownership is/but ownership is not) destroyed with it. A new certificate __________ (can/cannot) be issued to replace one that has been lost or destroyed.

recorded as the owner in the corporation's books

Notice of meetings, dividends, and operational and financial reports are all distributed according to the individual __________________ (in possession of the certificate/recorded as the owner in the corporation's books).