ACC 131 Chapter 13

Corporations can be separated into two types. A __________ held corporation does not offer its stock for public sale and usually has few stockholders. A __________ held corporation offers its stock for public sale and can have thousands of stockholders.

► PRIVATELY ► PUBLICLY

Identify the disadvantages of the corporate form of business. (Check all that apply) 1) Transferable ownership rights 2) Government regulation 3) Lack of mutual agency 4) Corporate taxation 5) Limited liability

2 & 4

Market value per share is: a) The price at which a stock is bought and sold. b) A contractual commitment by an investor to purchase unissued shares of stock. c) Stock not assigned a value per share. d)The right of common stockholders to protect their proportionate interests in a corporation by having the first opportunity to purchase additional shares of common stock issued by the corporation. e) An amount assigned to no-par stock

A

_________ stock is the number of shares that a corporation's charter allows it to sell. ○ Authorized ○ Outstanding ○ Issued

Authorized

A ___________ is an entity created by law that is separate from its owners. Owners are called stockholders or shareholders. These entities can be privately or publicly held. ○ sole proprietorship ○ limited liability partnership ○ partnership ○ corporation

Corporation

If the dividend rate on preferred stock is lower than the rate the corporation earns on its assets, the effect of issuing preferred stock is to ► increase the rate earned by common shareholders. ► decrease the rate earned by common shareholders. ► increase the rate earned by preferred shareholders. ► decrease the rate earned by preferred shareholders.

Decrease the rate earned by preferred shareholders.

All of the following are advantages of a corporation except: ► government regulation ► limited liability ► no mutual agency ► easier capital accumulation

Government regulation

Identify which of the following is not generally a right of common stockholders. ○ Vote at stockholders' meetings ○ Receive dividends if issued ○ Share any remaining assets if the corporation is liquidated ○ Sell stock ○ Purchase proportional shares if new stock is issued ○ Manage operations

Manage operations

___________ stock refers to issued stock that is currently held by stockholders. ► Authorized ► Outstanding ► Market ► Issued

OUTSTANDING

Preferred stock has a feature that allows it to share with common shareholders in any dividends paid in excess of the percent or dollar amount stated on the preferred stock. This feature is called: ► Participating ► Nonparticipating ► Sharing ► Leverage

PARTICIPATING

A charter application usually must be signed by the prospective stockholders called incorporators or ______________________. Then, it is filed with the appropriate state official.

Promotors

True or false: Stockholders do not have the power to bind the corporation to contracts. This is referred to as lack of mutual agency.

TRUE

A corporation is created by obtaining a charter from: ○ an attorney ○ the state government ○ initial stockholders ○ the federal government

The stat government

All of the following are true about a corporation except: ► a corporation is separate from its owners ► a corporation issues bond certificates to its owners. ► a corporation may be either privately held or publicly held. ► a public sale refers to selling stock on an organized stock market.

a corporation issues bond certificates to its owners.

Two of the biggest disadvantages of the corporate form of business are government regulation and corporate ____________

taxation