BSE 9
F
A court will overturn the decision of a board of directors if the shareholders can prove other corporations in the same business are doing things differently.
T
A derivative suit is one brought by a shareholder on behalf of the corporation.
B
A director of a corporation does NOT have a duty to: A. act diligently and in good faith in conducting corporate business. B. act resourcefully and always make the best business judgment. C. act on behalf of the beneficiary with great integrity. D. act in the best interests of the beneficiary.
F
A limited liability company is another name for a limited partnership.
C
According to the text, what is a corporation's greatest disadvantage? A. Double taxation B. Unlimited liability C. Lack of continuity D. Difficulty in raising capital
A
Although the law of partnerships originated in the common law, all states except _____ have adopted the Uniform Partnership Act. A. Louisiana B. Alabama C. Nevada D. Wisconsin
D
BestAg, Inc., invested millions of dollars in a promising harvester. However, the product did not sell well and now the corporation is nearly insolvent. The stockholders bring suit to hold the directors personally liable. What would be the likely result? A. Directors are always personally liable for the results of their decisions. Therefore, the stockholders win. B. Since a corporation is a separate legal entity, directors can never be liable for their decisions. Therefore, the stockholders lose. C. The only remedy for improper actions by the directors is to vote in a new board. Stockholders cannot sue directors individually. D. The directors would win under the business judgment rule.
F
Blue sky laws focus mainly on trading in the futures market.
T
Due diligence means acting in a wise and prudent manner, asking appropriate questions and making reasonable decisions based on reliable information.
T
Federal government intervention in stock issuance was initiated by the stock market crash of 1929.
F
In a limited liability company, the owners are referred to as interest holders.
F
In a limited partnership, the limited partners manage the business and are personally liable for all losses.
B
In a registration under the 1933 Act, financial statements: A. must be signed by the CEO. B. must include a statement of cash flows and a balance sheet. C. need not be audited. D. may be audited by internal accountants.
T
In general, courts and/or creditors cannot reach a shareholder's personal assets to satisfy corporate obligations.
D
Limited liability companies combine: A. the cost advantages of incorporation with the decision-making advantages of a sole proprietorship. B. the advantages of the investor restrictions of a Sub S corporation with the tax advantages of a corporation. C. the liability advantages of a partnership with the tax advantages of a partnership. D. the tax advantages of a partnership with the operating advantages of a corporation.
A
Limited partnerships: A. are not taxable entities. B. are easier to form than general partnerships. C. encourage the limited partners to make management decisions. D. make it difficult to transfer ownership of the shares.
B
Noah, Doris, and Francis set up a service to grow plants and give them to residents of hospitals and nursing homes. Francis only helps out when she can. As they are all independently wealthy, any money they receive from donations from grateful individuals is used for plants, fertilizer, pots and potting soil. Do they have a partnership? A. No, because there is no written partnership agreement. B. No, because they are not in business to make a profit. C. No, because this is an improper purpose for a partnership. D. No, because they do not share the duties equally.
F
One negative about an S corporation is that it pays double tax.
T
So-called "double taxation" is often seen as one of the major drawbacks in choosing to incorporate.
C
The SEC does all of the following EXCEPT: A. issues cease-and-desist orders. B. imposes civil fines. C. imposes criminal penalties. D. investigates violations of securities law.
D
The SEC requires registered corporations to file a Form 10-Q: A. whenever there is a change in control, change in auditor, and resignations of directors. B. whenever there are major asset acquisitions and dispositions, and bankruptcy. C. which includes information very similar to that found in an IPO registration statement, including audited financial statements. D. which contains year-to-date information and unaudited interim financial statements.
F
The SEC's primary goal is to protect investors from foolish investments by requiring disclosure of information through a prospectus.
T
The definition of a security for the purpose of federal securities law is very broad and includes many types of investments beyond traditional stocks and bonds.
A
The doctrine which makes the employer liable for an employee's acts is: A. respondeat superior. B. res ipsa loquitur. C. stare decisis. D. caveat emptor.
C
The major reason for the creation of limited liability partnerships was: A. tax generating concerns of the IRS. B. concerns about the continuity of sole proprietorships. C. liability concerns of accountants, lawyers and other professionals who were in traditional partnerships. D. the excessive taxes being paid by limited partnerships.
C
The only defense offered by Section 18 of the 1934 Act is: A. due diligence. B. reliance by the plaintiff on the false or misleading statements is presumed. C. the defendant acted in good faith, without knowledge of the false nature of the statement. D. a director may rely on information and advice given by a professional expert.
T
The purchase of a share of stock makes that shareholder an owner of the company
T
Venture capitalists and franchisors will often require the persons with whom they deal to incorporate.
D
What is the greatest advantage of the partnership form? A. A proven product or service, turn-key implementation, and access to support. B. Limited liability, indefinite life, freely transferable interests and centralized management. C. The partners are not personally liable for the partnership's obligations should it default. D. The extraordinary range of economic relationships that can be crafted.
C
Which of the following has the highest priority for payment upon dissolution and winding up of a corporation? A. Dividend arrearages owed to preferred shareholders. B. Claims of common shareholders for return of capital contributions. C. Claims of outside creditors. D. Claims of directors for loans made to the corporation.
A
Which of the following is true of the sole proprietorship form of business organization? A. It is the most common form of business organization in the U.S. B. There are many legal formalities required to create a sole proprietorship. C. It cannot have employees; the owner is the only person who is involved in the business. D. A sole proprietorship is a taxable entity.
A
Which of the following statements about corporations is true? A. Only after the articles of incorporation are filed does the corporation come into existence. B. The owners of a corporation are called the board of directors. C. The corporation should make modest filings monthly with the state to keep its records up-to-date, usually accompanied by a small fee. D. The cost of corporations' accounting systems generally reflects the decision to operate in corporate form, not their scale of operation.
D
Which of the following statements about tender offers is false? A. The offeror announces that it wishes to acquire a specific number of shares. B. It identifies where stockholders who want to participate must deliver their shares. C. It specifies the opening bid price. D. If less than the desired number of shares is tendered, the tender offeror can decrease the offering price.
A
Which of the following statements about the Securities Act of 1933 is false? A. It guarantees the economic merits of any investment opportunity. B. It seeks to ensure full disclosure of all material facts about the investment opportunity to offerees before they invest. C. It seeks to eliminate fraudulent conduct in the markets. D. It forbids any interstate offering of a new security until a registration statement has been filed with and approved by the SEC.
D
Which of the following would most likely be classified as a security under federal securities law? A. A direct investment in gold coins. B. An agreement with two other people to buy and sell real estate for profit. C. The purchase of a horse farm to raise thoroughbreds for racing. D. An investment in a limited partnership that develops oil wells.