Chapter 9 Daily Doubles

Which of the following statements about corporations is true?

A. A promoter files articles of incorporation with the state government to create a corporation.

_____ defense refers to a resistance tactic in which the target's management uses corporate cash to buy back the tender offeror's current stake, with a significant premium to "go away."

A. Greenmail

Which of the following statements is true of a limited liability partnership?

A. It is taxed like a general partnership.

Although the law of partnerships originated in the common law, all states except ______ adopted the Uniform Partnership Act.

A. Louisiana

Carey, the owner of a corporation, uses the business checking account to pay his personal bills. He also makes business deals knowing the business cannot pay the invoices. If he is sued by one of his creditors, which of the following courses of action is most likely to be taken by the court?

A. Pierce the corporate veil.

The legal doctrine that makes the employer liable for an employee's acts is _____.

A. respondeat superior

Which of the following presents the company's assets, liabilities, and equity in a registration statement?

B. Balance sheet

_____ refers to the severance pay packages the target's officers may have negotiated to protect themselves in the event of a takeover.

B. Golden parachutes

Which of the following legal doctrines will the court apply if the owners of a corporation fail to maintain a formal legal separation between their business and their personal financial affairs?

B. Piercing the Corporate Veil

According to the 1933 Act, during the _____ period, no sales are permitted but a limited amount of solicitation is allowed.

B. Waiting

The _____ defense against a takeover involves the target company selling off its most attractive assets.

B. crown jewel

Under the 1933 Act, a draft prospectus is included with the filed registration statement. This is known as a _____ prospectus.

B. red herring

If a delivery truck driver negligently hits a child in the street, the company for which the driver works will be liable for the injuries under the legal doctrine of _____.

B. respondeat superior

Identify the correct statement about the Securities Act of 1933.

C. It does not guarantee the economic merits of any investment opportunity.

Which of the following is true of the Securities Act of 1933?

C. It forbids any interstate offering of a new security until a registration statement has been filed with and approved by the Securities and Exchange Commission.

The lack of regulatory uniformity among the states led Congress in 1996 to enact the _____, preempting state registration requirements for securities traded on national markets.

C. National Securities Markets Improvement Act

Which of the following is a management's takeover defense strategy that gives current shareholders a tender offer-triggered right to buy additional stock at a discount, thus diluting the hostile bidder's shares?

C. Poison pill defense

Which of the following refers to a business venture that has no legal existence apart from the owner?

C. Sole proprietorship

The principal defense against a Section 11 claim is _____.

C. due diligence

Which of the following is true of the partnership form of business?

D. Events in the private lives of the partners can seriously impact the business venture.

Which of the following statements is true of the Securities Act of 1934?

D. It gives the Securities and Exchange Commission the power to suspend trading if it suspects price manipulation.

Which of the following acts prohibits broker voting unless specific instructions are received from the shareholder?

D. The Dodd-Frank Act

Which of the following statements is true of the formation of partnerships?

D. The co-owners of a partnership must intend to join in the sharing of risks and rewards via the active conduct of business.

Which of the following is true of limited liability companies?

D. To create a limited liability company, the owner(s) must file articles of organization with the state.

A partnership offers limited liability to it's owners.

False

An S corporation pays double tax on it's income.

False

Equity holders' claims are always satisfied before creditors' claims.

False

In a limited liability company, the owners are referred to as interest holders.

False

In a limited partnership, the limited partners manage the business and are personally liable for all loses.

False

In the context of the capital structure of corporations, equity capital has a short-term horizon.

False

Online trading services provide professional guidance to investors.

False

Sole proprietorship are mutual agencies.

False

Closely held corporations face the loss of limited liability through application of the doctrine known as piercing the corporate veil.

True

Common stockholders share all three property rights associated with stock ownership in proportion to their holdings.

True

Corporations are artificial persons created under the law of a state.

True

Corporations incur the disadvantage of double taxation.

True

In general, the creditors of a corporation cannot reach the personal assets of the shareholders to satisfy the corporation's obligations.

True

The Securities Act of 1933 seeks to ensure full disclosure of all material facts about the investment opportunity to offerees before they invest.

True

The owners of a corporation are called stockholders.

True

Where mergers or direct acquisitions fail, a takeover can be attempted.

True

Which of the following is a feature of a corporation?

A. Double Taxation

Corporations distribute their aftertax income to their shareholders as _________.

B. Dividends

On termination of a corporation, which of the following has the highest priority for payment?

C. Claims of creditors

Which of the following statements is true of the sole proprietorship form of business organization?

D. A sole proprietorship is not a taxable entity.

A shareholder derivative suit is bought by a minority shareholder, but any recovery inures to the corporation.

True

Although shareholders are the owners of the corporation, control rests with the board.

True

Blue sky laws are primarily applicable to solely intrastate offerings.

True