Chapter Quiz 18: True/ False (Exam 3 Material)

Because bonds do not represent debt, they need never be repaid.

False

Like the partners in a partnership, the shareholders in a corporation cannot change without affecting the continued existence of the firm.

False

To prevent errors in business judgment, when directors transact business and vote on issues affecting the corporation, ordinary matters generally require a greater-than-majority vote.

False

A shareholder's right to transfer his or her shares to another party can be subject to restrictions set out in the bylaws or a shareholder agreement.

True

Directors and officers whose failure to exercise due care results in harm to the corporation or the shareholders can be held liable for negligence unless the business judgment rule applies.

True

If a business says it is a corporation, and a third party deals with it as a corporation, neither party can question the validity of the business's status.

True

Individual state laws should be relied on to determine corporate law because, despite the existence and use of model corporation acts, there is considerable variation among the states.

True

Shareholders exercise ownership control through the power of their votes.

True

When deciding which form of business organization to choose, businesspersons normally take into account tax considerations.

True

When directors and officers do not act in the best interests of their corporations, the shareholders may sue them on the company's behalf.

True