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Exam 37: Corporate Formation and Financing

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Question 51

True/False

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Shareholders, not directors, make major corporate policy decisions.

A) True
B) False

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Question 52

Multiple Choice

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Initiating and negotiating the sale and lease of corporate assets outside the regular course of business is a responsibility of the corporation's

A) board of directors.
B) high-level managers.
C) chief executive officer.
D) shareholders.

E) B) and D)
F) A) and B)

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Question 53

Multiple Choice

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Sweetwater Corporation is incorporated in Texas. Outside that state, within the United States, the firm is

Common stockholders and preferred stockholders benefit when the market price of the stock increases.

A breach of fiduciary duties by those who own a close corporation normally constitutes oppressive conduct.

Daisy is a director of Excavation Corporation. She opposes an offer to merge Excavation with Fill Inc. because she would lose her board position. Daisy is most likely liable for breach of

To avoid potential liability for misconduct in corporate operations, directors can refrain from reasonable supervision of work delegated to

Belle is a director on the board of Construction Corporation. The board delegates certain tasks to Dido, the corporate president, and other officers. Belle fails to reasonably supervise the work. She is most likely liable for

A de jure corporation is one that is formed to accomplish a single purpose within a limited time.

Under the business judgment rule, directors cannot be held liable for the negligence or mismanagement of corporate personnel.

Most states provide that the minimum number of directors that must be present before the board may transact business is

To help small businesses raise capital, the Securities and Exchange Commission allows the companies to advertise investment opportunities to the public. This most likely encourages

All of a certain corporation's small number of shareholders agree that the firm can operate without directors, bylaws, shareholder meetings, stock certificates, and formal records of shareholders' decisions. This firm is most likely

To bring a corporation into existence requires securing a corporate name that is

A key advantage of the corporate form is the unlimited liability of its owners.

Kathy is a director of Line Production Inc. As a director, with respect to the corporation, Kathy is expected to subordinate

Corporate officers have responsibility for all policymaking decisions necessary to the management of corporate affairs.

When a shareholder commingles personal and corporate interests so that the firm has no separate identity, the shareholder may be held liable for the firm's debts.

Erin, a shareholder of Finance Inc., demands the right to inspect corporate records to determine whether management has engaged in self-dealing that impacts the company. The firm refuses the request. On Erin's challenge, a court is most likely to hold that her request constitutes

A close corporation need not meet all of the specific requirements set forth in state statutes for corporations because it is essentially a sole proprietorship.