Question 1

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.

Accepted Answer

A) True 
 B)False

Question 2

To make informed decisions and supervise corporate officers and employees, the directors need an unrestricted right to inspect corporate books and records.

Accepted Answer

A) True 
 B)False

Question 3

The rights of the director of a corporation include a right to

Accepted Answer

A)  access the corporation's books, records, facilities, and other property.
B)  subordinate the corporation's welfare to his personal interest.
C)  use confidential corporate information for personal advantage.
D)  self-deal by taking advantage of an opportunity offered to the firm.E) None of the above
F) All of the above

Question 4

The primary function of a corporation's officers is to authorize major corporate policy decisions.

Accepted Answer

A) True 
 B)False

Question 5

Directors are not answerable to the corporation for breaching their duty of care.

Accepted Answer

A) True 
 B)False

Question 6

To pierce the corporate veil is to disregard the corporate entity and hold the directors liable for a corporate obligation.

Accepted Answer

A) True 
 B)False

Question 7

The board of directors hires the corporation's officers, and normally can remove them at anytime with or without cause.

Accepted Answer

A) True 
 B)False

Question 8

Guy is a director of Healthcare Corporation. Guy attempts to use his best judgment in guiding corporate management but makes a few honest mistakes. He may be protected from liability for these mistakes by

Accepted Answer

A)  business success insurance.
B)  the business judgment rule.
C)  the duty of loyalty.
D)  none of the choices.E) A) and D)
F) B) and C)

Question 9

Every corporation is governed by a committee of managerial employees.

Accepted Answer

A) True 
 B)False

Question 10

Because of their positions within the corporation, directors can use confidential corporate information for personal advantage.

Accepted Answer

A) True 
 B)False

Question 11

Issuing securities is the only way for a new corporation to raise capital.

Accepted Answer

A) True 
 B)False

Question 12

When directors vote on issues affecting the corporation, ordinary matters generally require a greater-than-majority vote.

Accepted Answer

A) True 
 B)False

Question 13

To participate in a shareholders' meeting, a shareholder must present a proxy.

Accepted Answer

A) True 
 B)False

Question 14

Because state corporate laws differ, persons wishing to incorporate may look for the state that offers the most advantageous tax or other provisions.

Accepted Answer

A) True 
 B)False

Question 15

To avoid sharing control with someone they do not know or like, it would be most effective for the shareholders of a close corporation to

Accepted Answer

A)  require more than a majority of directors approve any board action.
B)  restrict the transferability of shares to outside persons.
C)  reorganize into a sole proprietorship or partnership.
D)  hold special shareholders' or directors' meetings on an annual basis.E) B) and C)
F) None of the above

Question 16

With respect to a corporation, a director is

Accepted Answer

A)  a fiduciary.
B)  an actuary.
C)  a notary.
D)  all of the choices.E) C) and D)
F) A) and B)

Question 17

Because a close corporation is one whose shares are held by a relatively small group of persons, the firm often operates like a partnership.

Accepted Answer

A) True 
 B)False

Question 18

Any corporation whose shares are publicly traded in securities markets is

Accepted Answer

A)  a benefit corporation.
B)  a private corporation.
C)  a public corporation.
D)  a publicly held corporation.E) B) and D)
F) A) and C)

Question 19

A businessperson who enters into a contract with an investor on behalf of a future corporation is not personally liable on the deal, even though the firm is not yet formed, because the nature of investment is risk.

Accepted Answer

A) True 
 B)False

Question 20

In most states, an individual can hold only one corporate office.

Accepted Answer

A) True 
 B)False

Exam 37: Corporate Formation and Financing

In most states, an individual can hold only one corporate office.

Correct AnswerverifiedShow Answer

Because state corporate laws differ, persons wishing to incorporate may look for the state that offers the most advantageous tax or other provisions.

Correct AnswerverifiedShow Answer

To participate in a shareholders' meeting, a shareholder must present a proxy.

Correct AnswerverifiedShow Answer

The rights of the director of a corporation include a right to

Correct AnswerverifiedShow Answer

Guy is a director of Healthcare Corporation. Guy attempts to use his best judgment in guiding corporate management but makes a few honest mistakes. He may be protected from liability for these mistakes by

Correct AnswerverifiedShow Answer

With respect to a corporation, a director is

Correct AnswerverifiedShow Answer

Issuing securities is the only way for a new corporation to raise capital.

Correct AnswerverifiedShow Answer

The primary function of a corporation's officers is to authorize major corporate policy decisions.

Correct AnswerverifiedShow Answer

Every corporation is governed by a committee of managerial employees.

Correct AnswerverifiedShow Answer

When directors vote on issues affecting the corporation, ordinary matters generally require a greater-than-majority vote.

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Because of their positions within the corporation, directors can use confidential corporate information for personal advantage.

Correct AnswerverifiedShow Answer

To make informed decisions and supervise corporate officers and employees, the directors need an unrestricted right to inspect corporate books and records.

Correct AnswerverifiedShow Answer

Directors are not answerable to the corporation for breaching their duty of care.

Correct AnswerverifiedShow Answer

A businessperson who enters into a contract with an investor on behalf of a future corporation is not personally liable on the deal, even though the firm is not yet formed, because the nature of investment is risk.

Correct AnswerverifiedShow Answer

To avoid sharing control with someone they do not know or like, it would be most effective for the shareholders of a close corporation to

Correct AnswerverifiedShow Answer

The board of directors hires the corporation's officers, and normally can remove them at anytime with or without cause.

Correct AnswerverifiedShow Answer

Because a close corporation is one whose shares are held by a relatively small group of persons, the firm often operates like a partnership.

Correct AnswerverifiedShow Answer

To pierce the corporate veil is to disregard the corporate entity and hold the directors liable for a corporate obligation.

Correct AnswerverifiedShow Answer

Any corporation whose shares are publicly traded in securities markets is

Correct AnswerverifiedShow Answer

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