Following are a series of statements regarding topics discussed in this chapter.
Required:
Indicate whether each statement is true (T) or false (F).
(a) The stock of closely held corporations is owned by a few individuals, often members of the same family, and is not publicly traded on a securities exchange.
(b) Among other items, the articles of incorporation identify a business’s purpose, its principal operating units, and the type and quantity of stock that it plans to issue.
(c) An important legal privilege of common stockholders is the right to vote on key corporate matters.
(d) If a corporate charter identifies only one class of stock, that stock is automatically considered the corporation’s preferred stock.
(e) If common shares issued are less than common shares authorized, the company must have treasury stock.
(f) ‘‘Authorized stock’’ refers to the number of shares of a corporate stock that have been sold or otherwise distributed.
(g) Once a company begins paying a dividend on com- mon stock, the same or a higher amount of dividend must be paid annually unless the company is losing money.
(h) Companies subject to the regulations of the Securities and Exchange Commission must disclose the cash dividends they have paid over their five most recent fiscal years.
(i) Book value per share is computed by dividing Retained Earnings by the number of common shares outstanding.
(j) Return on equity is computed by dividing a corporation’s net income, less preferred stock dividends, by average common stockholders’ equity for a given period.
(k) The dividend yield on preferred stock is the stated rate of dividend divided by the par value of the preferred stock.
(l) All stock splits cause the number of shares to decrease and the par value per share to increase.