Answers for 1-6

1. To protect creditors, corporations cannot pay dividends that exceed their earnings. (T or F) 2. If a corporation goes out of business, preferred stockholders are paid first, creditors next, and finally common stockholders. (T or F) 3. Happy Corporation has issued 575,000 shares of common stock and 100,000 shares of cumulative preferred stock. Annual dividends on the cumulative preferred stock are $2 per share. Last year, dividends of $1.25 per share were paid to preferred stockholders. This year the board of directors decided to distribute $1,080,000 in dividends. If you own 300 shares of common stock, what is the amount of your annual dividend? 4. All stockbrokerage companies provide the same type of services. (T or F ) 5. The New York Stock Exchange is located on Wall Street in New York City. (T or F) 6. When investors are optimistic about the overall economy and the stock market, stock prices rise; this is referred to as a bull market. (T or F)