Multiple Choice

1. Which of the following is incorrect in regard to convertible preference shares?

a) They can be converted into a fixed number of ordinary shares

b) They usually have a variable dividend rate

c) The shareholder has the option of converting them into ordinary shares or continuing to hold them so as to receive a preference dividend on them

d) They have the advantage of providing money to the company for expansion, instead of the company having to use debt finance

2. Which of the following is incorrect in regard to ordinary shares?

a) If you were a shareholder owning 5,000 shares in Company XYZ Ltd and XYZ Ltd had issued a total of 100,000 shares, you would own 5% of Company XYZ Ltd.

b) Shares are known as 'stock' in the USA and ordinary shares are known as 'common stock'

c) Shareholders in a listed company may only be directors or employees of the company in which they own shares

d) A shareholder is a part-owner of the company in which they have shares

3. When floating a share issue, the application account is used to

a) Pay out shareholder dividends

b) Pay wages to company employees

c) Record the increase in equity of the business when shares are allotted

d) Record the application money sent in by prospective shareholders

4. The Calls in Advance account is used when

a) Money is sent in by share applicants or shareholders, in excess of the money due and requested

b) Money is sent in by share applicants or shareholders, equal to the money due and requested

c) Money is sent in by share applicants or shareholders, less than the money due and requested

d) Money is refunded to unsuccessful share applicants

5. The Calls in Arrears account is used when

a) Money is sent in by share applicants or shareholders, less than the money due and requested (called)

b) Money is sent in by share applicants or shareholders, in excess of the money due and requested (called)

c) Money is sent in by share applicants or shareholders, equal to the money due and requested (called)

d) Money is refunded to unsuccessful share applicants