Multiple Choice

1. How would the declaration of a 15% share dividend by a corporation affect retained earnings and total shareholders' equity?

1. Retained earnings, decrease; total shareholders equity, no effect.
2. Retained earnings, no effect; total shareholders' equity, no effect.
3. Retained earnings, decrease; total shareholders equity, decrease.
4. Retained earnings, no effect; total shareholders' equity, decrease.

2. Which of the following are changed when a corporation buys equipment for cash?

1. Total Liabilities
2. Shareholders' Equity
3. Current Assets
4. Total Assets

3) This refers to an equitable right of shareholders to subscribe to newly issued shares in the corporation in proportion to their present shares in order to maintain their equity in their surplus as well as proportionate standing in the corporation.

1. Pre-emptive right.
2. Right of succession
3. Right of existence
4. Right of redemption

4) A share dividend

1. decreases assets.
2. increases total liabilities.
3. leaves total shareholders' equity unchanged.
4. decreases shareholders' equity.

5)Treasury stock is considered as

1. authorized and issued shares.
2. unissued and outstanding shares.
3. issued and outstanding shares.
4. authorized and unissued shares.

6)Which of these is not a right of an ordinary shareholder?

1. Attend the annual shareholders' meeting
2. Receive part of the profit before other classes of shares
3. Receive information about the corporation
4. Share in profits

7)ABC Corporation has a 5% participating preference shares issue, along with ordinary shares issue. Which of the following statements is true?

1. Participating preference shareholders receive a minimum dividend payment of 5%.
2. Participating preference shareholders receive an average dividend payment of 5%.
3. Participating preference shareholders receive a maximum dividend payment of 5%.
4. Participating preference shareholders receive only 5% in dividends.

8)One who has agreed to take shares from the corporation on the original issue of such share is called

1. incorporator.
2. promoter.
3. member.
4. subscriber.

9)A corporation whose stock can be purchased by anyone and is traded in stock markets is known as a(n)

1. not-for-profit corporation.
2. close corporation.
3. government-owned corporation.
4. open corporation.

10)When organizing a corporation, the incorporators submit articles of incorporation to

1. the local government unit.
2. the Securities and Exchange Commission.
3. the Department of Trade and Industry.
4. the Bureau of Internal Revenue.

11)Ordinary shareholders usually have all of the following rights EXCEPT to

1. vote to elect the board of directors.
2. receive their proportional share of dividends, if dividends are declared.
3. share in the assets in a profitable liquidation.
4. participate in day-to-day operations of the entity.

12)The owners of shares in a stock corporation are called

1. shareholders.
2. members.
3. promoters.
4. incorporators.

13)Which of the following information cannot be determined from the statement of financial position?

1. Debt-to-equity ratio
2. Retained earnings
3. Return on equity
4. Current ratio

14)Authorized shares are the

1. total number of shares that can be issued by the corporation at any time.
2. number of shares the corporation has repurchased.
3. number of shares that have been distributed to shareholders.
4. number of shares that are owned by shareholders at the balance sheet date.

15)The top governing body of a corporation is known as the

1. shareholders.
2. incorporators.
3. board of directors.
4. management.

16)A share split by a corporation affects which account on the statement of financial position?

1. Share premium
2. Par value
3. Shareholders' equity
4. Retained earnings

17)What is the primary disadvantage of both sole proprietorship and a partnership that a corporation overcomes?

1. Taxing complications
2. Unlimited liability
3. Ease of start up
4. No access to capital

18)On the statement of financial position, a corporation must disclose all of the following EXCEPT the

1. outstanding.
2. unissued.
3. issued.
4. authorized.

19)This is the right of the corporation to continue as a juridical entity for a period stated in the articles of incorporation despite the death of any shareholder.

1. Right of existence
2. Right of pre-emption
3. Right of succession
4. None of the above

20)Which of the following is an advantage of the corporate form of ownership?

1. Lack of secrecy.
2. Difficulty of formation
3. Expense of incorporation and selling stock
4. Limited liability

21)The corporate officers are

1. elected by shareholders.
2. elected by incorporators.
3. appointed by the board of directors.
4. appointed by management.

22)An ordinary or preference shareholder is similar to this partner because he can lose no more than the value of the investment.

1. secret partner
2. General partner
3. Nominal partner
4. Limited partner

23) Outstanding shares are the

1. number of shares that are owned by shareholders at the balance sheet date.
2. number of shares that have been distributed to shareholders.
3. number of shares the corporation has repurchased.
4. total number of shares that can be issued by the corporation at any time.

24)Which of the following qualifications is necessary in order that one may be elected president of the corporation?

1. He must be a director of the corporation.
2. He must not be a president of any other corporation.
3. He must not be a shareholder or director of a competitor corporation.
4. He must be a citizen and a resident of the Philippines.

25)A corporation might repurchase its own stock for all of the following reasons except to

1. improve financial ratios.
2. use for the board of directors.
3. use for employee compensation.
4. deter a takeover attempt.

26)When a corporation issues new ordinary shares, which of the following WILL NOT increase?

1. Net worth
2. Total liabilities
3. Quick assets
4. Total assets

27)Which of the following actions does not decrease working capital?

1. Paying off long-term bonds three years before the maturity date
2. Declaring a cash dividend
3. Buying machinery for cash
4. Paying a dividend

28)The par value of ordinary shares is equal to

1. a designated peso amount per share established in the articles of incorporation.
2. the amount at which the share is currently trading in an organized market.
3. the amount received by the corporation when the share was originally issued.
4. the book value of the ordinary shares.