Question 1

Which of the following statements is true of a corporation?

Shareholders are authorized to sign contracts or make business commitments on behalf of the corporation.

Shares of stock cannot be readily bought and sold by investors on the open market.

The liabilities of the corporation can be paid by the personal assets of the shareholders.

Corporations pay income tax on corporate earnings, and shareholders pay personal income tax on corporate dividends and gains from sale of stock.

Question 2

Outstanding stock refers to the:

total amount of stock that has been authorized by state law.

shares of stock that have been sold for the highest price.

total amount of stock that has not been sold yet.

shares of stock that are held by the stockholders.

Question 3

Which of the following represents one of the basic rights of stockholders?

Stockholders may determine at what price the company issues stock.

Stockholders may sell their stock back to the company if they wish.

Stockholders may authorize a business contract on behalf of the corporation.

Stockholders may receive dividends from corporate earnings.

Question 4

The two basic sources of stockholders' equity are:

common stock and bonds.

common stock and preferred stock.

loans from banks and gifts from donors.

paid-in capital and retained earnings.

Question 5

The retained earnings of a corporation is the:

externally generated capital that is raised from banks and other creditors.

externally generated capital that is contributed by shareholders.

internally generated capital that from the direct investment of employees.

internally generated capital that is raised from profitable operations.

Question 6

Preferred stock is a stock:

that is distributed by corporations to avoid liquidation.

that sells for a very high price.

that is distributed to employees of the company as a performance incentive.

that gives its owners certain benefits over common stock.

Question 7

The following information is from the balance sheet of Lawson Corporation as of December 31, 2015.

Preferred Stock, $100 par	$500,000
Paid-in Capital In Excess of ParPreferred	35,000
Common Stock, $1 par	170,000
Paid-in Capital in Excess of ParCommon	510,000
Retained Earnings	131,500
Total Stockholders' Equity	$1,346,500

What was the average issue price of the common stock shares?

$1.90

$3.00

$4.00

$1.00

Question 8

Which of the following is true of dividends?

Dividend payments decrease paid-in capital.

Dividend payments increase stockholders' equity.

Dividends increase assets and decrease total stockholders' equity of a corporation.

Dividends are a distribution of cash, stock, or other assets to the stockholders.

Question 9

Pearland Company has 5,000 shares of preferred stock outstanding. The preferred stock has a $90 par value, a 5% dividend rate, and is noncumulative. If Pearland has sufficient funds to pay dividends, what is the total amount of dividends that will be paid out to preferred shareholders?

$4,500

$9,000

$10,800

$22,500

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Question 10

Revival Corporation's annual report is as follows.

	March 31, 2014	March 31, 2015
Net Income	$350,000	$423,500
Preferred Dividends	0	0
Total Stockholders' Equity	$4,200,000	$5,082,000
Stockholders' Equity attributable to Preferred Stock	0	0
Number of Common Shares Outstanding	275,464	192,168

If the current market price is $15 on March 31, 2015, find the price/earnings ratio on March 31, 2015.

$6.81

$1.81

$8.29

$2.20