QUESTION 20

Two existing companies would like to work together on a new product while maintaining their independence. Expenses, profits, and losses would be shared between the companies. An appropriate business type would be a

	a.	joint venture.
	b.	sole proprietorship.
	c.	merger.
	d.	corporation.

1.8 points

QUESTION 21

Ralph, a salesperson for Southwest Corporation, learns that Southwest will be merging with Northeast Corporation. Ralph buys 1,000 shares of Southwest stock. When the price of the Southwest stock increases, Ralph sells his shares for a profit. Ralph would not be liable for insider trading if the information about the merger was

	a.	public before he bought the stock.
	b.	inside information.
	c.	material when he sold the stock.
	d.	public after he bought the stock.

1.8 points

QUESTION 22

Misappropriation theory allows courts to find individuals liable when they steal material non-public information and use it as the basis for insider trading.

True

False

1.8 points

QUESTION 23

One incentive some corporations offer to directors in order to align their interests with the interests of shareholders is

	a.	a grant of stock options.
	b.	a tender offer.
	c.	a golden parachute.
	d.	a promotion.

1.8 points

QUESTION 24

Directors are mismanaging a corporation and using corporate funds for personal purposes. If the shareholders are successful in a shareholder's derivative lawsuit against these directors, the proceeds (money) from the lawsuit will go to

	a.	the shareholders.
	b.	the corporation.
	c.	the directors.
	d.	the officers.

1.8 points

QUESTION 25

Lincoln Corporation purchases all of the assets of Matlock Corporation and, in writing, says that it does not take responsibility for the liabilities of Matlock Corporation. Lincoln services many of Matlock's former customers and employs many of Matlock's former employees. If an individual with a claim against Matlock files a lawsuit against Lincoln, a court would most likely

	a.	allow the lawsuit, because the purchase of assets and continuation of Matlock's business amounted to what is basically a merger.
	b.	dismiss the lawsuit, because there was no merger.
	c.	allow the lawsuit because the purchase of assets was evidenced in writing.
	d.	dismiss the lawsuit because Lincoln did not own Matlock when the individual was injured by the Matlock.

1.8 points

QUESTION 26

Officers are selected by a corporation's

	a.	board of directors.
	b.	other officers.
	c.	competitors.
	d.	incorporators.

1.8 points

QUESTION 27

Alex joins an existing general partnership. A partnership debt incurred before his admission to the partnership comes due. Alex is

	a.	personally liable to the full amount of that debt.
	b.	only liable for that debt up to the amount of his capital contribution.
	c.	not liable for that debt.
	d.	personally liable for that debt only if the other partners do not pay.

1.8 points

QUESTION 28

Ali sells her sole proprietorship to Norah. This is a transfer of

	a.	a license.
	b.	the ownership of the business.
	c.	the formula to make a product
	d.	a trade name.

1.8 points

QUESTION 29

All of the following are reasons a court might "pierce the corporate veil" and hold shareholders personally liable for corporate debts except

	a.	corporate formalities are not followed.
	b.	the corporation has not declared a dividend.
	c.	the corporation is not set up to make a profit and is too thinly capitalized.
	d.	personal and corporate assets are mixed together.

1.8 points

QUESTION 30

All corporate debt is in the form of accounts payable.

True

False