Question 21 (1 point)

Which of the following is not a true statement?

Question 21 options:

	Common stockholders have a residual claim to income.
	Bondholders may force a corporation into bankruptcy for failure to make interest payments.
	Common stockholders are legally entitled to some dividend.
	A minority interest can still elect members to the Board of Directors under cumulative voting even though someone else owns 51% of the stock.

Question 22 (1 point)

"Preemptive rights" means that

Question 22 options:

	existing shareholders can prevent management from issuing additional common stock.
	common shareholders can "preempt" preferred shareholders for dividends.
	existing shareholders are guaranteed an opportunity to retain their proportional share of ownership of the firm.
	management can preempt the right of shareholders to receive dividends if earnings are down.

Question 23 (1 point)

A rights offer made to existing shareholders with the sole purpose of making it more difficult for another firm to acquire the company is called

Question 23 options:

	a preemptive right.
	a poison pill.
	ex-rights.
	rights-on.

Question 24 (1 point)

The most important feature of the preemptive right is that the rights

Question 24 options:

	may be sold for profit.
	afford stockholders possible protection against dilution.
	may be cumulatively voted.
	are nontransferable.

Question 25 (1 point)

The computation of "basic earnings per share" will include consideration of

Question 25 options:

	all convertible securities.
	only shares outstanding.
	shares outstanding and convertible securities.
	None of these options

Question 26 (1 point)

Mirrlees Corp. has 1,000,000 outstanding shares. Compute the "basic earnings per share" if after-tax earnings are $1,400,000.

Question 26 options:

	$0.71
	$1.25
	$1.33
	$1.40

Question 27 (1 point)

The conversion ratio is the

Question 27 options:

	price at which a convertible security is exchanged into common stock.
	ratio of conversion value to market value of a convertible security.
	number of shares of common stock into which the convertible may be converted.
	ratio of the conversion premium to market value of a convertible security.

Question 28 (1 point)

A 2-for-1 stock split is declared. In this case, which of the following statements is true?

Question 28 options:

	The cash account declines.
	The common stock account rises.
	The retained earnings fall.
	The par value of the common stock is reduced.

Question 29 (1 point)

Lucas Inc. earned $15 million last year and retained $6 million. Lucas has 5 million shares outstanding, and the current price of Lucas shares is $30 per share. What is the payout ratio?

Question 29 options:

	2.67%
	4%
	40%
	60%

Question 30 (1 point)

A stock dividend will

Question 30 options:

	increase the total value of stockholders' equity.
	decrease the total value of stockholders' equity.
	not affect the total value of stockholders' equity.
	change the total value of stockholders' equity but the direction cannot be determined unless the market price and par value is known.

Question 31 (1 point)

A stock dividend will

Question 31 options:

	increase the value of a share of stock.
	decrease the "capital in excess of par" account.
	decrease the retained earnings account.
	None of these options

Question 32 (1 point)

In the initial stage (Stage I), the corporation

Question 32 options:

	has a product yet to be accepted in the marketplace.
	anticipates rapid growth in sales and earnings.
	needs all its earnings for reinvestment in new assets.
	All of these options

Question 33 (1 point)

A convertible bond is currently selling for $1,125. It is convertible into 20 shares of common stock that presently sell for $40 per share. The conversion premium is

Question 33 options:

	$325.
	$215.
	66.74 shares.
	23.8 shares.

Question 34 (1 point)

If the stock price rises substantially above the conversion price, an advantage to the corporation would be

Question 34 options:

	the premium would decrease.
	the floor price would offer the investor downside protection.
	the bond would most likely be converted into common stock and the debt would not have to be repaid.
	None of these options are advantages to the corporation.