Shareholders have unlimited liability.
True / False
False
In some cases the 'double taxation' of corporations can be advantageous.
True / False
True
The amortization period for corporation organization costs cannot exceed twenty years.
True / False
False
Ultimate control of a corporation rests with the shareholders, not the board of directors.
True / False
True
Shareholders must be present at annual shareholder meetings to elect the members of the board of directors.
True / False
False
The right of shareholders to purchase additional shares of common share issued by the corporation is called the preemptive right.
True / False
True
Authorized shares refer to the shares the corporation has issued.
True / False
False
An underwriter will purchase an issuance of shares directly from the issuing corporation at an amount equal to the probable market value of the shares to shareholders.
True / False
False
Shares do not have to have a par value.
True / False
True
Shareholders' equity is made up of the total contributed capital plus retained earnings.
True / False
True
Common shares may be issued for noncash assets.
True / False
True
When no-par common shares are sold for $27, the entire proceeds of the share issue are credited to Common Shares.
True / False
True
Preferred shares are guaranteed cash dividends.
True / False
False
If a corporation that has regularly paid cash dividends to holders of common shares fails to pay a cash dividend, the cash dividend is said to be in arrears.
True / False
False
Preferred shares that have the right to share in dividends above the fixed rate or amount stated on the share certificate are known as participating preferred shares.
True / False
True
A corporation has no legal commitment to pay dividends until the board of directors takes formal action to declare a dividend.
True / False
True
The call price or redemption value of preferred shares is often below the par value of the shares.
True / False
False
Preferred shares that have the right to be exchanged for common shares of the issuing corporation, at the option of the preferred shareholders, are known as cumulative preferred shares.
True / False
False
Issuing preferred shares to increase the return to common shareholders is called financial leverage.
True / False
True
In order to pay a cash dividend, a corporation must have adequate cash and adequate retained earnings.
True / False
True
A journal entry is required on the date of declaration, date of record, and date of payment.
True / False
False
The total amount of shares that a corporation's charter authorizes it to sell is called _______________ shares.
AUTHORIZED
The amount that must be paid to call and retire a preferred share is called the _______________ price.
CALL
_______________ (CALLABLE, CONVERTIBLE, or CUMULATIVE) is the type of preferred share for which the issuing corporation, at its option, may retire by paying a specified amount to the preferred shareholders plus any dividends in arrears?
CALLABLE
_______________ (CALLABLE, CONVERTIBLE, or CUMULATIVE) is the type of preferred share that gives holders the option of exchanging their preferred shares into common shares at a specified rate?
CONVERTIBLE
_______________ (CALLABLE, CONVERTIBLE, or CUMULATIVE) is the type of preferred shares for which undeclared dividends accumulate until they are paid?
CUMULATIVE
The general term referring to a corporation's shares used in obtaining its capital (owner financing) is _______________ stock.
CAPITAL
_______________ shares are the shares of a corporation that have only one class of shares.
COMMON
An unpaid dividend on cumulative preferred shares is called a dividend in _______________.
ARREARS
Financial _______________ is the achievement of an increased return on common shares by paying dividends on preferred shares or interest on debt at a rate that is less than the rate of return earned with the assets invested in the corporation by the preferred shareholders or creditors.
LEVERAGE
_______________ (NONCUMULATIVE or NONPARTICIPATING) is the type of preferred stock for which the right to receive dividends is lost for any year that the dividends are not declared?
NONCUMULATIVE
_______________ costs are the costs of bringing a corporation into existence.
ORGANIZATION
Preferred shares with a feature that allows preferred shareholders to share with common shareholders in any dividends paid in excess of the percent stated on the preferred share are called _______________ preferred shares.
PARTICIPATING
An arbitrary value assigned to a share of stock by the corporation is called _______________ value.
PAR
The right of common shareholders to protect their proportionate ownership in a corporation by having the first opportunity to buy additional common shares issued by the corporation is called a _______________ right.
PREEMPTIVE
A shareholder who does not attend a shareholder's meeting can exercise voting rights at the meeting through the issuance of a _______________.
PROXY
The equity of a corporation, also called corporate capital, is called _______________ equity.
SHAREHOLDERS'
The three dates associated with a cash dividend are the date of declaration, the date of record, and the date of _______________.
PAYMENT
The total amount of shares that a corporation's charter authorizes it to sell. Federally incorporated companies are authorized to issue an unlimited number.
Authorized shares
Preferred shares that the issuing corporation, at its option, may retire by paying a specified amount (the call price) to the preferred shareholders plus any dividends in arrears.
Callable preferred shares
Shares of a corporation that has only one class of shares.
Common shares
Preferred shares that give holders the option of exchanging their preferred shares into common shares at a specified rate.
Convertible preferred shares
The date the directors vote to pay for a dividend.
Date of declaration
The future date specified by the directors for identifying those shareholders listed in the corporation's records to receive dividends.
Date of record
An unpaid dividend on cumulative preferred shares; it must be paid before any regular dividends on the preferred shares and before any dividends on the common shares.
Dividends in arrears
The price at which stock is bought or sold.
Market value per share
A class of shares that has not been assigned a par value by the corporate charter.
No-par value shares
The costs of bringing a corporation into existence, including legal fees, promoters' fees, and amounts paid to the incorporating legal jurisdiction.
Organization costs
An arbitrary value a corporation places on each share of its capital stock.
Par value
Stock that gives its owners a priority status over common shareholders in one or more ways, such as the payment of dividends or the distribution of assets on liquidation.
Preferred shares
The cumulative net income retained by a corporation.
Retained earnings
The equity of a corporation; also called stockholders' equity or corporate capital.
Shareholders' equity
