Quiz Chapter 14 Answer
1. A privately held corporation usually has only a few shareholders, and does not offer its shares for sale to the general public.
A. True
B. False
2. Shareholders have unlimited liability for the debts of the corporation.
A. True
B. False
3. Treasury shares, which are extremely rare in Canada, are a corporation's own shares that have been issued and reacquired by the corporation but not retired.
A. True
B. False
4. Common shareholders have the right to share in the distribution of corporate income before preferred shareholders.
A. True
B. False
5. Book value per share may not equal market value per share.
A. True
B. False
6. A corporation that may have thousands of shareholders and whose shares are usually traded on an organized securities market is a:
A. closely held corporation.
B. nonprofit corporation.
C. privately held corporation.
D. publicly held corporation.
7. A crown corporation:
A. may have thousands of shareholders.
B. is often referred to as a closely held corporation.
C. offers its shares for sale to the general public.
D. is similar to a private corporation but is owned by the government.
8. Shareholders have all of the following rights except the right to:
A. share corporate earnings through receipt of dividends.
B. vote for the corporate officers.
C. keep the same percentage ownership when new shares are issued.
D. share in assets upon liquidation in proportion to their holdings.
9. Shares that have a specific value stated in the corporate charter are called:
A. par value shares.
B. no par value shares.
C. stated value shares.
D. authorized capital.
10. The shareholders' equity section of a corporation's balance sheet consists of:
A. contributed capital and common shares.
B. contributed capital and retained earnings.
C. common shares only.
D. contributed capital only.
11. When noncash assets are acquired in exchange for common shares, the assets are recorded at the:
A. par value of the shares.
B. fair market value of the consideration received.
C. fair market value of the consideration given up, if determinable.
D. authorized value of the shares.
12. Capital shares that have been issued and are being held by shareholders are called:
A. authorized shares.
B. issued shares.
C. treasury shares.
D. outstanding shares.
13. When the selling price of common shares is greater than the stated value, the difference is usually credited to:
A. Gain on Sale of Common Shares.
B. Cash.
C. Contributed Capital in Excess of Stated Value.
D. Retained Earnings.
14. Preferred shares that grant the issuing corporation the right to purchase the shares from shareholders at specified future dates and prices are called:
A. redeemable preferred shares.
B. retractable preferred shares
C. convertible preferred shares.
D. cumulative preferred shares.
15. Preferred shareholders have a priority over common shareholders as to:
A. dividends.
B. assets in the event of liquidation.
C. voting rights.
D. both dividends and assets in the event of liquidation.
16. Dividends in arrears relate to:
A. callable preferred shares.
B. convertible preferred shares.
C. preferred shares with a cumulative dividend feature.
D. no par preferred shares.
17. Preferred shares that require the corporation to buy back the shares at the shareholders' option at an arranged price and date are called:
A. callable preferred shares.
B. retractable preferred shares.
C. cumulative preferred shares.
D. redeemable preferred shares.
18. Return on equity, considered by many to be the most important measure of a firm's profitability, is calculated by dividing:
A. average shareholder's equity by net income.
B. total shareholders' equity by the number of common shares outstanding.
C. market value per share by the number of common shares outstanding.
D. net income by average shareholders' equity.
19. When a company has both preferred and common shares, book value per share is calculated by dividing:
A. total shareholders' equity by the number of common shares outstanding.
B. total shareholders' equity by the number of common shares issued.
C. common shareholders' equity by the number of common shares outstanding.
D. common shares equity by the number of common shares issued.
20. The equity a common shareholder has in the net assets of a corporation from owning one share is the:
A. par value per share.
B. market value per share.
C. stated value per share.
D. book value per share.
A. True
B. False
2. Shareholders have unlimited liability for the debts of the corporation.
A. True
B. False
3. Treasury shares, which are extremely rare in Canada, are a corporation's own shares that have been issued and reacquired by the corporation but not retired.
A. True
B. False
4. Common shareholders have the right to share in the distribution of corporate income before preferred shareholders.
A. True
B. False
5. Book value per share may not equal market value per share.
A. True
B. False
6. A corporation that may have thousands of shareholders and whose shares are usually traded on an organized securities market is a:
A. closely held corporation.
B. nonprofit corporation.
C. privately held corporation.
D. publicly held corporation.
7. A crown corporation:
A. may have thousands of shareholders.
B. is often referred to as a closely held corporation.
C. offers its shares for sale to the general public.
D. is similar to a private corporation but is owned by the government.
8. Shareholders have all of the following rights except the right to:
A. share corporate earnings through receipt of dividends.
B. vote for the corporate officers.
C. keep the same percentage ownership when new shares are issued.
D. share in assets upon liquidation in proportion to their holdings.
9. Shares that have a specific value stated in the corporate charter are called:
A. par value shares.
B. no par value shares.
C. stated value shares.
D. authorized capital.
10. The shareholders' equity section of a corporation's balance sheet consists of:
A. contributed capital and common shares.
B. contributed capital and retained earnings.
C. common shares only.
D. contributed capital only.
11. When noncash assets are acquired in exchange for common shares, the assets are recorded at the:
A. par value of the shares.
B. fair market value of the consideration received.
C. fair market value of the consideration given up, if determinable.
D. authorized value of the shares.
12. Capital shares that have been issued and are being held by shareholders are called:
A. authorized shares.
B. issued shares.
C. treasury shares.
D. outstanding shares.
13. When the selling price of common shares is greater than the stated value, the difference is usually credited to:
A. Gain on Sale of Common Shares.
B. Cash.
C. Contributed Capital in Excess of Stated Value.
D. Retained Earnings.
14. Preferred shares that grant the issuing corporation the right to purchase the shares from shareholders at specified future dates and prices are called:
A. redeemable preferred shares.
B. retractable preferred shares
C. convertible preferred shares.
D. cumulative preferred shares.
15. Preferred shareholders have a priority over common shareholders as to:
A. dividends.
B. assets in the event of liquidation.
C. voting rights.
D. both dividends and assets in the event of liquidation.
16. Dividends in arrears relate to:
A. callable preferred shares.
B. convertible preferred shares.
C. preferred shares with a cumulative dividend feature.
D. no par preferred shares.
17. Preferred shares that require the corporation to buy back the shares at the shareholders' option at an arranged price and date are called:
A. callable preferred shares.
B. retractable preferred shares.
C. cumulative preferred shares.
D. redeemable preferred shares.
18. Return on equity, considered by many to be the most important measure of a firm's profitability, is calculated by dividing:
A. average shareholder's equity by net income.
B. total shareholders' equity by the number of common shares outstanding.
C. market value per share by the number of common shares outstanding.
D. net income by average shareholders' equity.
19. When a company has both preferred and common shares, book value per share is calculated by dividing:
A. total shareholders' equity by the number of common shares outstanding.
B. total shareholders' equity by the number of common shares issued.
C. common shareholders' equity by the number of common shares outstanding.
D. common shares equity by the number of common shares issued.
20. The equity a common shareholder has in the net assets of a corporation from owning one share is the:
A. par value per share.
B. market value per share.
C. stated value per share.
D. book value per share.