#1
Which of the following is a characteristic of a corporation?
Unlimited liability for owners
Limited life
Double taxation
Simple and inexpensive formation process
#2
What is the main advantage of issuing common stock?
Fixed dividend payments
Preferential treatment in bankruptcy
Voting rights
Priority in asset distribution
#3
Which financial statement reports the amount of capital contributed by stockholders?
Income statement
Statement of cash flows
Balance sheet
Statement of retained earnings
#4
What is treasury stock?
Stock that has been authorized but not yet issued
Stock that has been issued but later reacquired by the corporation
Stock issued by the federal government
Stock that has no voting rights
#5
What is the difference between authorized, issued, and outstanding shares of stock?
Authorized shares represent shares that have been repurchased by the corporation.
Issued shares represent shares available for sale in the stock market.
Outstanding shares represent shares that have been sold to investors.
Authorized shares represent shares available for sale in the stock market.
#6
Which of the following is a characteristic of preferred stock?
Voting rights
Fixed dividend payments
Last claim on assets in case of liquidation
Convertible into common stock at the option of the stockholder
#7
What is the purpose of the Securities and Exchange Commission (SEC) in the context of corporations?
To regulate the issuance and trading of securities in the stock market
To provide loans to corporations for expansion
To oversee corporate mergers and acquisitions
To audit corporate financial statements
#8
What is the difference between common stock and preferred stock?
Common stockholders have preferential rights in bankruptcy.
Preferred stockholders have voting rights.
Preferred stockholders receive fixed dividend payments, while common stockholders do not.
Common stockholders have priority in receiving dividends over preferred stockholders.
#9
What is the role of the board of directors in a corporation?
To manage the day-to-day operations of the corporation
To represent the interests of bondholders
To oversee the management and strategic direction of the corporation
To approve the annual budget of the corporation
#10
What does the return on equity (ROE) ratio measure?
Profitability relative to sales
Liquidity of the company
Efficiency of inventory management
Profitability relative to stockholders' investment
#11
What is a stock dividend?
A payment made to stockholders out of earnings
A distribution of additional shares of stock to existing stockholders
A payment made to preferred stockholders before any dividends are paid to common stockholders
A payment made to bondholders
#12
What is the primary purpose of the statement of retained earnings?
To report the net income or net loss of the corporation
To report the changes in the corporation's stockholders' equity accounts over a period
To report the financial position of the corporation at a specific point in time
To report the cash inflows and outflows from operating, investing, and financing activities
#13
What is the formula for calculating earnings per share (EPS)?
Net income / Number of common shares outstanding
Net income / Total assets
Net income / Total liabilities
Net income / Total stockholders' equity
#14
What is a stock split?
A reduction in the number of authorized shares of stock
A distribution of additional shares to existing stockholders without any change in total equity
A payment made to stockholders out of earnings
A distribution of dividends in the form of additional shares of stock
#15
What is the significance of the par value of a stock?
It represents the market value of the stock.
It is the value at which the stock is initially sold to investors.
It determines the dividend payments to stockholders.
It is a nominal value assigned to the stock for accounting purposes.
#16
What does the term 'dividend yield' measure?
The total dividends paid by the corporation
The annual dividend payment per share relative to the market price per share
The total earnings of the corporation
The earnings per share of the corporation