MGMT 353 Exam 3 Study Set || with A+ Guaranteed Solutions.
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Course
MGMT 353
Institution
MGMT 353
Three primary forms of business organization correct answers 1. proprietorship
2. partnership
3. corporation
Which form dominates correct answers corporation
special characteristics of the corporate from correct answers 1. influence of state corporate law
2. use of capital stock or share s...
MGMT 353 Exam 3 Study Set || with A+ Guaranteed
Solutions.
Three primary forms of business organization correct answers 1. proprietorship
2. partnership
3. corporation
Which form dominates correct answers corporation
special characteristics of the corporate from correct answers 1. influence of state corporate law
2. use of capital stock or share system
3. development of a variety of ownership interests
capital stock/share system correct answers - each share of stock has certain rights and privileges
- only by special contract can a company restrict these rights and privileges at the time it issues
the shares
In the absence of restrictive provisions, each share carries the following rights correct answers -
To share proportionately in profits and losses
- To share proportionately in management (the right to vote for directors)
- To share proportionately in assets upon liquidation
- To share proportionately in any new issues of stock of the same class
— called the preemptive right
Common stock correct answers represents the basic ownership interest and is the residual
corporate interest
- bears ultimate risks of loss
- receives the benefits of success
- not guaranteed dividends nor assets upon dissolution
preferred stock correct answers a special class of stock created by contract, when stockholders
sacrifice certain rights in return for other rights or privileges
- a common type of preference is to give the preferred stockholders a priority claim on earnings
corporate capital structure hierarchy(increased protection against default risks as list goes down)
correct answers 1. rights and warrants
2. common stock
3. preferred stock
4. subordinated debt
5. senior unsecured debt
6. secured debt
4 components of stockholders' equity correct answers 1. capital stock
2. additional paid-in capital
3. retained earnings
, 4. accumulated other comprehensive income(OCI)
common stock correct answers
companies follow the procedures in issuing stocks: correct answers 1. shares authorized
2. shares offered for sale
3. shares issued
corporations maintain accounts for: correct answers 1. common stock
2. paid-in capital in excess of par(also APIC)
(par value of stock has no relationship to its fair value
Preferred stock correct answers special class of shares that possesses certain preferences or
features not possessed by common stock
features often associated with preferred stock: correct answers 1. preference as to dividends
2. preference as to assets in the event of liquidation
3. convertible into common stock
4. callable at the option of the corporation
5. nonvoting
(A corporation may attach whatever preferences or restrictions, as long as it does not violate its
state in corporation law)
reacquisition of shares correct answers share buybacks now exceeds dividends as a form of
distribution to stockholders
corporations purchase their outstanding stock to: correct answers 1. provide tax-efficient
distributions of excess cash to stockholders
2. increase earnings per share and return on equity
3. provide stock for employee stock compensation contracts or to meet potential merger needs
4. thwart takeover attempts or to reduce the number of stockholders
5. make a market in the stock because purchasing stock in the marketplace creates a demand
two acceptable methods to purchasing treasury stock correct answers 1. cost method
2. par (stated)value method
Journal entry for treasury stock correct answers Deb: Treasury stock for (repurchase price *
shares repurchased)
Cred: Cash
Cash dividends characteristics correct answers 1. board of directors vote on the declaration of
cash dividends
2. a declared cash dividend is a liability
3. companies do not declare or pay cash dividends on treasury stock
three dates for cash dividends correct answers a. date of declaration
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