BUL 5810 – CORPORATIONS EXAM QUESTIONS WITH DETAILED ANSWERS
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Module
BUL 5810 - CORPORATIONS
Institution
BUL 5810 - CORPORATIONS
BUL 5810 – CORPORATIONS EXAM QUESTIONS WITH DETAILED ANSWERS
__________, usually called debentures, have only the obligation of the corporation behind them. - Answer-Unsecured bonds
/.A corporation is considered a citizen: - Answer-of the state in both
(1) where it has a principal office ...
__________, usually called debentures, have only the obligation of the corporation
behind them. - Answer-Unsecured bonds
/.A corporation is considered a citizen: - Answer-of the state in both
(1) where it has a principal office
(2) its incorporation
/.A corporation's proportional distribution of additional shares of the corporation's capital
stock to its shareholders is a: - Answer-stock or share dividend
/.A promoter of a corporation has a fiduciary duty to: - Answer-any other promoters of
that corporation
/.All of the following are characteristics of a corporation EXCEPT:
a. it has perpetual existence.
b. it is a legal entity of its own.
c. it is able to be sued and to sue.
d. it is usually managed by its owners. - Answer-It is usually managed by its owners
/.All states impose a "cash flow test" on the payment of dividends or other distributions.
The "cash flow test" is also known as the: - Answer-Equity Solvency Test
/.Allen owns 200 of the 1,000 shares outstanding of General Myopics. GM plans to
issue 1,000 new shares. If Allen has preemptive rights, he may buy: - Answer-200
shares at the new stock price
/.Barbara, a self-made millionaire, wants to start a corporation exclusively for charitable
and educational purposes. What type of corporation should Barbara form? - Answer-
Non-profit corporation
/.Carlos is a promoter of Debonair Enterprises, Inc. To whom, if any, does Carlos owe a
fiduciary duty? - Answer-Carlos owes a fiduciary duty to any other promoters of
Debonair Enterprises.
/.Claire opened Claire's Beauty Parlor in her home. She solicited funds to begin the
business from Jack, who believed that the business was incorporated. Claire had, in
fact, never filed the papers. One day, Claire fell asleep while giving a customer a
permanent and the solution caused her customer severe burns. The customer sued the
Beauty Parlor for $500,000, an amount enormously in excess of the business assets.
Under the Revised Act, what would be the result? - Answer-Jack would not be
personally liable, but Claire would
, /.Courts have responded by piercing the veil when the shareholders have:
a. not followed the formalities of corporate procedures.
b. not provided an adequate financial basis for the business.
c. used the corporation to defraud. - Answer-ALL OF THESE ARE CORRECT
/.Deer Haven, Inc. is a corporation incorporated in Arkansas and has its principal office
in San Antonio, Texas. Which of the following is true of Deer Haven, Inc.'s citizenship
status? - Answer-Deer Haven, Inc. is a citizen of Arkansas and Texas, for the purpose
of determining diversity of citizenship
/.Denali, Inc. is seeking to pay out dividends to all of its shareholders and seeks advice
on the customary type of dividend to pay out to its shareholders. What advice would you
give Denali, Inc.? - Answer-Pay shareholders cash dividends
/.If Alfred seeks to find out what the par value of his stock in Denim Corporation, Alfred
wants to know: - Answer-the minimum price at which Denim Corporation may sell the
stock at issuance
/.If The Raintree Company has accumulated earnings each year but the directors have
not declared dividends for five years, the shareholders may: - Answer-ask for an
injunction requiring a dividend to be declared
/.In Cox Enterprises, Inc. v. Pension Benefit Guaranty Corporation, the court found that
solvency should be measured on the date: - Answer-of a payment to a shareholder
/.In the case of Coopers & Lybrand v. Fox, the court held: - Answer-a promoter is
personally liable for the contracts he makes
/.In the case of Dodge v. Ford Motor Co., the court held: (3) - Answer-1. A business
corporation is organized and carried on primarily for the profit of the stockholders
2. The right of shareholders to receive a dividend may not be arbitrarily withheld by the
directors
3. The directors were not acting in the best interest of the corporation.
/.In the case of Harold Lang Jewelers, Inc. v. Johnson, the court found that: - Answer-
Lang's business was regular, continuous and substantial such that it was transacting
business in North Carolina
/.In the case of Metropolitan Life Insurance Company v. RJR Nabisco, Inc., the court: -
Answer-examined the indentures themselves to determine the agreement of the parties
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