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Corporate Forms of Ownership Pretest

True/False
Indicate whether the statement is true or false.
 

 1. 
Corporations are many in number and generally large in size.
 

 2. 
All corporations are large in size.
 

 3. 
A corporation can make contracts and borrow money.
 

 4. 
A person must own at least ten shares of stock to be considered a stockholder.
 

 5. 
Stockholders decide when dividends are to be distributed.
 

 6. 
Stockholders elect members of the board of directors.
 

 7. 
The top officer of a corporation is referred to as a CFO.
 

 8. 
It is possible for someone else to legally vote for a stockholder in a corporation.
 

 9. 
A joint venture could include an agreement among three contractors to connect two cities by building a tunnel under a river.
 

 10. 
A virtual corporation can include only agreements with business partners located in the same country.
 

Multiple Choice
Identify the choice that best completes the statement or answers the question.
 

 11. 
An official document giving power to run a corporation is a
a.
document certificate
c.
proxy
b.
charter
d.
shareholder certificate
 

 12. 
A corporation is authorized to act as if it were a single person, separate from its owners, by
a.
the federal government
c.
the U.S. Attorney General
b.
the city in which it is located
d.
the state in which it is located
 

 13. 
Which activities are corporations allowed to practice?
a.
Make contracts but not borrow money.
b.
Make contracts but not own property.
c.
Make contracts but not be sued.
d.
Make contracts, borrow money, and be sued.
 

 14. 
Ownership of a corporation is measured in
a.
dividends
c.
shares
b.
charters
d.
prospectuses
 

 15. 
A shareholder cannot
a.
transfer ownership to others
b.
vote for members of the ruling body of the corporation
c.
share in the net proceeds should the corporation go out of business
d.
create contracts for the corporation
 

 16. 
If the corporation fails, stockholders are responsible for
a.
only the amount invested in the corporation
b.
only the value of the assets of the corporation
c.
all of the debts of the corporation
d.
only the amount owed in dividends
 

 17. 
If the assets of a corporation amount to $900,000 and its debts amount to $550,000, what is the value of the capital stock?
a.
$1,450,000
c.
$550,000
b.
$900,000
d.
$350,000
 

 18. 
A stockholder who cannot attend a stockholders' meeting can submit votes via
a.
prospectus
c.
dividend
b.
proxy
d.
contract
 

 19. 
The actual management of a corporation is the function of its
a.
officers
c.
stockholders
b.
board of directors
d.
employee teams
 

 20. 
The decision to distribute dividends is made by the
a.
stockholders
c.
CFO
b.
board of directors
d.
CEO
 

 21. 
What is true about a closely held corporation?
a.
All stockholders run the business.
b.
It does not need to obtain a state charter.
c.
It does not offer stock for general sale.
d.
It is not required to prepare reports for the state in which it operates.
 

 22. 
Which of the following is true of an open corporation?
a.
It rarely has more than a few stockholders.
b.
It has access to a limited amount of capital.
c.
Stockholders are protected against losses of their investment.
d.
It may have hundreds of thousands of stockholders.
 

 23. 
An advantage of corporations in relation to partnerships is that
a.
corporations have a tax advantage
b.
corporations have a limited life
c.
shareholders have unlimited financial liability
d.
shareholders can transfer ownership easily
 

 24. 
Once a corporation receives its charter, it can
a.
operate any kind of business chosen by the board of directors
b.
never change the purpose of the business
c.
add other purposes or activities to the business if the state approves the charter changes
d.
change the purpose of the business without state approval
 

 25. 
Two or more contractors who work together to build a retirement home are an example of a
a.
cooperative
c.
joint venture
b.
close corporation
d.
Subcharter S corporation
 

 26. 
A network of companies that form temporary alliances among themselves to take advantage of fast-changing market conditions is a
a.
limited liability company
c.
nonprofit corporation
b.
virtual corporation
d.
cooperative
 

 27. 
The primary purpose of forming a cooperative is to
a.
avoid having to obtain a state charter
b.
provide members cost and profit advantages otherwise unavailable
c.
avoid double taxation
d.
create temporary alliances
 

 28. 
Limited liability companies have
a.
higher income tax rates than partnerships and unlimited liability
b.
lower income tax rates than partnerships and unlimited liability
c.
higher income tax rates than partnerships and limited liability
d.
lower income tax rates than partnerships and limited liability
 

 29. 
A nonprofit corporation is an organization that
a.
pays taxes and exists to make a profit
b.
pays taxes and does not exist to make a profit
c.
does not pay taxes and does not exist to make a profit
d.
pays dividends to shareholders
 

 30. 
Quasi-public corporations are often supported by
a.
subsidies
c.
dividends
b.
stocks
d.
tariffs
 

Matching
 
 
Match each item with the correct statement below.
a.
board of directors
h.
open corporation
b.
charter
i.
prospectus
c.
close corporation
j.
proxy
d.
dividends
k.
quasi-public corporation
e.
foreign corporation
l.
stock
f.
incorporated
m.
stockholder
g.
officers
 

 31. 

 Profits of a corporation that are distributed to its stockholders.
 

 32. 

 Top executives of a company who are hired to manage its business.
 

 33. 

 A term in the name of a business indicating that a corporation has been formed.
 

 34. 

 A written authorization for someone to vote on behalf of the stockholder.
 

 35. 

 A corporation that does not offer shares of stock for public sale.
 

 36. 

 A publicly owned corporation.
 

 37. 

 Shares of ownership of a corporation.
 

 38. 

 Formal summary of the chief features of a business and its stock offering.
 

 39. 

 Official document granting the power to operate as a corporation.
 

 40. 

 Ruling body of a corporation.
 



 
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