Multiple Choice Answers

Brenda is on the board of directors for Money Company. Brenda rarely attends board meetings and doesn’t pay attention when she does attend. Brenda usually votes like her friend Sadie, who is also on the board. Brenda voted for some proposals that harmed the company. Brenda likely violated
A. the actual authority rule.
B. her duty of obedience.
C. her duty of due diligence.
D. the fairness rule.

Company I, Inc., and Company II, Inc., are consolidating. Which of the following statements regarding this consolidation is true?
A. Both companies disappear and stop carrying on business.
B. Both companies join and carry on business under a new name.
C. One company disappears, and the other company carries on with both businesses.
D. Both companies continue and carry on business as usual.

Tom is president of Big Drug, Inc. Tom receives a phone call from a federal agency informing him that a new drug owned by Big Drug will be approved for sale to the public. Tom knows that this drug will be very popular and will cause a significant increase in the company’s profits. Tom quickly purchases as much Big Drug stock as he can afford. Then, when the federal agency formally announces approval of the drug, Big Drug stock triples in value, and Tom becomes rich. Tom has violated the
A. business judgment rule.
B. corporate opportunity doctrine.
C. insider trading rule.
D. fairness rule.

Robert owns shares in Products, Inc., and suspects that Zach, one of the directors of the company, has been stealing corporate assets. Robert complains to the corporation, but no action is taken. Robert should file a
A. direct suit against Products, Inc.
B. direct suit against Zach.
C. derivative suit against Products, Inc., on his own behalf.
D. derivative suit against Zach on behalf of Products, Inc.
.
In a general partnership, management decisions are made by
A. unanimous vote in all business decisions.
B. two-thirds votes of the partners.
C. majority vote, with each partner having an equal vote.
D. majority vote, with partners votes weighted in proportion to the interest owned.
.
Jennie owns shares in Superstore, Inc. A vote about whether Superstore should expand its operations to China is coming up. Jennie thinks this is a good idea, but she doesn’t own enough shares to control the outcome of the vote. Jennie could increase the chance that the vote will go her way by
A. offering to give someone else a proxy.
B. filing a derivative suit.
C. making a shareholder proposal.
D. entering into a pooling agreement.
.
Stuart and Cole enter a business venture in which they both agree to contribute funds, money, and time to a sporting goods store. Furthermore, the two agree to equally split all profits. Stuart and Cole have entered into a
A. partnership.
B. corporation.
C. limited liability company.
D. sole proprietorship.
Brenda is on the board of directors for Money Company. Brenda rarely attends board meetings and doesn’t pay attention when she does attend. Brenda usually votes like her friend Sadie, who is also on the board. Brenda voted for some proposals that harmed the company. Brenda likely violated  ;
A. the actual authority rule.
B. her duty of obedience.
C. her duty of due diligence.
D. the fairness rule.
.
Under the Revised Uniform Partnership Act,
A. partners don’t have transferable economic interests.
B. partners are co-owners of partnership property.
C. the partnership is an aggregate rather than an entity in its own right.
D. partnership property is owned by the partnership.

Tricia purchases securities from a company from which she is ensured ownership and priority as to payment of dividends and distribution of assets on dissolution. What type of securities did Tricia purchase?
A. Preferred stock
B. Common stock
C. Convertible bonds
D. Debenture bonds
.

Sharon purchased $1,000 of ABC Company stock. In effect, Sharon
A. loaned money to the company.
B. purchased an ownership interest in the company.
C. borrowed money from the company.
D. purchased a seat on the board for the company.

Crawford, Inc., would like to own some land owned by Toxic Waste, Inc., to build a storage warehouse for inventory. However, Crawford doesn’t want to be responsible for the liabilities of Toxic Waste. The best method of accomplishing Crawford’s goals is
A. merger.
B. consolidation.
C. asset acquisition.
D. stock acquisition.

Difference between a limited partnership and a registered limited liability partnership (RLLP) is that
A. all partners have limited liability in a limited partnership, but not in an RLLP.
B. a limited partnership can have secret partners, while an RLLP can’t.
C. an RLLP can have secret partners, while a limited partnership can’t.
D. all partners have limited liability in an RLLP, but not in a limited partnership.

Sal is a shareholder in XYZ Corporation. XYZ Corporation made defective products, and many individuals have filed lawsuits due to the defects. As a shareholder, Sal may
A. not be held personally liable for the defects.
B. be held personally liable only if the corporation was aware of the defects.
C. be held personally liable for the defects.
D. be held personally liable only if the plaintiffs name Sal as a defendant.

An advantage of an S corporation is that shareholders can avoid
A. estoppel.
B. double taxation.
C. insider trading.
D. bylaws.

Crawford, Inc., wants to acquire the assets of Toxic Waste, Inc., but Toxic Waste won’t sell. Toxic Waste is a publicly held company with widely dispersed share ownership. What technique can Crawford use to accomplish its goal?
A. Consolidation
B. Takeover bid
C. Merger
D. Asset acquisition