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Chapter 10: Shareholder's Equity and Rights

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Chapter 10: Shareholder's Equity and Rights

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Questions and Answers

What is the primary right of shareholders in terms of dividends?

Right to vote on matters that come before the shareholders

Right to receive a proportionate part of any dividend (correct)

Right to maintain one's proportionate ownership in the corporation

Right to receive a proportionate share of assets left upon liquidation

What is the term for the amount of shareholders' equity that a corporation has earned through profitable operations?

Dividend distribution

Paid-in capital

Accumulated deficit

Retained earnings (correct)

What is the authority responsible for declaring cash dividends?

Shareholders

Board of directors (correct)

Management team

Auditors

What is the effect of a stock split on par value?

Proportionate reduction (A) Signup and view all the answers

What is the purpose of the date of record in the dividend payment process?

To identify the shareholders eligible to receive the dividend (A) Signup and view all the answers

What is the term for the accumulated balance of a corporation's earnings, reduced by dividends and losses?

Retained earnings (A) Signup and view all the answers

What is the primary reason why a corporation's board of directors may not declare a cash dividend?

Because the corporation does not have enough retained earnings (B) Signup and view all the answers

What is the result of a corporation's lifetime losses and dividends exceeding its lifetime earnings?

A debit balance in retained earnings (B) Signup and view all the answers

What is the purpose of the pre-emption right of shareholders?

To maintain one's proportionate ownership in the corporation (C) Signup and view all the answers

What is the difference between a corporation's retained earnings and its paid-in capital?

Retained earnings represents the amount of shareholders' equity earned through profitable operations, while paid-in capital represents the amount of shareholders' equity contributed by shareholders (B) Signup and view all the answers

What is the effect of a corporation's liquidation on its shareholders?

Shareholders receive a proportionate share of the corporation's assets left upon liquidation (B) Signup and view all the answers

What is the primary reason why a corporation's shareholders have the right to vote on matters that come before the shareholders?

To give shareholders a say in the management of the corporation (D) Signup and view all the answers