Company Law Session 1 - Legal Mechanisms for Profit Generating Activity

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Which of the following arrangements is NOT an alternative to setting up a corporation, as suggested in the text?

Alice licenses her intellectual property to Bart, who borrows from Chris to finance operations.

Alice incorporates a company, with Bart as a shareholder and Chris as a lender. (correct)

Alice, Bart, and Chris agree to share profits and losses as partners.

Chris loans cash to Alice, who enters into a manufacturing contract with Bart.

What is the primary purpose of company law?

To define the rights and liabilities of stakeholders in a company.

To facilitate borrowing and lending arrangements for business activities.

Both a and b. (correct)

To enable entrepreneurs to pursue business through a legal form.

In the example given, which stakeholder represents the intellectual property holder?

Alice (correct)

Bart

Chris

None of the above

Which of the following statements is NOT true about the example provided in the text?

Bart is the heir to an industrial dynasty that owns a manufacturing facility. Signup and view all the answers

Based on the text, which of the following best represents the concept of a company?

A box that defines the rights and liabilities of stakeholders. Signup and view all the answers

According to the example, which stakeholder combination could potentially form a partnership?

Alice, Bart, and Chris Signup and view all the answers

What is the primary purpose of corporate law?

To ensure that corporate transactions benefit all stakeholders involved Signup and view all the answers

In the case of Dodge v. Ford, what was the relief sought by the plaintiffs?

To require Ford Motor Company to declare a dividend of at least 75% of its cash surplus Signup and view all the answers

What was the issue in the case of Dodge v. Ford?

The refusal of directors to declare a higher dividend despite the company's large cash surplus Signup and view all the answers

What is the shareholder wealth maximization rule?

The maximization of the current price of corporate shares Signup and view all the answers

In the case of Dodge v. Ford, what was the percentage of shares held by the plaintiffs in Ford Motor Company?

10% Signup and view all the answers

What was the approximate cash surplus of Ford Motor Company at the time of the Dodge v. Ford case?

$112 million Signup and view all the answers

According to Ford's argument, what was his primary motivation for reinvesting profits into the company?

To employ more workers and spread the benefits of the industrial system Signup and view all the answers

Which stakeholder group did the Dodge brothers claim Ford's policy would jeopardize?

Shareholders Signup and view all the answers

Based on Ford's response, which of the following stakeholder groups did he prioritize?

Employees and customers Signup and view all the answers

What was the Dodge brothers' primary concern regarding Ford's policy?

Financial risk and uncertain economic conditions Signup and view all the answers

What was the court's ruling regarding Ford's policy?

The court ordered Ford to pay dividends to shareholders Signup and view all the answers

Which of the following best represents the central conflict presented in the text?

Shareholder primacy versus stakeholder theory Signup and view all the answers

Company Law Session 1 - Legal Mechanisms for Profit Generating Activity

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