Corporate Finance Quiz on Residual & Pre-emptive Rights
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Questions and Answers

What is a primary source of shareholders' equity?

  • External debt
  • Income retained by the corporation (correct)
  • Decreased earnings from the previous year
  • Selling company assets

    • How is shareholders' equity generally classified?

  • Contributed capital and appropriated capital
  • Issued capital and outstanding capital
  • Appropriated capital and retained earnings (correct)
  • Retained earnings and unappropriated capital

    • What is the least appropriate basis for recording a transaction when a corporation issues its capital stock in payment for services?

  • Total assets of the corporation (correct)
  • Market value of the services received
  • Par value of the shares issued
  • Market value of the shares issued

    • When are direct costs incurred to sell stock accounted for as an expense?

    <p>During the period in which the stock is issued</p> Signup and view all the answers

    What will create a 'secret reserve' in accounting?

    <p>Inadequate depreciation charged to income</p> Signup and view all the answers

    What is stock with a fixed per-share amount printed on each stock certificate called?

    <p>Stated-value stock</p> Signup and view all the answers

    The pre-emptive right of ordinary shareholders is the right to:

    <p>Share proportionately in any new issues of stock of the same class</p> Signup and view all the answers

    The pre-emptive right enables a stockholder to:

    <p>Share proportionately in any new issues of stock of the same class</p> Signup and view all the answers

    In a corporate form of business organization, legal capital is best defined as:

    <p>The par value of all capital stock issued</p> Signup and view all the answers

    Which one of these has the residual interest in a corporation?

    <p>Ordinary shareholders</p> Signup and view all the answers

    Shareholders of a business enterprise are said to be the residual owners. The term residual owner means that shareholders:

    <p>Have the last claim on the corporation's assets after all other obligations have been met</p> Signup and view all the answers

    Which of the following is not a characteristic of preference shareholders?

    <p>They have a fixed rate of return on their investment</p> Signup and view all the answers

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