8 loc 1,2

Question 1

Corporation whose stock is exchanged between a limited number of individuals.

Answer 1

closely held corporation

Question 2

Evidence of ownership interest issued when an investor contributes assets to a corporation;

Answer 2

stock certificate

Question 3

Items on an application filed with a state agency for the formation of a corporation; contains such information as the corporation’s name, its purpose, its location, its expected life, provisions for its capital stock, and a list of the members of its board of directors.

Answer 3

articles of incorporation

Question 4

Legal entity separate from its owners; formed when a group of individuals with a common purpose join together in an organization according to state laws.

Answer 4

corporation

Question 5

Business entity owned by at least two people who share talents, capital, and the risks of the business.

Answer 5

partnership

Question 6

Business (usually small) owned by one person.

Answer 6

sole proprietorship

Question 7

A legal document that defines the responsibilities of each partner and describes the division of income and losses.

Answer 7

partnership agreement

Question 8

Acts passed after the stock market crash of 1929 designed to regulate the issuance of stock and govern the stock exchanges; created the Securities and Exchange Commission (SEC), which has the authority to establish accounting policies for companies registered on the stock exchanges.

Answer 8

Securities Act of 1933 and Securities Exchange Act of 1934

Question 9

Policy to tax corporate profits distributed to owners twice, once when the income is reported on the corporation’s income tax return and again when the dividends are reported on the individual’s return.

Answer 9

double taxation

Question 10

Organizations offer many of the best features of corporations and partnerships and with many legal benefits of corporations (e.g., limited liability and centralized management) but are permitted by the Internal Revenue Service to be taxed as a partnership, thereby avoiding double taxation of profits.

Answer 10

limited liability company (LLC)

Question 11

Concept that investors in a corporation may not be held personally liable for the actions of the corporation (the creditors cannot lay claim to the owners’ personal assets as payment for the corporation’s debts).

Answer 11

limited liability

Question 12

Concept that describes the fact that a corporation’s life may extend well beyond the time at which any particular shareholder decides to retire or to sell his or her stock

Answer 12

continuity

Question 13

A concept referring to the practice of dividing the ownership of corporations into small units that are represented by shares of stock, which permits the easy exchange of ownership interests.

Answer 13

transferability

Question 14

Group of individuals elected by the stockholders of a corporation to oversee its operations.

Answer 14

board of directors

Question 15

Management that may have become ineffective but because of political implications may be difficult to remove.

Answer 15

entrenched management

Question 16

Arbitrary value assigned to stock by the board of directors.

Answer 16

par value

Question 17

Amount of assets that should be maintained as protection for creditors; the number of shares multiplied by the par value.

Answer 17

legal capital

Question 18

Arbitrary value assigned to stock by the board of directors

Answer 18

stated value

Question 19

The price at which securities sell in the secondary market: also called fair value.

Answer 19

market value

Question 20

An accounting measure of a share of common stock, computed by dividing total stockholders’ equity less preferred rights by the number of common shares outstanding. (assets-liabilities) / #common shares

Answer 20

book value per share

Question 21

Number of shares that the corporation is approved by the state to issue.

Answer 21

authorized stock

Question 22

Stock sold to the public.

Answer 22

issued stock

Question 23

Stock first issued to the public and then bought back by the corporation.

Answer 23

treasury stock

Question 24

Stock owned by outside parties; normally the amount of stock issued less the amount of treasury stock

Answer 24

outstanding stock

Question 25

The par value represents the :
-the _____ liability of the investors
-________amount of assets that must be retained in the company as protection for creditors, when multiplied by the number of shares of stock issued

Answer 25

maximum, minimum

Question 26

Which of the following statements is true?
A. Numerous laws specifically affect the operations of proprietorships and partnerships.
B.Trading on a stock exchange is limited to the stockbrokers who are members of the exchange.
C.The stock of closely held companies is not sold on major stock exchanges.
D. The extensive regulations of trading on stock exchanges began in the 1080s.

Answer 26

B, C

Question 27

Distributions to the owners of proprietorships and partnerships.

Answer 27

withdrawals