Chapter 11

Question 1

Corporation

Answer 1

A separate legal entity

Question 2

Limited liability of stockholders

Answer 2

Stockholders are liable to debt of the company

Question 3

Continuous life

Answer 3

A company will live on because its not tied to any physical life

Question 4

Lack of mutual agency for stockholders

Answer 4

Company can not enter into binding contracts for stockholders

Question 5

Government regulation

Answer 5

Corporations must abide to government regualtions

Question 6

Double taxation and corporate taxation

Answer 6

corporations are taxed twice on their profits they earn when they pay dividends

Question 7

preemptive right

Answer 7

Stockholders are able to purchase their proportional share of any common stock issued later.

Question 8

Authorized share

Answer 8

the number if shares that a corporation’s charter allows it to sell

Question 9

Issued share

Answer 9

Is the number of shares issued to shareholders of the company

Question 10

Outstanding share

Answer 10

is the number of shares held by stockholders.

Question 11

Paid in captial

Answer 11

total amount of cash and other assets the corporation receives from its stockholders in exchange for its stock

Question 12

3 Dates of importance for dividends

Answer 12

1. Date of declaration 2. Date of record 3. Record of payment

Question 13

Contract rate

Answer 13

interest rate specified in the bond

Question 14

Market rate

Answer 14

interest rate that the borrowers are willing to pay and lenders are willing to accept