Multiple Choice

1. Common stockholders may receive compensation for their investment in the form of

A. dividend payment(s).

B. capital gains when the stock is sold.

C. interest earnings.

D. A and B and C.

E. A and B.

2. The common stock of a corporation may be

A. privately owned by an individual.

B. closely owned by a small group of investors, such as a family.

C. publicly owned by a broad group of investors.

D. B and C.

E. A and B and C.

3. The ____________________ allows common stockholders to maintain their proportionate ownership in a corporation when new shares are issued.

A. preemptive right

B. sinking fund

C. debenture clause

D. collateral right

4. Since most shareholders in a corporation do not attend the annual meeting to vote, they may assign their voting rights to another party via a ___________________.

A. no-fault clause.

B. proxy statement.

C. preemptive right.

D. trustee lien.

5. When a corporation decides to go public and sell its common stock on the public equity market for the first time

A. it must obtain approval from its current shareholders.

B. the firms auditors and lawyers must certify that all documents for the company are legitimate.

C. the firm must hire an investment bank to underwrite the stock offering.

D. A and B and C.

E. A and B.