MULTIPLE CHOICE

1. From which of the following does a third party typically derive an agents apparent authority?

a.	the conduct of the principal
b.	reasonable inference of usual authority
c.	an expression of the limitations of authority
d.	inferring typical authority

2. Which of the following is a duty owed by a principal in an agency relationship?

a.	reimburse the agent for out-of-pocket expenses
b.	fiduciary duty to uphold the trust placed by the agent
c.	retroactively acknowledge authority of agents
d.	ratify all contracts within prescribed time limits

3. The application of which of the following is most likely to be created by the liability arising from agency principles with respect to employees and independent contractors?

a.	the doctrine of vicarious liability
b.	the common law principle of agency
c.	the common law neighbour principle
d.	the doctrine of primary liability

4. Why are corporations seen as being capable of remedying many of the shortcomings found in the sole proprietorship and partnership business forms?

a.	because corporations are easily formed business entities
b.	because none of a corporations assets are at risk
c.	because some of the owners assets in a corporation are at risk
d.	because of a corporations existence as a separate legal entity

5. Which of the following is synonymous with the term widely held?

a.	restrictions on classes of shares
b.	private corporations
c.	rights attaching to a share class
d.	public corporations

6. What is the term, in some jurisdictions, for a corporation that does NOT offer its shares for sale to the public?

a.	closely held corporation
b.	unlimited liability entity
c.	non-public corporation
d.	limited liability entity

7. Which of the following is one of the distinctions between shares and bonds?

a.	Shares represent units of ownership, whereas bonds are debts owed by the corporation.
b.	The issuance of bonds is not regulated by securities legislation, whereas the issuance of shares is.
c.	Bonds are unsecured, whereas shares are secured by the assets of the corporation.
d.	Shares may be sold at securities exchanges, whereas bonds are never sold on securities exchanges.

8. Which of the following is a distinguishing characteristic attributable to preferred shares?

a.	They give the right to a priority interest in a liquidated corporations assets on dissolution.
b.	They must state nonvoting on the share certificate itself.
c.	They give the right to be given notice of shareholders meetings.
d.	They must be issued as nonvoting shares with dividend rights.

9. What is the most important factor that contributes to a minority shareholders ability to commence a derivative action?

a.	The action must arise from discrimination against minority shareholders.
b.	The action must be a pursuit of proper and adequate disclosure of material information.
c.	The action must arise as a direct result of a fundamental change to the corporation.
d.	The action must be in the corporations cause as a result of some injury to it.

10. What is the source of the laws that specifically govern the relationship between partners and third parties?

a.	the Law of Partnership
b.	the Law of Agency
c.	the Partnership Act
d.	the Agency Act

11. What is the most likely reason, from a financial liability perspective, for a corporation to be viewed as the most risk-aversive form of business entity?

a.	It forms a distinct legal entity, the corporation is liable for its own obligations.
b.	Any entity that deals with a corporation may demand personal guarantees.
c.	It shields directors from negligent acts of management.
d.	It provides limited liability to the corporations directors.

12. In what manner are a sole proprietorship and a partnership similar?

a.	There is no legislated regulation affecting either.
b.	Both require special steps to create.
c.	Neither is a separate legal entity with capacity to contract.
d.	Both require regulation of their profit motives.