1.  Preferred stock offers shareholders the right to ________. 

 receive dividends after the common shareholders receive any dividends

 voting rights

 receive, in the event of bankruptcy, a share of the assets before common shareholders

 pre-emptive rights

2.  In exchange for stock, corporations may receive ________.  

 income

 earnings

 cash or other assets

 treasury stock

3.  ________ is the stock sold to the public. 

 Issued stock

 Outstanding stock

 Authorized stock

 Treasury stock

4.  The owners of ________ stock have the specific right to vote for members of the board of directors. 

 preferred

 treasury

 common

 both common and preferred

5.  A monetary value assigned to and printed on each share of stock is called ________. 

 par value

 retained earnings

 paid-in capital

 additional paid-in capital

6.  AZ Best, Inc.’s corporate charter allows it to issue 1,500,000 shares of common stock. In 2011, its first year of business, the company sold 200,000 shares of common stock. In 2011, the company bought back 5,000 shares to be held as treasury stock. At December 31, 2011, how many shares of common stock are outstanding? 

1,300,000 shares

 200,000 shares

 5,000 shares

 195,000 shares     

7.  A difference between preferred stock and common stock is preferred shareholders ________. 

 have voting rights, while common shareholders do not

 have the right to share in any assets left if the company goes out of business after both the creditors     and common shareholders receive their share

 must receive their dividends before any of the common shareholders are paid

 have the right to buy new shares in order to maintain their percentage ownership before the company can issue new shares to the general public

8.  Team Shirts reported total shareholders’ equity of $80,000 on its October 31 balance sheet. During November, the business earned $270,000, and declared and paid a cash dividend of $20,000. What was total shareholders’ equity on November 30? 

$330,000    

 $350,000

 $250,000

 $80,000

9.  The date of record is the date ________. 

 when cash is actually paid to the shareholders

 on which the board of directors of a corporation announces that a dividend will be paid

 when earnings are declared

 used to determine exactly who will receive dividends

10.  A company has 2,000 shares of $100 par, 6%, noncumulative preferred stock outstanding. If the board of directors declares a dividend this year, how much will the preferred shareholders receive? 

 $200,000 in total

 $6 per share   

 $60 per share

 $100 per share

11.  Treasury stock ________. 

 is a contra-equity account

 is the amount of stock issued by the company

 is a contra-asset account

 results in an increase in total shareholders’ equity

12.  When a company buys shares of its own stock and holds them as treasury stock, ________. 

 its earnings per share will increase

 its earnings per share are not affected

 its earnings per share will decrease

 the market price of its stock will decrease

13.  A corporation’s distribution of new shares of stock to the corporation’s current shareholders is called a ________. 

 stock split

 stock dividend

 cash dividend

 liquidating dividend

14.  Equitable, Inc. issued no new common stock and had 100,000 shares issued and outstanding during 2011. The following information is taken from Equitable’s accounting records.

Net income for the year ended, December 31, 2011$370,000

Retained earnings, December 31, 2010$280,000

Retained earnings, December 31, 2011$360,000

Total shareholders’ equity at December 31, 2011$725,000

What was the dividend declared during the year ended December 31, 2011? 

$290,000  

 $365,000

 $725,000

 $360,000

15.  Team Shirts issued 20,000 shares of stock for $20 per share. This transaction increased Cash $400,000 and increased ________ $400,000. 

 Paid-in capital

 Treasury stock

 Retained earnings

 Additional paid-in capital

16.  PDG Corporation had a return on equity of 18%. Beginning and ending shareholders’ equity for the corporation were $570,000 and $560,000 respectively. There were 350,000 common shares and no preferred shares outstanding. What was net income for the year? 

 $101,700 

 $3,138,888.89

 $63,000

 $1,944,444.44

17.  Use the following information for Equitable, Inc. to answer the following question(s). Equitable issued no new common stock and had 100,000 common shares issued and outstanding during 2011. Equitable has no preferred stock.

Net income for the year ended, December 31, 2011   $370,000

Retained earnings, December 31, 2010   $280,000

Retained earnings, December 31, 2011   $360,000

Total shareholders’ equity at December 31, 2011   $725,000

Total liabilities at December 31, 2010   $105,000

Total liabilities at December 31, 2011   $385,000

Total assets at December 31, 2010   $750,000

What was earnings per share for the year ended December 31, 2011? 

 $0.51

 $370,000

 $7.50

 $3.70   

18.  Return on equity is ________. 

 net income divided by the average number of common shares outstanding

 total shareholders’ equity divided by the average number of outstanding common shares

 net income divided by sales

 net income divided by average shareholders’ equity

19.  Team Shirts had net income of $23,000. The balance sheet showed beginning and ending balances in shareholders’ equity of $100,000 and $110,000, respectively. There were no preferred shares and 20,000 common shares outstanding. Calculate the return on equity. 

 21.9%   

 5.25%

 1.15%

 4.56%

20.  Risks associated with owning an investment in a company’s stock include the risk that ________. 

the company may not be able to buy back the stock when it matures

this particular stock becomes part of a diversified portfolio

the company will not be able to make regular interest payments to shareholders

the company will not be successful