1. Millard and Locke are shareholders of Fillmore Transport, Inc

1. Millard and Locke are shareholders of Fillmore Transport, Inc. Which the following Fillmore actions would require their approval?

a. Hiring of a chief executive officer

b. Declaring a corporate dividend

c. Amending the articles of incorporation

d. All of the above

2. The bylaws of a corporation

a. are adopted at its first organizational meeting.

b. are submitted for approval to the public official in charge.

c. establish the value and classes of corporate stock.

d. establish the operating name of the corporation.

3. The minimurn number of shareholders that must be present at a meeting before shareholders can vote is

a. a voting trust.

b. a voting list

c. a quorum.

d. a proxy.

of

4. Abe and Mary are shareholders of Lincoln Construction Company. Lincoln must hold a shareholders’ meeting

a. once a month.

b. once a year.

C. once every two years.

d. only when it is called by the board of directors.

5. Taj Mahal, Inc., a franchisor of pizza restaurants, wishes to standardize the pricing practices of its franchisees, who have engaged in price-cutting to increase their respective shares of the market. The most prudent remedy might be for Taj to

a. set the prices at which its franchisees sell their products to the public.

b. publish a list of suggested prices.

c. terminate those franchisees who continue to cut prices.

d. none of the above.

 

Page: 2

6. Tina bought a sports Grill franchise. Tinars agreement with the franchisor requires that she purchase sports Grill products for every phase of the operation, from napkins and sink cleaner to kitchen utensils and cash register tape. Tina challenges this requirement because she wishes to buy less expensive products available elsewhere Her best argument is probably that the requirement violates

a. federal antitrust laws.

b. the First Amendment

c. the Equal Protection Clause.

d. the commerce clause.

7. A close corporation is

a. exempt from corporate duties such as filing a certificate of incorporation.

b. taxed in the same manner as a partnership.

c. eligible to make public offerings of securities.

d. generally allowed to restrict transfer of stock.

8. The form of business consisting of at least one general partner and one or more limited partners is

a. a general partnership.

b. a limited partnership.

C. a corporation.

d. a sole proprietorship.

9. A foreign corporation

a. is chartered in a country other than the U.S., such as Peru.

b. is a synonym for an alien corporation.

c. may be required to obtain a certificate of authority to do business in states where it is not chartered.

d. may transact business only in foreign nations.

10. Sherrie and Al operate a business out of their home and are thinking of incorporating. Which of the following types of corporations would allow them to avoid the double taxation of the corporate form?

a. An S corporation

b. A C corporation

c. A close corporation

d. None of the above

 

Page: 3

11. Martin and Van are officers of Buren Information Corporation. As corporate officers, the rights of Martin and Van are

a. the same as those held by the corporate directors.

b. determined by their employment contracts.

c. specified in state corporation statutes.

d. the same as those held by the corporate shareholders.

12. The right to inspect corporate books and records is

a. held only by directors.

b. held by shareholders, but the right is limited to the inspection and copying of corporate books and records for a proper purpose, and the request to inspect the books must be made in advance.

c. never available to shareholders

d. a virtually absolute right of shareholders and cannot be restricted.

13 William and Leon, as shareholders in McKinley office Supplies, Inc., are issued stock certificates by the firm. If Leon loses his certificates

a. ownership of the stock is forfeited, and the shares revert to McKinley’s treasury

b. ownership of the stock is not affected because ownership rights exist independently of the certificate.

c. a new certificate cannot be issued to replace it.

d. the finder of the certificate assumes ownership of the stock.

14. Shares are referred to as watered stock if they are

a. issued by the corporation for less than their stated value.

b. no-par shares.

C, transferred in violation of a shareholders’ stock-transfer agreement.

d. subject to stock warrants.

15. Junior is a director of Massachusetts Manufac~ring Corporation. Which of the followi?}g is not an automatic right of Junior, as a director?

a. Participation

b. Inspection of books

C. Compensation

d. None of the above

 

Page: 4

16. George is a director of Washington Corporation. Which of the following describes George’s position with regard to Washington?

a. Agent

b. Principal

c. Fiduciary

d. Trustee

17. A shareholder’s derivative suit is a suit brought

a. by a shareholder or shareholders on behalf of the corporation when the directors fail to undertake any action to redress a wrong suffered by the corporation.

b. by the directors against a majority shareholder who has breached his or her fiduciary duty to the corporation or to minority shareholders.

c. against a majority shareholder by a third party who was harmed by the corporate decision approved of, and voted for, by the shareholder.

d. by a shareholder who is also a director of the corporation being sued.

18. A corporation may indemnify a director for legal costs, feest and judgments involved in defending corporation-related suits in

a. most states but not under the Revised Model Business Corporation Act.

b. most states and under the Revised Model Business Corporation Act.

c. only a few states.

d. no states

19. which of the following funds are available in all states for payment of dividends?

a. Retained earnings

b. Accumulated surplus

c. Net profits

d. Gross profits

20. All corporations issue

a. bonds.

b. common stock.

c. preferred stock.

d. bonds, common stock, and preferred stock.

 

Page: 5

21. All of the following are elements of a security except

a. the hope that profits will be made primarily by the efforts of the investor

b. an investment of money.

c. a common enterprise

d. the expectation that profits will be made by the efforts of people other than the investor

22 The primary reason that corporations issue securities is to

a. obtain financing

b. increase their market share.

c. reduce their production costs.

d. increase their visibility

23. Preferred stockholders

a. have the right to payment of an annual dividend but usually do not have voting rights

b. have the right to payment of an annual dividend and voting rights.

c. do not have the right to payment of an annual dividend and may or may not have voting rights.

d. do not have the right to payment of an annual dividend but always have voting rights.

24. Venturecorp files a registration statement that contains material misrepresentations regarding the financial health of the company. The parties involved in preparing the registration statement who might be found guilty of violating the securities laws would include

a. the persons who signed the statement

b. the underwriters of the issue.

c. the auditors of the company S financial statements.

d. all of the above.

25. The Securities and Exchange Commission

a. was created by a law passed by Congress in 1934.

b. was created by the United States Supreme Court.

c. gives opinions as to the value of securities upon request by people.

d. issues a prospectus concerning the sale of common stocks.

 

Page: 6

26. Profits made by an insider who purchases and sells or sells and purchases the corporation’s stock within any six-month period are

a. short-term profits.

b. short-swing profits.

C. short-sell profits.

d. short-line profits.

27. Which of the following are not covered by Section 16(b) of the Securities Exchange Act of 1934?

a. Officers

b. Large shareholders

c. Tippees

d. Directors

Fact pattern 28-1

Regis, the treasurer of Xanadu Company, learns that the corporation is planning to sell an engine part that will double the gas mileage of any automobile. Regis decides to purchase 10,000 shares of company stock. He also tells his friend Herb, who knows what Regis’s job is, about the part, prompting Herb to purchase 5,000 shares of xanadu stock. Herb tells Fritz, who purchases 1,000 shares. Fritz tells Trevor, who purchases 500 shares. Fritz and Trevor are also told where the information came from.

28. Pefer to Fact Pattern 28-1. Regis¹s best defense to charges of insider trading would be that the information about the engine part

a. is not material

b. has already been made public

c. is overly speculative.

d. none of the above.

29. Refer to Fact Pattern 28-1. Who would be subject to insider trading liability under the Securities Exchange Act 1934?

a. Regis

b. Herb

c. Fritz

d. All of the above

 

Page: 7

Fact pattern 28-1

Regis, the treasurer of Xanadu Company, learns that the corporation is planning to sell an engine part that will double the gas mileage of any automobile. Regis decides to purchase 10,000 shares of company stock. He also tells his friend Herb, who knows what Regis’s job is, about the part, prompting Herb to purchase 5,000 shares of xanadu stock. Herb tells Fritz, who purchases 1,000 shares. Fritz tells Trevor, who purchases 500 shares. Fritz and Trevor are also told where the information came from.

30. Refer to Fact Pattern 28-1. If a court were to issue guidelines to persons such as Regis and Herb, regarding how long they should wait before they could be confident that information about the engine part had become public knowledge, the court would most likely suggest that Regis and Herb refrain from investing for

a. two weeks.

b. thirty days.

c. six months.

d. a reasonable waiting period.

31. Oscar introduces Vinny to his business suppliers as “my associate.” Although Oscar has not given Vinny authority, Vinny purports to act as his agent in several deals with the suppliers. An agency relationship may be found to exist between Oscar and Vinny according to

a. the doctrine of estoppel.

b. the mirror image rule.

c. the Statute of Frauds.

d. the parol evidence rule.

32. When a written agency agreement exists that describes the rights and duties of both parties, then the agent may be said to have

a. express authority.

b. implied authority.

c. apparent authority.

d. equal authority.

 

Page: 8

33, Greg trains with, and works as an agent for, Tristate Insurance Company. Which of the following types of information acquired during the relationship could be used by Greg for his own personal gain following the termination of the relationship?

a. Trade secrets

b. Customer lists

c, Acquired skills and basic knowledge

d- None of the above

34. Burger Queen, Inc., grants its agent Phil an exclusive territory in which to sell Burger Queen products. Burger Queen cannot compete with Phil in that territory under the principal’s duty of

a. compensation.

b reimbursement

C. indemnification.

d. cooperation.

Fact pattern 19-5

Ella hires Mort to do some remodeling work in her home.

35, Refer to Fact Pattern 19-5. While Mort is doing remodeling work for Ella in her home, he accidentally drops a hammer on the foot of Ella’s friend, Rose, who has come to visit, breaking two toes. Ella is

a. not liable to Elaine because Mort, as an independent contractor, is responsible for his own conduct

b. liable to Rose because she was injured in Ella’s house.

c. liable to Rose for Mort’s negligence. She would not have been responsible if Mort’s act had been an intentional tort.

d. not liable to Rose because Mort, as an employee of Ella’s, is responsible for his own conduct.

Fact Pattern 19-4

Al indicates that he is acting as an agent on behalf of an unidentified client when he enters into a contract with Stacey.

36. Refer to Fact Pattern 19-4. The principal is

a. disclosed.

b. partially disclosed.

C. undisclosed.

d. none of the above.

 

Page: 9

37. Refer to Fact Pattern 19-4. Who is liable to the third party for nonperformance of the contract?

a. Al

b. Al’s principal

c. Both a and b

d. flone of the above

Fact Pattern 19-1

Liz and Sara work as clerks in Ann’s Dress Shop. Ann withholds federal taxes from their pay, and controls the methods and details of the performance of their work. Liz and Sara are not authorized to modify the prices or other terms of a sale at the shop.

38. Refer to Fact Pattern 19-1. At the shop, Liz and Sara are

a. Ann’s employees only.

b. Ann’s employees and agents.

C. independent contractors.

d. none of the above.

39. Brenda is a salesperson for Scot’s Home Supply. She advises a customer that certain lumber will last for twenty years without treatment to prevent water damage. Tn reliance on this advice, the customer purchases the wood. Brenda’s statement is in error, and the lumber deteriorates within three years. Scot’s Home Supply is

a. not liable–only Brenda is liable.

b. not liable, nor is Brenda~ because the customer should have known that the wood could not last for twenty years.

c. liable, because the misrepresentation occurred within the scope of Brenda’ 5 employment.

d. liable, with Brenda, under the rule of shared liability.

40. A court seeking to determine whether an employer-independent contractor relationship exists would not consider

a. how much control the employer exercised over the details of the work.

b. whether the employer supplied the tools used by the worker.

c. how much money the employer paid the worker.

d. the degree of skill required to do the job for which the worker was hired.

 

Page: 10

41. generally, a worker who suffers injury from an on-the-job accident will be compensated under state workers’ compensation laws

a. only if the injury completely disables the worker.

b. only if the worker agrees to bring a private lawsuit against the employer and if successful, reimburse the state for any unemployment compensation received.

c. even if the employer’s negligence caused the injury. The injured worker must accept workers’ compensation as the sole remedy.

d. only if the worker does not have private health or disability insurance.

42. Remedies for violations of the Family and Medical Leave Act of 1993 include

a. damages for unpaid wages.

b. job reinstatement or promotion.

c. both a and b.

d. none of the above.

43. Which of the following is a valid defense to payment under a workers’ compensation act?

a. Negligence of the injured employee

b. Negligence of the employee who caused the injury

C. Intentional, self-inflicted injury by the injured employee

d. None of the above

44. The Fair Labor Standards Act covers employers engaged in

a. interstate commerce.

b. the production of goods for interstate commerce.

c. either a or b.

d. none of the above.

45. Which of the following best depicts whistleblowing in the employment context?

a. Tim jokes with his subordinates about the activities of his coworker, flick.

b. The National Assemblers Union publishes a statement disclosing the unfair labor practices of a competing union.

c. Ruth tells acoworker that she thinks a product about to be marketed is unsafe.

d. Kim informs government authorities that his employer is engaging in illegal activities.

 

Page: 11

46. unemployment compensation is provided by

a. employees, who are taxed at regular intervals to pay into a federal fund.

b. employers, who are taxed at regular intervals to pay into a federal fund.

c both a and b.

d. none of the above.

47. Oppressive child labor is prohibited by

a. the Taft-Hartley Act.

b. the Landrum-Griffin Act.

c. the Fair Labor Standards Act.

d. the Family and Medical Leave Act.

48. The Immigration Reform and Control Act of 1986

a. requires employers to hire illegal immigrants.

b. permits employers to hire illegal immigrants if the employersfile a special form with the Immigration and Naturalization Service.

c. permits employers to hire illegal immigrants if the immigrantsfile a special form with the Immigration and Naturalization Service.

d. prohibits employers from hiring illegal immigrants.

49. Under the employment-at-will doctrine,

a. the employer or the employee may terminate an employment relationship at any time and for any reason.

b. only the employer may terminate an employment relationship without cause; employees’ rights are not recognized by the doctrine.

c. the employer may terminate an employment relationship at will only if the employee has in some way harmed the employer’s interests.

d. the termination of an employment relationship, unless done with the mutual consent of the parties, is always construed as a breach of an express or implied employment contract

50. The Americans with Disabilities Act of 1990 specifically includes

a. homosexuality.

b. kleptomania.

c. diabetes.

d. none of the above.

 

Page: 12

51. Under the Americans with Disabilities Act of 1990,

a, employers are required to undertake affirmative action programs to counter the effects of past discrimination against disabled persons.

b. an employer may not ~rbitrarily exclude a disabled person from employment if, with reasonable accommodation, the person could perform the job as required.

C. disabilities do not include cancer or acquired immune ~~ficiency syndrome (AIDS)

d. an employer must reasonably accommodate a disabled person even if it creates an undue hardship for the employer because employers are in a better position than disabled persons to bear the social costs of disability.

52. Alex, who is Hispanict applies for a job at Gorden Fixtures Company. The interviewer says that Gorden hires Hispanics, but does not hire African Americans. Making this distinction

a. constitutes impermissible discrimination on the basis of race.

b. constitutes discrimination but is permissible at the application stage of employment.

c. does not constitute discrimination.

d. none of the above.

53. Under the Equal Pay Act of 1963, a wage differential for equal work is justified if it is because of

a. seniority.

b. merit.

C.

d.

a system that pays according to quality or quantity of production. any of the above.

54. Quid-pro-quo harassment occurs when

a. job opportunities are doled out on the basis of sexual favors.

b. the reasonable employee standard is applied.

c, the work environment is hostile.

d. a pregnant employee is fired.

Fact Pattern 21-4

Evan works for Bobcat Company. In January, Bobcat adopts an “Employee Update Examination,” which it requires all employees to take and pass. Even fails the exam three times and is discharged. Even files a lawsuit against Bobcat, claiming disparate-impact discrimination.

 

Page: 13

55. Refer to Fact Pattern 21-4. Bobcat learns that Evan made material misrepresentations on his employment application. Bobcat can use this

a. as a complete defense to EvanTs discrimination claim.

b. to alter the award that Evan might otherwise receive from the court.

c both a and b.

d. none of the above.

Fact Pattern 21-3

Dana, who has a ~isability, is an employee of Hersch & Company. After the installation of new entry doors, Dana finds it nearly impossible to get into and out of the Hersch building. For repeatedly failing to be on time, Hersch discharges Dana. Dana is replaced by Gert, who does not have a disability. Dana files a claim against Hersch under the Americans with Disabilities Act of 1990.

56. Refer to Fact Pattern 21-3. To ~uccessfully defend against Dana’s claim, Hersch will have to show that

a. Dana ~onsistently failed to meet the essential requirements of her job.

b. Gert is qualified for Dana’s position

c. Hersch cannot reasonably accommodate Dana without undue hardship.

d. all of the above.

Fact Pattern 21-2

Phil, a fifty-year-old is replaced in his job at Reinhardt Company by Chaz, a twenty~two-year-old.

57. Refer to Fact pattern 21-2. To successfully defend against Phil’s age~discrimination claim, Reinhardt will have to show that Phil

a. is a member of a protected age group

b. is no longer qualified for the position.

c. often makes discriminatory statements.

d. none of the above.

Fact Pattern 21-1

Jane works for Butler warehouse Company. Jane is the only woman on her work crew. The male crew members often tell jokes and play minor pranks on each other. When Jane attempts a prank, the supervisor fires her, saying that “we don’t tolerate horseplay at Butler.”

 

Page: 14

58. Refer to Pact Pattern 21-1. Assuming that Jane can establish the ground for a lawsuit againstButler, Butler can defend itself by showing that

a. Jane is themember of a protected class and she was qualified for the job.

5. the misconduct Jane engaged in was nearly identical to that engaged in by an employee who isnot amember of the protected class and who was not fired.

C. there was alegitimate, nondiscriminatory reason for the discharge.

d. both a and 5.

59.Disparate-treatment discrimination

a. requires intent to discriminate on the part ofthe employer.

5. can only occur in the hiring phase of an employment relationship.

C. can only occur once an employee has been hired and hasbegun performance under the employment contract.

d. is not subject to the prinis fade casestandard.

60. Rary applies for a job at Seltz, Inc. During the interview, Kary mentions that many of her best friends are Hispanic. The interviewer says that Seltz does not hire people who associate with Hispanics. Naking this distinction

a. constitutes impermissible discrimination on the basis of national origin

5. constitutes discrimination but is permissible at the application stage of employment.

C. does not constitute discrimination.

d. none of the above.