Personal Finance 7th Canadian Edition By Kapoor – Test Bank

Chapter 11
Investing in Stocks
True / False Questions
1. A public corporation is a corporation whose stock is owned by relatively few people and is not traded openly in the stock market.
FALSE

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 11-01 Identify the most important features of common stocks.
Topic: 11-01 Common Stocks

2. Dividend payments on common stock are guaranteed, but the amount is determined by the board of directors.
FALSE

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 11-01 Identify the most important features of common stocks.
Topic: 11-01 Common Stocks

3. A proxy is a legal form that lists the issues to be decided at a stockholders’ meeting and requests that stockholders transfer their voting rights to some individual or individuals.
TRUE

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 11-01 Identify the most important features of common stocks.
Topic: 11-01 Common Stocks

4. The record date is the date that the actual dividend payment is made to stockholders.
FALSE

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 11-01 Identify the most important features of common stocks.
Topic: 11-01 Common Stocks

5. A stock split is a procedure in which a stockholder’s common stock is exchanged for preferred stock.
FALSE

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 11-01 Identify the most important features of common stocks.
Topic: 11-01 Common Stocks

6. The most important priority that an investor in common stock enjoys is receiving cash dividends before preferred stockholders are paid any cash dividends.
FALSE

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 11-02 Discuss the most important features of preferred stocks.
Topic: 11-05 Preferred Stocks

7. Preferred stocks are often referred to as “middle” investments.
TRUE

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 11-02 Discuss the most important features of preferred stocks.
Topic: 11-05 Preferred Stocks

8. The Cumulative feature of a preferred stock is that a corporation may exchange, at its option, for a specified amount of money.
FALSE

Accessibility: Keyboard Navigation
Difficulty: Easy
Learning Objective: 11-02 Discuss the most important features of preferred stocks.
Topic: 11-05 Preferred Stocks

9. Corporations issue preferred stock because it provides an alternative to financing through corporate bonds or common stock.
TRUE

Accessibility: Keyboard Navigation
Difficulty: Medium
Learning Objective: 11-02 Discuss the most important features of preferred stocks.
Topic: 11-05 Preferred Stocks

10. If an investor owns participating preferred stock, missed or omitted dividends accumulate and must be paid before any cash dividend is paid to common stockholders.
FALSE