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Shareholder Rights and Responsibilities

Description: This quiz covers the rights and responsibilities of shareholders in a company.
Number of Questions: 15
Created by:
Tags: corporate law shareholder rights shareholder responsibilities
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What is the primary right of a shareholder?

  1. To vote on company matters

  2. To receive dividends

  3. To sell their shares

  4. To inspect company records


Correct Option: A
Explanation:

Shareholders have the right to vote on important company matters, such as the election of directors, changes to the company's charter, and mergers and acquisitions.

What is the primary responsibility of a shareholder?

  1. To pay taxes on their dividends

  2. To attend shareholder meetings

  3. To vote on company matters

  4. To monitor the company's financial performance


Correct Option: D
Explanation:

Shareholders have a responsibility to monitor the company's financial performance and to hold the company's management accountable for its actions.

What is the difference between a common shareholder and a preferred shareholder?

  1. Common shareholders have voting rights, while preferred shareholders do not.

  2. Preferred shareholders have voting rights, while common shareholders do not.

  3. Common shareholders receive dividends before preferred shareholders.

  4. Preferred shareholders receive dividends before common shareholders.


Correct Option: D
Explanation:

Preferred shareholders have a higher claim on the company's assets and earnings than common shareholders. This means that preferred shareholders receive dividends before common shareholders, and they are also more likely to receive their investment back in the event of a liquidation.

What is a shareholder derivative suit?

  1. A lawsuit filed by a shareholder on behalf of the company

  2. A lawsuit filed by the company against a shareholder

  3. A lawsuit filed by a shareholder against the company's management

  4. A lawsuit filed by the company's management against a shareholder


Correct Option: A
Explanation:

A shareholder derivative suit is a lawsuit filed by a shareholder on behalf of the company. This type of lawsuit is typically filed when the company's management is accused of wrongdoing.

What is the purpose of a shareholder proxy?

  1. To allow shareholders to vote on company matters without attending a shareholder meeting

  2. To allow shareholders to sell their shares

  3. To allow shareholders to receive dividends

  4. To allow shareholders to inspect company records


Correct Option: A
Explanation:

A shareholder proxy is a document that allows a shareholder to authorize another person to vote their shares on their behalf at a shareholder meeting.

What is the difference between a public company and a private company?

  1. Public companies are owned by the government, while private companies are owned by individuals.

  2. Public companies are owned by individuals, while private companies are owned by the government.

  3. Public companies are required to file financial statements with the SEC, while private companies are not.

  4. Private companies are required to file financial statements with the SEC, while public companies are not.


Correct Option: C
Explanation:

Public companies are required to file financial statements with the Securities and Exchange Commission (SEC). This is because public companies are owned by a large number of shareholders, and the SEC wants to ensure that these shareholders have access to accurate and up-to-date information about the company's financial performance.

What is the role of the board of directors in a company?

  1. To manage the company's day-to-day operations

  2. To set the company's strategic direction

  3. To oversee the company's financial performance

  4. All of the above


Correct Option: D
Explanation:

The board of directors is responsible for managing the company's day-to-day operations, setting the company's strategic direction, and overseeing the company's financial performance.

What is the difference between a stock split and a stock dividend?

  1. A stock split increases the number of shares outstanding, while a stock dividend does not.

  2. A stock dividend increases the number of shares outstanding, while a stock split does not.

  3. A stock split increases the value of each share, while a stock dividend does not.

  4. A stock dividend increases the value of each share, while a stock split does not.


Correct Option: A
Explanation:

A stock split increases the number of shares outstanding, while a stock dividend does not. A stock dividend is a payment of shares to shareholders, while a stock split is a division of each share into a larger number of shares.

What is the purpose of a shareholder meeting?

  1. To elect the company's board of directors

  2. To approve changes to the company's charter

  3. To vote on mergers and acquisitions

  4. All of the above


Correct Option: D
Explanation:

Shareholder meetings are held to elect the company's board of directors, to approve changes to the company's charter, and to vote on mergers and acquisitions.

What is the difference between a right and a privilege?

  1. A right is something that you are entitled to, while a privilege is something that you are granted.

  2. A privilege is something that you are entitled to, while a right is something that you are granted.

  3. A right is something that you can enforce in court, while a privilege is something that you cannot enforce in court.

  4. A privilege is something that you can enforce in court, while a right is something that you cannot enforce in court.


Correct Option: A
Explanation:

A right is something that you are entitled to, while a privilege is something that you are granted. Rights are typically protected by law, while privileges are not.

What is the difference between a majority shareholder and a minority shareholder?

  1. A majority shareholder owns more than 50% of the company's shares, while a minority shareholder owns less than 50% of the company's shares.

  2. A majority shareholder owns less than 50% of the company's shares, while a minority shareholder owns more than 50% of the company's shares.

  3. A majority shareholder has more voting rights than a minority shareholder.

  4. A minority shareholder has more voting rights than a majority shareholder.


Correct Option: A
Explanation:

A majority shareholder owns more than 50% of the company's shares, while a minority shareholder owns less than 50% of the company's shares. Majority shareholders have more voting rights than minority shareholders.

What is the purpose of a poison pill?

  1. To prevent a hostile takeover

  2. To increase the value of the company's shares

  3. To attract new investors

  4. To reduce the company's debt


Correct Option: A
Explanation:

A poison pill is a provision in a company's charter that is designed to prevent a hostile takeover. A poison pill typically gives shareholders the right to purchase additional shares of the company at a discounted price if a hostile takeover is attempted.

What is the difference between a tender offer and a proxy fight?

  1. A tender offer is an offer to purchase all of the company's shares, while a proxy fight is a contest for control of the company's board of directors.

  2. A proxy fight is an offer to purchase all of the company's shares, while a tender offer is a contest for control of the company's board of directors.

  3. A tender offer is typically made by a hostile bidder, while a proxy fight is typically made by a friendly bidder.

  4. A proxy fight is typically made by a hostile bidder, while a tender offer is typically made by a friendly bidder.


Correct Option: A
Explanation:

A tender offer is an offer to purchase all of the company's shares, while a proxy fight is a contest for control of the company's board of directors. Tender offers are typically made by hostile bidders, while proxy fights are typically made by friendly bidders.

What is the difference between a short sale and a margin call?

  1. A short sale is a sale of a stock that the seller does not own, while a margin call is a demand for additional collateral from a margin account.

  2. A margin call is a sale of a stock that the seller does not own, while a short sale is a demand for additional collateral from a margin account.

  3. A short sale is typically made by a bear, while a margin call is typically made by a bull.

  4. A margin call is typically made by a bear, while a short sale is typically made by a bull.


Correct Option: A
Explanation:

A short sale is a sale of a stock that the seller does not own, while a margin call is a demand for additional collateral from a margin account. Short sales are typically made by bears, while margin calls are typically made by bulls.

What is the difference between a bull market and a bear market?

  1. A bull market is a market in which stock prices are rising, while a bear market is a market in which stock prices are falling.

  2. A bear market is a market in which stock prices are rising, while a bull market is a market in which stock prices are falling.

  3. A bull market is typically characterized by high investor confidence, while a bear market is typically characterized by low investor confidence.

  4. A bear market is typically characterized by high investor confidence, while a bull market is typically characterized by low investor confidence.


Correct Option: A
Explanation:

A bull market is a market in which stock prices are rising, while a bear market is a market in which stock prices are falling. Bull markets are typically characterized by high investor confidence, while bear markets are typically characterized by low investor confidence.

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