You Have Been Asked by Two Fellow Graduates to Join

question 111

Multiple Choice

You have been asked by two fellow graduates to join them in incorporating a closely held corporation that would commence a consulting business. One was in your class, so you know him quite well, but the other is graduating from a different school. You have been discussing the law to review the protection it gives you. Read each of the following statements separately and indicate which is true.

• A) If you have preemptive rights and the directors decide to issue a new allotment of shares, the corporation must offer you a portion of the new issue to allow you to keep your proportional share of the corporation.
• B) As a shareholder, you will have the right to vote for the officers of the corporation.
• C) If you each take one-third of the first allotment of the shares, you will necessarily be a minority shareholder, and have no voting rights in electing the directors of the corporation.
• D) A shareholder's agreement allows shareholders and not officers to manage the corporation.
• E) If you were voted out as a director by the others, who could show that it was in the best interests of the corporation, you could always sell your shares to any interested buyer without interference from the other directors.

Recognize the different components that are included in the calculation of EPS.

Know the distinction between basic EPS and diluted EPS.

Understand the impact of corporate actions like bonus shares and share splits on the calculation of EPS.

Identify adjustments necessary for calculating diluted EPS.

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Definitions:

Convergence

The process or state of converging, especially in the context of ideas, technologies, or forces coming together.

Interposition

A visual cue in which one object partially covers another, creating a perception of depth.

Retinal Disparity

The slight difference in the visual images that the two eyes perceive because of their different angles, enabling binocular vision.

Linear Disparity

The difference in the horizontal position of an object as seen by the left and right eyes, contributing to depth perception.