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WorksheetsCompany Finance Share Capital Quiz
Total questions: 34
Worksheet time: 18mins
What is known as share capital in a company?
The total amount of company borrowings
The total amount of shares issued by a company
The total amount of dividends paid to shareholders
The total amount of profits made by a company
What does a share represent in a company?
A right of ownership of the company property
A liability measured by the sum of money
An investment in a company and a fraction of its capital
A legal obligation to pay for the company's debts
Which type of shareholders are known as the owners of the company and take the biggest risk?
Preference shareholders
Bondholders
Ordinary shareholders
Debenture holders
What happens to ordinary shareholders if a company goes into liquidation?
They are the first to be paid back
They are the last category to be paid
They receive a fixed dividend payment
They have a right to the company's property
What do ordinary shareholders receive if the company does well?
A fixed interest rate on their investment
A larger return on their investment in the form of variable dividends
The par value of their shares before preference shareholders
A right to the company's property
What right do ordinary shareholders have if the company is being wound up?
They have the right to a return of their capital if there are surplus assets
They have the right to keep their shares
They have the right to the company's property
They have the right to be paid first before any creditors
What is a key characteristic of preference shares compared to ordinary shares regarding dividend payments?
Preference shareholders receive a variable percentage of the dividend.
Preference shareholders are entitled to a fixed dividend payment.
Preference shareholders are paid dividends only if the company experiences growth.
Preference shareholders receive dividends at the directors' discretion.
What happens to unpaid dividends of preference shares if a company does not release a dividend in a given year?
They are forfeited and never paid.
They are paid to ordinary shareholders instead.
They are carried forward and paid as a priority when the next dividend is declared.
They are converted into additional shares for the preference shareholders.
Do preference shareholders usually have the right to vote in general meetings?
Yes, they have equal voting rights as ordinary shareholders.
No, but they have the right to attend company meetings.
Yes, but only on specific issues outlined in the company's articles of association.
No, they have no involvement in company meetings at all.
What is the risk associated with preference shares in the event of a company winding up?
Preference shareholders are paid first before any external creditors.
Preference shareholders are paid only after all external creditors have been paid.
Preference shareholders have no risk as they are guaranteed their investment back.
Preference shareholders are paid simultaneously with ordinary shareholders.
What are redeemable shares?
Shares that can be converted into preference shares at any time.
Shares that guarantee a fixed dividend payment indefinitely.
Shares that the issuing company may buy back at some point in the future.
Shares that can be exchanged for company assets at the shareholders' discretion.
The amount of capital owed on shares that the company has not requested payment for is ….
Unpaid capital
Uncalled capital
Partly paid shares
Partly paid capital
What is the term used for the total nominal value of the shares that a company has issued?
Issued share capital
Share capital
Nominal share value
Market share value
Under what condition can a company pay out dividends to its shareholders?
Only if the company is a public company
If it is from the company's 'distributable profits'
Regardless of the company's profits
Only if the dividend does not reduce the share capital below its nominal value
What is the liability of members in a limited company limited to?
The total debt of the company
The market value of the shares
The nominal value of their shares
The issued share capital
If a company with a share capital of 500,000 shares at £1 each issues only 300,000 shares, what is the 'issued share capital'?
£200,000
£300,000
£500,000
£1,000,000
What is called-up capital according to section 5.47 of the CA 2006?
The amount of capital owed on shares that the company has not requested payment for.
The total amount of financial consideration that shareholders have been required to pay the company in return for shares.
The amount that shareholders have actually paid on the shares issued.
The additional money made on the sale of shares above their nominal value.
Under the Companies Act 2006, what is the minimum percentage of the nominal value that must be paid-up on shares issued by a public company?
50%
25%
100%
75%
What is unpaid capital?
The amount of capital owed on shares that the company has not requested payment for.
The total amount of financial consideration that shareholders have been required to pay the company in return for shares.
The difference between the amount paid on each share and the nominal value of each share.
The additional money made on the sale of shares above their nominal value.
What is premium share capital?
The total amount of financial consideration that shareholders have been required to pay the company in return for shares.
The amount that shareholders have actually paid on the shares issued.
The additional value received on the shares in addition to or above the nominal value of the shares.
The amount of capital owed on shares that the company has not requested payment for.
Which of the following is NOT a permitted use for the money held in a premium share account?
To write off the expenses related to the issue of those shares.
To write off the commission paid on the issue of those shares.
To pay up new shares to be issued to members as bonus shares.
To distribute as dividends to shareholders.
Under the Companies Act 2006, what is the minimum price at which a share with a nominal value of £1 can be sold?
At any price below its nominal value
For exactly £1
For more than its nominal value
Cannot be sold
If a companies assets have decreased to the extent where the share capital is now greater than the net asset value, what can the company do to reduce its share capital?
Extinguish liability of partly paid shares
Cancel any paid up capital so that it reflects the value of the assets
Issue more shares to raise money for the company
Use its additional cash to pay off any additional share capital
What must be carried out when shares are issued for a non-cash consideration to ensure they are not sold for less than their nominal value?
A shareholder vote
A public auction
An independent valuation
A director's approval
According to the Companies Act, when can a company distribute dividends to its members?
When the company's net assets are less than the subscribed share capital
When the company has sufficient distributable profits
When the company's share capital is reduced
Whenever the director decides
What action might a director be liable to take if they authorize dividend payments knowing there were insufficient funds?
Resign from the company
Pay a fine to the government
Repay the company any dividend payments made
Increase the share capital
What may a company do to extinguish or reduce the outstanding liability of partly paid shares?
Increase the nominal value of the shares
Reduce the nominal value of the shares to the amount that has been partly paid
Pay the shareholders an additional amount equal to the unpaid portion
Transfer the liability to another company
What is the result of reducing the nominal value of shares to the amount that has been partly paid?
The share capital remains the same
The share capital is increased
The share capital is reduced
The share capital is unaffected
What must a limited company do to reduce its share capital?
Pass an ordinary resolution
Obtain approval by the shareholders only
Pass a special resolution and have a declaration of solvency
Apply for a new incorporation
What additional step must a public limited company take beyond a limited company to reduce its share capital?
Obtain approval by the CEO
Obtain approval by the court
Issue new shares
Merge with another company
Under what condition can a limited company issue redeemable shares according to the CA 2006 s.684?
If it is permitted by its articles of association
If all shareholders agree to it
If the company has no debts
If the company passes a unanimous resolution
What does the CA 2006 s.690 allow a limited company to do?
Issue shares without conditions
Purchase its own shares, including redeemable shares, provided certain conditions have been met
Merge with other companies without restrictions
Exempt itself from declaring solvency
What is the purpose of the requirement for the courts’ approval when a public company is reducing its share capital?
So that shareholders can be sure that the action is legal
So that the public are aware that the company may be in difficulty
To ensure that all creditors have had the opportunity to consent or object to the reduction
When a share is sold above nominal value, the additional value above the nominal value is referred to as the …
(a)
