Section
1:
Define in your own words the characteristics
of a corporation Below:
What is:
1.
Separate legal existence:
2.
Limited liability of stockholders:
3.
Transferable ownership rights:
Section 2:
1.
A corporation has been defined as an entity
separate and distinct from its owners. In what ways is a corporation a separate
legal entity?
2.
What three conditions must be met before a cash
dividend is paid?
3.
SUPERVALU, one of the largest grocery retailers in the
United States, is headquartered in Minneapolis. Suppose the following financial
information (in millions) was taken from the company’s 2022 annual report: net
sales $44,597, net income $393, beginning stockholders’ equity $2,581, and
ending stockholders’ equity $2,887. There were no dividends paid on preferred
stock. The return on common stockholders’ equity is 14.37%.
a.
Provide a brief interpretation of your findings.
Section 3:
1.
What criteria must be met before a contingency
must be recorded as a liability? How should the contingency be disclosed if the
criteria are not met?
2.
A
large retailer was sued nearly 5,000 times in a recent year—about once every 2
hours every day of the year. It has been sued for everything imaginable—ranging
from falls on icy parking lots to injuries sustained in shoppers’ stampedes to
a murder with a rifle purchased at one of its stores. The company reported the
following in the notes to its financial statements.
The
Company and its subsidiaries are involved from time to time in claims,
proceedings, and litigation arising from the operation of its business. The
Company does not believe that any such claim, proceeding, or litigation, either
alone or in the aggregate, will have a material adverse effect on the Company’s
financial position or results of its operations.
Explain why the company does not have to record these contingencies.
Section 4:
1.
The board of directors is considering a stock
split or a stock dividend. They understand that total stockholders’ equity will
remain the same under either action. However, they are not sure of the
different effects of the two actions on other aspects of stockholders’ equity.
Explain the differences to the directors.
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