35A company had 100,000 shares of stock outstanding and repurchased 20,000 of those shares as treasury stock.What is a valid reason for this action?To increase dividends to improve market perceptionTo increase shares available for stock compensationTo increase shareholders' equityTo increase assets to avoid a takeover

To increase shares available for stock compensation.Companies often repurchase shares to have them…

Answered: 35 A company had 100,000 shares of…

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter10: Stockholder's Equity

Section: Chapter Questions

Problem 12MCQ

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The excess of issue price over par of common stock is termed a(n) a. income O b. premium C. discount O d. deficit
A company might purchase treasury stock for all of the following reasons excepta. it wants to increase its net assets by buying its stock low and reselling it at a higher price.b. management wants to decrease the earnings per share of common stock.c. management wants to avoid a takeover by an outside party.d. the company needs the stock to distribute to employees as part of its employee stockpurchase plans.
For what reason might a company purchase treasury stock? To increase shareholder liquidity To execute an acquisition through a share exchange To increase the number of outstanding shares of stock To reduce future income taxes
Why might a company repurchase its own stock? A) It believes that the market undervalues its shares B) To offset dilutive effects of employee stock options granted C) To recognize an economic gain when the treasury shares are later sold for a profit D) To improve earnings per share by reducing the denominator E) All of the above is it just A and B or is it all of the above
Which one of the following statements is correct? A) Modigliani and Miller argued that dividend decisions are more important than capital structure decisions. Dividend policy is usually set by shareholders during the Annual General Meeting of a company. C) A share repurchase is an alternative to a dividend as a means for redistributing cash to the equity market. Shareholders typically view dividend increases as a signal of financial distress.
5) What is a share buyback?A) An opportunity for the company to increase dividends without sending a signal that leads to a fall in the share priceB) An opportunity for shareholders to receive additional shares in proportion to their existing holding instead of the normal cash dividendC) A method by which the company can raise the level of borrowings on its balance sheetD) A mechanism by which the company buys a proportion of its own shares from investors
The form of corporate restructuring in which a small group of investors raises loan financing to purchase all the equity shares of a public company is called Select one: a. a privatization. b. a leveraged buyout. c. an indenture. d. a debenture. e. a reorganization.
12. Why might a company repurchase its own stock? A) It believes that the market undervalues its shares B) To offset dilutive effects of employee stock options granted C) To recognize an economic gain when the treasury shares are later sold for a profit D) To improve earnings per share by reducing the denominator E) All of the above
* Your answer is incorrect. A company may repurchase its own shares for all of the following reasons, except O to reduce the number of shares issued and thereby increase earnings per share and return on equity. to have additional shares available for use in the acquisition of other companies. O to attempt to influence the market price of the shares. O to reduce the number of shares issued in order to meet debt to equity bank covenant requirements.
Companies sometimes go through stock splits or repurchase of their own shares. What is the importance of stock split, stock repurchase, and reverse stock splits? List a pro and con of each along with an example of a company that has gone through this.
Which of the following statements about EPS is true? Question 25 options: a) Both publicly and non-publicly accountable enterprises must disclose EPS on their financial statements. b) EPS is an indicator of liquidity of an entity. c) Two types of EPS are reported: basic and complex. d) Diluted EPS looks at earnings on a per-share basis for shares that were outstanding and also for shares that had the potential to be outstanding during the year.
TRUE OR FALSE? 1. "Dividend in arrears" is a term that applies to cumulative preference shares. 2. A share capital dividend decreases retained earnings but it increases contributed capital. 3. A share capital dividend does not change total shareholders' equity. 4. Book value per share is the amount earned for every capital share owned by a shareholder. 5. Appropriation of retained earnings is necessary when the corporation reacquires its own share capital. 6. The liquidation value of a preference share is always equal to its par value. 7. Property dividends should be recorded at the fair value of the assets to be distributed. 8. Earnings per share is computed for both preference and ordinary shares. 9. On a corporation's statement of financial position, Ordinary Share Capital Subscribed will appear in the shareholders' equity section rather than in the asset section. 11. A deficit (or debit balance) in Retained Earnings means that Retained Earnings appears in the asset section of the…

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