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.
1. In the context of choosing a share repurchase over declaring dividends, a share repurchase woulda. Decrease available financing whereas declaring dividends increase available financing.b. Increase earnings per share by decreasing the number of shares outstanding.c. Decrease earnings per share by decreasing dividends payabled. invlove all shareholders. 2. XYZ Corp. raised P50 million from bonds and P110 million from ordinary shares. It invested P150 million of these into operating assets. Subsequently, XYZ was offered a project that is similar to its operations but requires a higher level of insurance coverage. This would require P10 million in invested capital. What is the most likely discount rate to be used for evaluating this project?a. Weighted average cost of capitalb. A project-specific rate which is the adjusted incremental cost of capitalc. Incremental cost of capitald. A project-specific rate which is the adjusted weighted average cost of capital3. During the first five…
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
1. The cost method of accounting for stock investments is used when the company acquires a. Greater than 50% of the company's stock b. Between 20% to 50% of the company's stock c. Less than 20% of the company's stock 2. The significance of percentage of ownership relates to how much _____________ the acquiring company has in the new company. a. data b. control c. confidence
9) When new shares of stock are sold at a price greater than par value, the excess over par is recorded as: a) b) c) d) capital surplus. retained earnings. treasury stock. wwwwww authorized capital. 10) A company's board of directors is primarily an agent of the company's: a) 비데대 management. employees. shareholders. management and employees. wwwwww
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
Indicate whether the following statements are true or false. If the statement is false, explainwhy.a. If a firm repurchases its stock in the open market, the shareholders who tender thestock are subject to capital gains taxes.b. If you own 100 shares in a company’s stock and the company’s stock splits two-forone,you will own 200 shares in the company following the split.c. Some dividend reinvestment plans increase the amount of equity capital available tothe firm.d. The Tax Code encourages companies to pay a large percentage of their net income inthe form of dividends.e. If your company has established a clientele of investors who prefer large dividends,the company is unlikely to adopt a residual dividend policy.f. If a firm follows a residual dividend policy, holding all else constant, its dividendpayout will tend to rise whenever the firm’s investment opportunities improve.
10. A company would repurchase its own shares for all of the following reasons except if it a.believes the shares are overvalued. b.wishes to increase the earnings per share. c.wishes to prevent unwanted takeover attempts. d.needs the shares for employee bonuses.
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
Please Solve In 15mins True or False
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.

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