TRUE OR FALSE Companies typically reacquire shares with the hopes of selling them at a higher price to increase profits for the period.
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TRUE OR FALSE
Companies typically reacquire shares with the hopes of selling them at a higher price to increase profits for the period.
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- A firm’s preferred stock often sells at yields below its bonds because:a. Preferred stock generally carries a higher agency rating.b. Owners of preferred stock have a prior claim on the firm’s earnings.c. Owners of preferred stock have a prior claim on a firm’s assets in the event of liquidation.d. Corporations owning stock may exclude from income taxes most of the dividend income they receive.When the selling price of treasury shares is greater than its cost, the company credits the difference to a.Gain on Sale of Treasury Shares. b.Share Premium–Treasury. c.Treasury Shares. d.Share Premium–Ordinary.Which of the following statements is true in relation to the call price of preference shares? The call price is used in computing book value per share. In the absence of call price, the liquidation value is disregarded and the par or stated value is instead used. The call price is the amount paid to preference shareholders upon redemption of preference shares during the lifetime of the entity. All of these statements are true.
- 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 taxesWhat is a share repurchase? When a company buys back its own shares at IPO prices When a company buys back its own shares at market prices When a company buys shares of its competitors, driving prices downWhich of the following correctly indicates how the issue price of common stock shares would be valued when a corporation makes a follow-on issue? Market forces determine the selling price, as it is marketed by the selling group The highest expected issue price per share that can be obtained while still selling of all of the shares is selected The highest expected issue price per share that can be obtained, regardless of the selling group's ability to market the shares, is selected The market price of existing shares is used as guidance
- When a stock repurchase occurs, which of the following is not correct?a. EPS decreasesb. Shares are repurchased then cancelledc. Investors may regard this as a tax break compared to a dividend paymentd. Costs in servicing small shareholders may be reducede. All of the above are correctIn the context of choosing a share repurchase over declaring dividends, a share repurchase would *a. 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.The primary purpose of a stock split is to a. reduce the market price of the stock per share. b. increase paid-in capital. c. increase retained earnings. d. increase the market price of the stock per share.
- When non-par value shares are reacquired at a cost greater than their average issue price and cancelled, what account(s) should be debited? Select one: a. The share account for the total cost. b. The share account for the average issue price, contributed surplus-repurchases up to its account balance, other contributed surplus relating to this class of shares in proportion to the number of shares repurchased versus outstanding and lastly retained earnings for any remaining amount. c. The share account for the average per share amount, retained earnings for the additional amount, and lastly contributed surplus for any remaining amount. d. The share account for the average per share amount and a loss account for the additional amount. e. none of the above answers are correct.What is the difference between a stock dividend and a stock split? As a stockholder, would you prefer to see your company declare a 100% stock dividend or a 2-for-1 split? Assume that either action is feasible.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.
