Companies are more apt to choose repurchases over dividends if doing so will enable them to I. take advantage of a market undervaluation of their shares. II. maintain or increase the value of executive stock options. III. offset the dilution created by the exercise of executive stock options. IV. distribute revenue increases that are considered temporary or short-term in nature.

Companies are more apt to choose repurchases over dividends if doing so will enable them to I. take advantage of a market undervaluation of their shares. II. maintain or increase the value of executive stock options. III. offset the dilution created by the exercise of executive stock options. IV. distribute revenue increases that are considered temporary or short-term in nature.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter8: Fraud, Internal Controls, And Cash

Section: Chapter Questions

Problem 17MC: What would be a reason a company would want to understate income? A. to help nudge its stock price...

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If the stock market is efficient, why do companies manage their earnings? O To avoid violating debt covenants. O To receive bonuses based on reported earnings. O Because companies do not believe the Efficient Market Hypothesis. O All of the above.
To what extent do you feel the company’s dividend policies support or hinder their strategies? For example, if the company is attempting to grow, are they retaining and reinvesting their earnings rather than distributing them to investors through dividends? Be sure to substantiate your claims.
To what extent does the company’s dividend policies support or hinder their strategies? For example, if the company is attempting to grow, are they retaining and reinvesting their earnings rather than distributing them to investors through dividends? Be sure to substantiate claims.
Which of the following statements is correct? a. Companies may pay too high a price in a large open market repurchase if it takes too long to complete. b. If a company uses the residual dividend model to determine its dividend payments, dividends payout will tend to increase whenever its profitable investment opportunities increase. c. An investor's capital gains from selling stock in a repurchase are always taxed at a higher rate than if the distribution were dividends. d. The tax code encourages companies to pay dividends rather than reinvest earnings. e. The stronger management thinks the clientele effect is, the more likely the firm is to adopt a strict version of the residual dividend model.
What would be a reason a company would want to understate income? A. to help nudge its stock price higher B. to lower its tax bill C. to show an increase in overall profits D. to increase investor confidence
One of the following decisions is not taken to increase the stock price: Select one: a. Maximize costs b. Attracting additional funds c. Maximize net income or profit d. Returning profits to owners over time
Which of the following is NOT an acceptable basis on which to measure an expense? A cash outflow. O A pro rata measure. O An estimation. O All of these options are acceptable. O An invoice price. Which of the following is a likely explanation as to why preparers would choose to deliberately understate the reported profit of a listed entity? O To reduce investors' expectations of future earnings. O To decrease the entity's weighted average cost of capital. To reduce the entity's tax liability. O To satisfy the qualitative characteristic of faithful representation. O All of these are likely explanations why preparers would deliberately understate the reported profit.
Which of the following theories is supported by the argument that shareholders can transform a company dividend policy into a different policy by means of investors buying and selling on their own account? a. dividend irrelevance theory b. "bird-in-the-hand" theory C. residual distribution model d. tax preference theory
What would be a reason a company would want to understate income?A. to help nudge its stock price higherB. to lower its tax billC. to show an increase in overall profitsD. to increase investor confidence
Which of the following statements is not correct? Group of answer choices A)Purchasing fixed assets using cash decreases the current ratio. B)Accruing a commission expense will affect the net profit margin ratio. C)Increasing the financial leverage ratio guarantees the net profit margin ratio will increase. D)Purchasing treasury stock results in a decrease in the current ratio. E)All of the above are correct
Which of the following best describes the possible result of treasury share transactions? a. May decrease but not increase net income. b. May increase net income if the cost method is used. c. May increase but not decrease retained earnings. d. May decrease but not increase retained earnings.
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