Which Statement Is Correct About the "Two Transaction Method" for Treasury

question 37

Multiple Choice

Which statement is correct about the "two transaction method" for treasury shares?

• A)This method decreases the contributed surplus when the repurchased shares are later re-sold.
• B)This method has the same effect on contributed surplus to that of the two transaction method.
• C)This method treats the reacquisition and subsequent sale as once cycle for accounting.
• D)This method increases contributed surplus at the time of re-purchase.

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Definitions:

Earnings Yields

The inverse of the price-to-earnings ratio, representing the earnings generated by a company per share relative to its share price, often used to compare the profitability of investments.

Treasury Yields

The returns on government securities that are considered risk-free; they serve as a benchmark for other interest rates.

Market-to-Book Ratio

A financial ratio that compares a company's market value (price of its stock) to its book value (total assets minus liabilities), used to evaluate whether a stock is under or overvalued.

Price-to-Sales Ratio

A valuation ratio comparing a company's stock price to its revenues, used to evaluate the company's size and growth potential.