Which of the Following Is a Disadvantage of a Stock

question 18

Multiple Choice

Which of the following is a disadvantage of a stock repurchase?

• A) Management may have information about good future prospects for the firm that was not previously publically announced prior to the repurchase.
• B) The firm ends up paying more for the shares than they are worth.
• C) The IRS may impose penalties on the firm if tax authorities can show that the repurchase was performed to avoid dividend taxation.
• D) All of the above

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Definitions:

Cost Driver

An activity or factor that incurs costs based on its level of use or consumption, influencing the total cost of production.

Activity Level

A measure of the volume or quantity of production or operations in a business, which can significantly impact costs.

Job Order Cost

The total cost associated with a specific job order, including direct materials, direct labor, and allocated manufacturing overhead.

Process Cost System

An accounting system used to track and assign costs to units of product in continuous, homogenous production processes.