Which of the Following Is NOT Accurate Regarding Share Repurchases

question 224

Multiple Choice

Which of the following is NOT accurate regarding share repurchases?

• A) In a perfect world, there would be essentially no difference between a share repurchase and a cash dividend.
• B) Share repurchases cannot be undertaken with the sole purpose of avoiding taxes.
• C) Repurchasing shares is a useful method of stabilizing cash dividends.
• D) Share repurchases result in an increase in earnings per share.
• E) Investors will not prefer share repurchases to extra cash dividends if the capital gains tax rate is lower than the tax rate on dividends.

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Definitions:

Negotiable Instrument

A written document guaranteeing the payment of a specific amount of money, either on demand or at a set time.

Stock Certificate

A physical document that represents ownership of shares in a company.

Certificate of Deposit

A time-bound, interest-bearing financial product offered by banks, requiring the holder to leave a lump-sum deposit untouched until maturity.

Postdating

The act of dating a document, check, contract, or other legal instruments with a date that is later than the actual date.