All Else Equal, When a Company Uses Excess Cash to Buy

question 119

Multiple Choice

All else equal, when a company uses excess cash to buy back some of its outstanding common stock, which of the following ratios will be affected directly in the manner described below?

• A) The return on equity (ROE) will decrease.
• B) Earnings per share (EPS) will increase.
• C) The inventory turnover ratio will increase.
• D) The receivables turnover ratio will increase.

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Definitions:

HR Strategy

An organizational plan focusing on the management and development of human resources to achieve business objectives.

Organizational Strategy

A high-level plan to achieve one or more goals under conditions of uncertainty.

Internal Fit

The alignment between an organization’s strategies, practices, and the characteristics of its internal environment.

Human Capital Perspective

Viewing employees as valuable assets whose investments in skills and abilities contribute to organizational success.