Which Statement About "Share Buyback" Is Correct

question 25

Multiple Choice

Which statement about "share buyback" is correct?

• A)If the repurchase price is below the issue price, an accounting "gain" results.
• B)If the repurchase price is below the issue price, the difference goes to "common shares."
• C)If the repurchase price is below the issue price, the difference goes to "contributed surplus."
• D)If the repurchase price is below the issue price, an accounting "loss" results.

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Definitions:

Net Income

The total earnings of a company after subtracting all expenses, taxes, and costs from total revenue.

Depreciation Expense

The allocated amount of the cost of an asset, spread out over the time it is expected to be used, reflecting its consumption, wear and tear, or obsolescence.

Indirect Method

In cash flow calculation, this method adjusts net income for non-cash transactions and changes in working capital to arrive at net cash provided by operating activities.

Net Loss

The negative financial result that occurs when a company's expenses exceed its revenues.