A Share Repurchase Is Said to Be Equivalent to the Payment

question 102

Multiple Choice

A share repurchase is said to be equivalent to the payment of a cash dividend because each strategy:

• A)causes share price to decline.
• B)causes share price to increase.
• C)creates the same tax liability for the investor.
• D)leaves the firm with the same amount of assets.

---

Definitions:

Cash Realizable Value

The amount of money that can be expected to be received from receivables or other assets, after accounting for any discounts or allowances.

Allowance Method

An accounting technique that estimates and deducts accounts receivable deemed uncollectible from total accounts receivable.

Allowance for Doubtful Accounts

A contra-asset account designed to anticipate the amount of accounts receivable that might be uncollectible.

Bad Debt Expense

An accounting expense recognized when a company can no longer recover a debt that it has issued.