Which of the Following Statements Is Correct

question 39

Multiple Choice

Which of the following statements is correct?

• A) Capital gains earned in a share repurchase are taxed less favorably than dividends;this explains why companies typically pay dividends and avoid share repurchases.
• B) Very often,a company's stock price will rise when it announces that it plans to commence a share repurchase program.Such an announcement could lead to a stock price decline,but this does not normally happen.
• C) Stock repurchases increase the number of outstanding shares.
• D) The clientele effect is the best explanation for why companies tend to vary their dividend payments from quarter to quarter.
• E) If a company has a 2-for-1 stock split,its stock price should roughly double.

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Definitions:

Overhead Cost

Refers to ongoing expenses that are not directly tied to production but are necessary for running the business, such as rent, utilities, and insurance.

Direct Labour-Hours

A measure of the total time individuals spend working directly on manufacturing a product.

Expected Activity

This refers to the anticipated level of use or production volume a company plans for in a given period.

Activity Cost Pools

Groupings of individual costs associated with distinct activities in the process of costing, often used in activity-based costing.