When a Firm Buys Some of Its Shares That It

question 20

Multiple Choice

When a firm buys some of its shares that it had previously issued, this is referred to as a

• A)reverse IPO.
• B)leveraged buyout.
• C)ladder spin.
• D)stock repurchase.

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Definitions:

Equity Method

The equity method is an accounting technique used to record investments in associate companies where the investor has significant influence but does not control the company outright, typically identified by owning 20-50% of the voting stock.

Deferred Intra-entity

Pertains to transactions between entities within the same company that are not settled immediately but are recorded and settled at a later date.

Markup Over Cost

The ratio or percentage by which a product’s selling price exceeds its cost, effectively representing the gross profit margin.

Consolidated Cost Of Goods Sold

The total cost of goods that have been sold by a parent company and its subsidiaries, presented as a single figure in consolidated financial statements.