Which of the Following Statements Is a Reason Why a Company

question 10

Multiple Choice

Which of the following statements is a reason why a company would buy treasury stock?

• A)Because management believes the market price of stock is undervalued.
• B)To have stock available to issue to employees in stock option plans.
• C)To avoid a hostile takeover.
• D)All of these are reasons a company would buy treasury stock.

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Definitions:

External Financing Need

The requirement for funds that a company must fulfill through external sources, like equity or debt, to finance its operations beyond what it can fund through its internal cash flow.

Full Capacity

The maximum level of output that a company can sustain over a long period without increasing its fixed costs.

Capital Intensity Ratio

A financial metric that measures the amount of capital needed per unit of output or the capital required to generate a dollar of revenue.

Operating Capacity

The maximum output that a company can produce under normal conditions.