Which of the Following Considerations Should NOT Be Related to Management's

question 44

Multiple Choice

Which of the following considerations should NOT be related to management's concerns when setting a stock repurchase policy?

• A) Over the long term, how much does a company's level of earnings exceed its investment requirements? How certain is this level?
• B) Is the stock currently undervalued? Can the management add value to the company by initiating a stock repurchase?
• C) Does a firm have enough financial reserves to meet the short-term obligations in periods when earnings are down or investment requirements are up?
• D) Can a firm quickly raise equity capital if necessary?

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Definitions:

Net Present Value

A financial metric used to evaluate the profitability of an investment, calculated by discounting all future cash flows to their present value and subtracting the initial investment.

Working Capital

The difference between a company's current assets and current liabilities, indicating the short-term financial health and operational efficiency of the business.

Annual Cash Operating Inflows

Annual cash operating inflows refer to the total cash receipts a business receives from its operating activities during a fiscal year.

Salvage Value

The estimated residual value of an asset at the end of its useful life, reflecting what it can be sold for or scrapped.