1. Why might a company repurchase its own stock?
A. It believes that the market undervalues its shares
B. To offset dilutive effects of employee stock options granted
C. To recognize an economic gain when the treasury shares are later sold for a profit
D. To improve earnings per share by reducing the denominator
E. All of the above
2. Companies value-to-book and market-to-book ratios may differ due to accounting reasons. An example of an accounting reason that would create a difference is:
using LIFO versus FIFO for inventory.
accelerated methods of depreciation.
investments in successful research and development programs that are expensed according to conservative accounting principles.
high operating leverage.