Compensation of senior management is often tied to earnings per share or return on equity. Treasury stock purchases have a favorable impact on both these measures because treasury stock reduces the denominator in both calculations. In the recent buyback boom, many companies borrowed money to purchase treasury shares. In some cases, the motivation for the borrowing and repurchase of shares was the desire of executives to secure their year-end cash bonuses. Did these executives act ethically? Were their actions in the best interests of stockholders? Why or why not? How might such behavior be avoided in the future?
Answer to relevant QuestionsThe list that follows itemizes Swoboda Corporation’s transactions. Identify each as (a) An operating activity, (b) An investing activity, (c) A financing activity, (d) A noncash transaction, (e) None of the above.1. Sold ...During 2011, Minh Corporation had a net income of $144,000. Included on its income statement were depreciation expense of $16,000 and amortization expense of $1,800. During the year, accounts receivable decreased by $8,200, ...In 2011, Hnat Corporation had year-end assets of $600,000, sales of $825,000, net income of $70,000, net cash flows from operating activities of $98,000, dividends of $30,000, purchases of plant assets of $125,000, and sales ...Bronek Corporation’s income statement for the year ended June 30, 2011, and its comparative balance sheets as of June 30, 2011 and 2010 follow. During 2011, the corporation sold at a loss of $2,000 equipment that cost ...Assume that Lincoln Company’s chief financial officer gave you the following information: net sales, $720,000; cost of goods sold, $350,000; loss from discontinued operations (net of income tax benefit of $70,000), ...
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