Question

Which of the following statements is FALSE?A. A stock split is an increase in a firm's shares outstanding without any change in owners' equity.B. A reverse split is a stock split under which a firm's number of shares outstanding is reduced.C. A stock buyback refers to the purchase of the firm's shares of stock by the firm's debt holders.D. A stock dividend is a payment in the form of stock made by a firm to its owners, diluting the value of each share outstanding.

Answer 1

Answer:

The false statement is letter "C": A stock buyback refers to the purchase of the firm's shares of stock by the firm's debt holders.

Explanation:

A stock buyback refers to publicly traded companies buying back their shares from shareholders -not debt holders as in option "C". This reduces the number of outstanding shares in the market and typically in simple market dynamics raises the stock price. Companies fund their buybacks with excess cash. since they do not find any other better destination for that money.