3. Dividends versus stock repurchases Ignoring possible tax effects and signaling costs, the total value of a firm's equity remains the same irrespective of how the firm distributes its residual earnings-dividends or stock repurchases. Each distribution method has certain advantages and disadvantages. Based on your understanding of dividends and stock repurchases, select the best terms to go with the statements. Select the best term to complete the sentence Repurchase stock Distribute dividends Excess cash or a desire to recapitalize usually leads management to 7777 False True Repurchases are more dependable than dividends because the investor wealth does not decrease after a repurchase, whereas the stock price decreases when dividends are distributed. This statement is 7777 Avoid Encourage Management tries to maintain consistent, regular dividend distributions to 7777 any dividend cuts in the future and prevent a negative signaling effect. Debt-to-equity Liquidity ratio Repurchases are also used to make significant adjustments to a firm's 7777 ratio