To:

Krugman Exports, Inc., Board of Directors

Re: How the purchase of treasury stock will make it more difficult for outsiders to take over the company

Purchasing treasury stock will make it more difficult for outsiders to take over the company.Purchasing treasury stock decreasing the amount of stock outstanding /increases the amount of authorized shares / increases the amount of outstanding If Krugman Exports holds a sufficient quantity of company stock in the treasury, outsiders, such as the

Creston investor group, may be able to/may not be able to acquire a controlling interest (50+ percent) of the outstanding stock from the remaining stockholders.

Because it takes cash to buy treasury stock, the purchase decreases/has no impact/increases the size of the corporation. Reducing the company's cash position may make the company sufficiently unattractive to cause the outside investors to abandon their takeover plan/vulnerable to cause the outside investors to take control of company.

Requirement 2. Suppose Krugman is successful in fighting off the takeover bid and later sells the treasury stock at prices greater than the purchase price. Explain what effect these sales will have on assets, stockholders' equity, and net income.

Sales of treasury stock at prices above the purchase price decrease/do not affect/increase company assets because of the greater amount of assets coming in from the sale than went out to buy the stock. Treasury stock transactions decrease/do not affect/increase liabilities ,so the sale of treasury stock also decreases/does not affect/increases stockholders' equity.

These sales of treasury stock will affect/will not affect net income because the company is dealing with its owners. Transactions between the corporation and its owners cannot generate a profit or a loss/can generate a profit or a loss.

Krugman Exports, Inc., is located in Clancy, New Mexico. The company does business with specialty stores such as Neiman Marcus. Krugman's recent success has made the company a prime target for a takeover. (Click the icon to view takeover information.) X i Requirements Read the requirements. To: Krugman Exports, Inc., Board of Directors Re: How the purchase of treasury stock will make it more outsiders, Purchasing treasury stock such as the Creston investor group, 1. Suppose you are a significant stockholder of Krugman Exports, Inc. Write a memorandum to explain to the board how the purchase of treasury stock would make it difficult for Creston to take over Krugman. Explain the effect that purchasing treasury stock would have on stock outstanding and on the size of the corporation. 2. Suppose Krugman is successful in fighting off the takeover bid and later sells the treasury stock at prices greater than the purchase price. Explain what effect these sales will have on assets, stockholders' equity, and net income. olders. the compan Because it takes cash to buy treasury stock, the purchase sufficiently Print Done Requirement 2. Suppose Krugman is successful in fightin what effect these sales will have on assets, stockholders' ce. Explain Sales of treasury stock at prices above the purchase price out to buy the stock. Treasury stock transactions company assets because of the greater amount of assets coming in from the sale than wer liabilities, so the sale of treasury stock also stockholders' equity. These sales of treasury stock net income because the company is dealing with its owners. Transactions between the corporation and its owners that is reported on the income statement. Click to select your answer(s)