The below are from Stalla mocks: 1. A company purchased 10,000 shares of its common stock for the treasury at $30 per share at the end of 2002. The par value of the stock is $1 and the shares were originally issued at $10 per share. What is the effect of the repurchase on common shareholder’s equity for 02? S.E ROE A Decrease of 290,000 higher B Decrease of 300,000 higher C Decrease of 300,000 lower D Decrease of 200,000 lower The answer is B. I understand the SE part. For the ROE, I understand that E is decreasing because of the repurchase so ROE is higher, but kind of wondering, where’s the money to for the repurchase from? isn’t it from NI? In that case, shouldn’t ROE lower instead of higher as NI is decreasing more than Equity? 2. How will cash flow from operations be affected by increase in inventory and LT loans? increase in inventory increase in LT loans A decrease increase B decrease no effect C decrease decrease D increase decrease The answer is B. I don’t have problem with the first part. For the 2nd part, if LT loans increased, shouldn’t int exp increase? If that’s the case, shouldn’t CFO decrease instead of no effect?