When L'oreal, a beauty product company, buys back its own shares with its transactional bank account, ____________________________.A.its liabilities decreaseB.it reallocates its assetsC. its balance sheet shrinksD.its shares on issue increaseE. its accumulated profit increases if the price of the share has increased since the issue of the shares

The correct answer is C. its balance sheet shrinks.

Here's why:

A. Its liabilities decrease. This is incorrect. Buying back shares does not affect a company's liabilities. Liabilities are what a company owes, and buying back shares does not reduce what the company owes.

B. It reallocates its assets. This is incorrect. While the company is using its assets (cash in its transactional bank account) to buy back shares, this does not necessarily mean it is reallocating its assets. It is simply using its cash to reduce its outstanding shares.

C. Its balance sheet shrinks. This is correct. When a company buys back its own shares, it reduces the number of its outstanding shares. This means the equity section of its balance sheet decreases. At the same time, the company is using its cash (an asset) to buy back the shares, so its assets decrease as well. As a result, both sides of the balance sheet shrink.

D. Its shares on issue increase. This is incorrect. When a company buys back its own shares, the number of shares on issue decreases, not increases.

E. Its accumulated profit increases if the price of the share has increased since the issue of the shares. This is incorrect. The company's accumulated profit is not affected by the buyback of shares. Accumulated profit is the total net income of the company since its inception, minus any dividends paid. The buyback of shares does not affect this figure.