If you ignore taxes and transaction costs, a stock repurchase will reduce the total equity of a firm.

Name: If you ignore taxes and transaction costs, a stock repurchase will reduce the total equity of a firm.
Brand: Quizplus
Rating: 4.9 (39 reviews)

Question

Quizplus · Accepted Answer

When a company repurchases its own stock, it uses cash (an asset) to buy back shares, which reduces the total shareholders' equity on the balance sheet because it decreases both assets (cash) and equity (shares outstanding are reduced).

If You Ignore Taxes and Transaction Costs, a Stock Repurchase