The net effect of a stock repurchase is
A) similar to a stock split.
B) similar to the payment of a stock dividend.
C) similar to a cash dividend.
D) similar to a reverse stock split.

Question

Quizplus · Accepted Answer

A stock repurchase involves a company buying back its own shares from the market, which reduces the number of outstanding shares. This typically increases the earnings per share and can lead to a higher stock price. However, unlike a stock split or stock dividend, it does not increase the number of shares held by shareholders. Instead, shareholders who sell their shares back to the company receive cash, which is similar to a cash dividend. Therefore, option C is the best choice as a stock repurchase is most similar to a cash dividend.

The Net Effect of a Stock Repurchase Is