Generally, firms resort to repurchase of stock because:
I. Firms have accumulated large amount of excess cash
II. Firms want to change their capital structure
III. Firms want to substitute it for regular dividends
A) I only
B) II only
C) I and II only
D) III only

Question

Quizplus · Accepted Answer

Firms typically resort to stock repurchase due to accumulated excess cash that is not being utilized effectively. Additionally, they may want to change their capital structure by reducing the number of outstanding shares to increase earnings per share or return on equity. However, stock repurchase is not usually a substitute for regular dividends, as it does not provide a fixed income stream for investors.

Generally, Firms Resort to Repurchase of Stock Because