An alternative to a cash dividend payment by the ﬁrm from its earnings to the shareholders, achieved by the ﬁrm buying some of its outstanding stock on the open market, is a:

Question

Quizplus · Accepted Answer

A share repurchase, also known as a stock buyback, is when a company buys its own shares on the open market, reducing the number of outstanding shares. This can have the effect of increasing the value of the remaining shares and improving earnings per share. It is an alternative to a cash dividend payment as it allows the company to distribute earnings to shareholders without incurring the tax liabilities associated with dividends.

An Alternative to a Cash Dividend Payment by the ﬁRm