With a stock repurchase:
A)no cash flow is extended from the company.
B)the company obtains some of its stock, and the value of the firm drops.
C)shareholders' ownership in the company will decrease.
D)the equity of the firm will increase.

Question

Quizplus · Accepted Answer

A stock repurchase involves a company buying back its own shares from the marketplace, which reduces the amount of outstanding stock and can increase the value of remaining shares. However, the value of the firm does not drop due to the repurchase itself; instead, the company's cash reserves decrease by the amount used for the repurchase, affecting the equity side of the balance sheet by reducing it.

With a Stock Repurchase