Stock repurchases are appropriate when a stock is temporarily undervalued or the firm has excess cash.

Question

Stock repurchases are appropriate when a stock is temporarily undervalued or the firm has excess cash. ​

Quizplus · Accepted Answer

Stock repurchases can be a good use of excess cash or when a stock is undervalued, as it can increase the value of remaining shares and improve financial ratios such as earnings per share. However, it is important for companies to consider the long-term impact on their financial position and avoid excessive repurchases that may jeopardize their ability to invest in future growth.

Stock Repurchases Are Appropriate When a Stock Is Temporarily Undervalued