When will a company repurchase shares of its common stock in the financial markets?

Question

Quizplus · Accepted Answer

If a firm has excess cash but no good investment opportunities, it may choose to repurchase its shares of common stock in the financial markets. This can provide a return to shareholders while also decreasing the number of outstanding shares, which can increase the value of the remaining shares. Option A is not necessarily a reason for a company to repurchase shares as it may wait for the stock's price to decrease. Option B is incorrect because repurchasing shares would actually increase ownership control if the number of shares outstanding decreases. Option D is not necessarily a reason for a company to repurchase shares as it may choose to hold onto its cash for other uses. Option E is a misconception as capital gains can still provide returns for shareholders even if the firm repurchases shares.

When Will a Company Repurchase Shares of Its Common Stock