When a firm repurchases shares the supply of shares is ________ but at the same time the firm's assets ________.

Question

Quizplus · Accepted Answer

When a firm repurchases shares, it reduces the supply of shares available in the market. This reduction leads to a decrease in the number of outstanding shares which results in an increase in the earnings per share of the remaining shares. At the same time, the firm's assets decline because it is using its cash reserves to fund the share buyback. Therefore, the correct option is A, where the supply of shares reduces, and the assets decline.

When a Firm Repurchases Shares the Supply of Shares Is