Why might a company repurchase its own stock?
A) It feels that the market undervalues its shares
B) To offset dilutive effects of employee stock options
C) To increase the number of shares outstanding
D) A and B

Question

Quizplus · Accepted Answer

Companies may repurchase stocks to send a 'signal' to the market that the stock is undervalued. The company may also repurchase shares to keep the outstanding shares constant in order to reduce the dilutive effect on earnings per share that may occur when employees exercise stock options. Treasury stock acquisitions decrease the number of shares outstanding.

Why Might a Company Repurchase Its Own Stock