The net effect of a stock repurchase is ________.
A) similar to an interest payment
B) similar to a cash dividend
C) similar to a stock split
D) similar to a reverse stock split

Question

Quizplus · Accepted Answer

A stock repurchase is similar to a cash dividend in that it is a way for a company to return value to its shareholders. However, while a cash dividend is a distribution of earnings paid out to shareholders, a stock repurchase involves the company buying back some of its own outstanding shares on the open market. This reduces the number of outstanding shares and theoretically increases the value of each remaining share.

The Net Effect of a Stock Repurchase Is ________