CFA Practice Question

There are 60 practice questions for this topic.

CFA Practice Question

Which of the following would not be considered a disadvantage of a stock repurchase?

A. They may not have the same positive effect on stock prices that a cash dividend would have.
B. They may invite lawsuits from stockholders who had insufficient information about future prospects before selling.
C. The firm may pay too high a price for the repurchased stock.
D. They signal management's perception that the company's stock is currently undervalued.
Correct Answer: D

One of the advantages of a stock repurchase is that it may signal management's perception that the firm's stock is undervalued.

User Contributed Comments 4

User Comment
quynhnk79 Why B is correct? (in a sense that it would be considered as disadv? ) Is it inviting lawsuit? Why it could be?
thekapila it is a disadvantage if lawsuit is filed against corporation.
tichas @quynhnk79, look out for questions with double negatives and in this case ,not be and disadvantage.
nzee good example of tricky question for those who sleep during exams !
You need to log in first to add your comment.