Isn't a stock repurchase the "lazy management"

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Wnfvz80

Business Finance

Description

Isn't a stock repurchase the "lazy management" way of utilizing the excess cash?   Isn't there better ways to invest the money in the company to get better returns in the long run for the stockholders?

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Explanation & Answer

Thank you for the opportunity to help you with your question!

Stock repurchases in organizations mean the following.

That the organization has no new opportunities that it deems fit to invest in. Therefore the only way to use the excess proceeds is to repurchase the stock and reduce any potential debt burden.

More so, this means that the organization wants to restructure the capital structure.

Due to these two reasons therefore, this is a lazy management approach to utilize the excess reserves it has. Instead, the company should invest in any investment that has positive returns irrespective of the size of returns.

Please let me know if you need any clarification. I'm always happy to answer your questions.


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