What happens when a company buys its own shares?

Question

Why does this reduce capital, and why does this reduce the company’s ability to pay creditors?

In: 141

Answer 1

Use profits to increase share price for investors and pay less tax on profits. Then get greedy, do it too much, artificially inflate share price, have no safety net, something bad happens, ask the government for a bailout using tax payer money, profit.