Which of the following is a method a company can use to raise its stock price?

• A. Cutting dividends
• B. Repurchasing stock
• C. Issuing more shares
• D. Reducing marketing expenses

Answer: (B)

Repurchasing stock is a method that companies can use to raise their stock price due to a few key reasons. When a company buys back its own shares, it reduces the number of shares outstanding in the market. This reduction increases the earnings per share (EPS) since the company's profits are now distributed over a smaller number of shares. Investors often view share repurchases as a sign that the company is confident in its future prospects, which can lead to increased demand for the stock, thereby driving up the stock price.

Additionally, stock buybacks can signal to the market that the company believes its shares are undervalued, further encouraging investors to purchase the stock. Companies might also choose to repurchase shares rather than paying dividends, as this can provide a more favorable tax treatment for shareholders and maintain capital for future growth.

In contrast, cutting dividends may suggest financial instability and can lower investor confidence, ultimately causing the stock price to decrease. Issuing more shares can dilute the value of existing shares, leading to a decrease in stock price. Reducing marketing expenses might save costs in the short term but could negatively impact future revenue growth, making it less effective as a strategy to raise stock prices. Thus, stock repurchase stands out as a proactive approach to increase