waht is the impact of a stock repurchase on a companys debt ratio? Does this suggest another use for excess cash?

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When a company repurchases its own stock, it shows an excess of cash and boosts the price of the stock.

financial management

The impact of a stock repurchase on a company's debt ratio depends on how the repurchase is financed. If the company uses its excess cash to repurchase its stock, it does not affect the company's debt ratio directly. However, if the company borrows money to repurchase its stock, it can increase the company's debt and therefore increase its debt ratio.

When a company repurchases its own stock, it suggests another use for excess cash. Instead of keeping the extra cash on hand, which may not provide a high return, the company can use it to buy back its own shares. By reducing the number of outstanding shares in the market, this can boost the earnings per share (EPS) and potentially lift the stock price. Therefore, a stock repurchase can be seen as a way to enhance shareholder value and use excess cash efficiently.

To calculate the impact of a stock repurchase on a company's debt ratio, you would need to know the amount of debt incurred, the amount of cash used for repurchasing shares, and the company's total assets and total liabilities. You can calculate the debt ratio by dividing the company's total debt by its total assets. If the repurchase is not financed by any additional borrowing, the debt ratio would remain unchanged.