Fin 600 homework question | Business & Finance homework help
It is possible, however that investors might perceive Executive Chalk’s move as an indication that Executive Chalk could not be financially stable and therefore want to avoid additional risk in uncertain times. If too many investors feel this way then there could be a decrease in demand for the company’s stock, leading prices to drop instead.
Importantly, companies that borrow large amounts of money will often have to pay interest and dividends. If they cannot use the funds elsewhere to make higher revenue or reduce costs, this can lead to a reduction in their profit margins. As such, if Executive Chalk’s buyback fails to create enough value over time then shareholders may decide sell off their stocks at lower prices – resulting in an overall decline in market value even if short-term gains have been made initially due to investor speculation.
In conclusion then, while it is difficult predict precisely how much impact Executive Chalk’s decision will have on its share price without further information about its strategy and management plans going forward – any changes will likely be influenced by both investor confidence as well as longer-term financial performance considerations.