The Profitability of a Firm's Purchase of Its Own Common Stock.

The article discusses the profitability of a firm's purchase of its own common stock. Acquisition-minded firms find that companies can frequently be bought more easily on an exchange of stock basis than for cash. The acquiring firm can issue new shares to effect the merger but sometimes it is expedient to buy outstanding stock and use it for this purpose. Another reason companies purchase their own shares is simply as an investment. The true growth company has attractive internal investment opportunities. This means it can invest its available funds in projects that promise a relatively high internal rate of return.