What is a stock buyback?

A stock buyback refers to a situation where a company repurchases its own shares from the marketplace. This action results in a reduction of the number of outstanding shares available to investors. There are several reasons a company might engage in a buyback, including the intention to increase shareholder value, improve earnings per share (EPS) by reducing the denominator in the EPS calculation, or to use excess cash effectively. By decreasing the number of shares in circulation, the company can also have a positive impact on its stock price, assuming demand remains constant or increases.

In the context of the other potential answers, they do not accurately capture the definition of a stock buyback. Increasing company debt, selling additional shares, or acquiring another company are distinct financial activities with different implications and objectives. A stock buyback is specifically focused on the repurchase of shares rather than these other financial maneuvers.