Description: Critics may say that share buybacks take away from resources for future growth. But in his latest letter to shareholders of Berkshire Hatheway, Warren Buffet argues that buybacks can be a good move, as long as the price is right. One purpose of the buyback can be for management to signal concerns that the share price is undervalued.
Date: March 20, 2017; updated March 21, 2017
1) Where can you read about share buybacks in Wiley’s Kimmel, Financial Accounting: Tools for Business Decision-Making, Sixth Canadian Edition?
2) After reading through the article, what is your feeling on use of share buybacks?
3) Buffet says “both American corporations and private investors are today awash in funds looking to be sensibly deployed.” This seems to be an enviable situation for a business. But what are the dangers of too much cash?