Answer: To signal that the company's prospects are positive

## Explanation Share repurchases are often used by companies to signal positive future prospects to the market. When a company announces a share repurchase program, it typically indicates that management believes the company's shares are undervalued and that the company has sufficient cash flow and confidence in its future earnings to return capital to shareholders. **Key points:** - **Option B (Correct)**: Share repurchases can signal management's confidence in the company's future prospects and that they believe the stock is undervalued - **Option A**: Share repurchases actually decrease equity, which typically increases financial leverage rather than decreasing it - **Option C**: While share repurchases can create expectations, this is not the primary motivation compared to signaling positive prospects Share repurchases provide flexibility to management and can be viewed as a more tax-efficient way to return capital to shareholders in some jurisdictions.

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