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Politics : Ask Michael Burke
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To: valueminded who wrote (61343)6/3/1999 2:56:00 PM
From: Freedom Fighter  Read Replies (1) of 132070
 
Chris,

>>Companies believe that their return on equity (read return on borrowings) is in excess of the interest they are paying so it is a good deal.<<

By return on equity do you mean return on tangible assets or the return on the shares themselves?

If it's the former, you have to keep in mind that for most businesses current stock prices are far in excess of the equity invested so the return on share repurchases is much lower than the return on the capital of the business. They are buying back shares, not a portion of the actual equity.

(maybe this is what you meant. just trying to clarify.)

Wayne



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