Final answer:
ABC purchasing its own common shares in the open market is an example of share buyback or stock repurchase. It can have various effects on the company and its shareholders.
Step-by-step explanation:
ABC purchasing its own common shares in the open market is an example of share buyback or stock repurchase. It is a common practice used by companies to reduce the number of outstanding shares in the market and increase the value of the remaining shares.
A share buyback can have several effects on the company and its shareholders. It can increase the earnings per share (EPS), improve financial ratios such as return on equity (ROE) and return on assets (ROA), and signal that the company believes its stock is undervalued.
However, share buybacks can also be seen as a way for companies to manipulate their stock prices or divert funds from other areas such as research and development or capital investments.