Buy Back of Shares

5524 Words Oct 24th, 2010 23 Pages
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“Buy Back of Shares”

Contents

|Sr.No. |Topic |Page No. |
|1. |Introduction |1 |
|2. |Share buyback- An Overview |2 |
|3. |Share buyback: Positive Aspects |3 |
|4. |Share buyback: Negative Aspects |4 |
|5. |Which
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The repurchase of shares reduces the number of shareholders, which in turn enhances the earnings per share (EPS), and thus improves investors sentiments.

SHARE BUY BACK: AN OVERVIEW
SHARE BUY-BACK: OBJECTIVES
A company may decide to buy back its shares for one of the following reasons:

➢ To return surplus cash to shareholders as an alternative to a higher dividend payment or investing the surplus cash in existing or new operations.

➢ Adjust or change the company’s capital structure quickly, say for those companies seeking to increase its debt/equity ratio.

➢ To increase earnings per share and net asset value per share as a possible signal to the market place that management is of the view that the prospects of the company justify a market price higher than that currently accorded by the market.

➢ To improved the various performance parameters like EPS,DPS, operating cash flow per share, etc.

➢ To thwart the attempts of a hostile takeover.

SHARE BUY-BACK: POSITIVE ASPECTS

➢ The market generally interprets share buy-backs as positive signal.

➢ Shareholders have a choice of deciding whether or not to receive the payout by selling or holding their shares, unlike a dividend payout.

➢ Returning excess cash by way of a share buy-back gives a company greater flexibility with regard to its dividend policy

➢ Share buy-backs could enable a company to achieve its desired capital structure more

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