Buy Back of Shares MCQ

Buyback of Shares Questions and Answers:

Ques. ____ companies are permitted to buy back its shares
(a) Insolvent
(b) Solvent
(c) Both (a) & (b)
(d) None of the above

Ans. (b)

Ques. Which of the following can be used for buy back of shares
(a) Free reserves
(b) Securities premium
(c) Proceeds of fresh issue of shares
(d) All of the above

Ans. (d)

Ques. Buy back securities should be physically destroyed with in ____ days
(a) 7
(b) 17
(c) 21
(d) 28

Ans. (a)

Related: definition of Cheque

Ques. After buy back company can’t issue the same kind of shares for __ months
(a) 6
(b) 12
(c) 18
(d) 24

Ans. (a)

Ques. In case of company opting for buy back of own shares. It should pass resolutions through postal ballot
(a) Yes
(b) No

Ans. (a)

Ques. If buy back is made from free resources then what should be created___
(a) Debenture Redemption Reserve
(b) Capital Redemption Reserve
(c) Statutory liquid Ratio
(d) None of the above

Ans. (b)

Related: Contracts multiple choice questions and answers

Ques. Every buy back shall be completed with in___ month from the date of passing the S.R.
(a) 6
(b) 8
(c) 10
(d) 12

Ans. (d)

Ques. Buy back by board resolution can only be upto_____
(a) 15
(b) 10
(c) 25
(d) 20

Ans. (b)

Ques. In case of buy back debt equity ratio should be____
(a) 1 : 2
(b) 2 : 1
(c) 3 : 1
(d) 1 : 3

Ans. (b)

Related: Worlds biggest Stock exchanges

How Do Share Buybacks Benefit a Company?

One of the questions that arise is: How do share buybacks benefit a business? These actions help companies to reduce their share count without diluting existing shareholders. They also increase the demand for stock, which in turn increases the price. Stock prices are determined by supply and demand, and share buybacks create the demand necessary for increased stock prices. In addition, buybacks help companies to reward employees with lucrative compensation. However, if the stock buyback process is too frequent and excessive, it can dilute existing shareholders’ stakes in the company.

A company may believe that it can reap additional value by buying back its shares, but this information is not always accurate. Share buybacks can create problems, because they can conflict with the company’s intended message. However, in most cases, this problem is not significant and the buyback program can benefit the company. By allowing employees to retain their current positions and earning potential, a company can boost its earnings and market share.

One of the primary benefits of share buybacks is the growth in shareholder value. Share buybacks are especially relevant when a stock has suffered a sharp correction. The company may have to pay off its debt in order to fund these repurchases, which signals a bottom in the market. This can also be a positive factor for a company that wants to keep its share price high.

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Jaspreet (Masters in Commerce-LLB) not only have exceptional command of Accounts and Commerce subjects but also have keen interest in Law. He is consistent in producing high quality assignments.

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