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Share Splits and Buybacks of Shares in Corporations, Slides of Financial Management

Aligarh Muslim UniversityFinancial Management

The process of share splits, which is the process of splitting shares with high face value into shares of a lower face value. It also explains the significance of share splits and how it can improve market liquidity and generate greater investor interest. Additionally, the document explains the concept of buybacks, which is when a company buys its own outstanding shares to reduce the number of shares available on the open market. It also outlines the reasons why companies may choose to do buybacks and the SEBI guidelines for buybacks of shares.

Typology: Slides

2022/2023

Available from 03/11/2023

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SURPLUS CASH CAN BE

USED FOR :-

  1. Pay high dividend
  2. Invest in securities
  3. To acquire other companies
  4. Use the cash for buy back

ADVANTAGES :-

 To increase the EPS ( earning per share ) EPS = EARNINGS / NO OF SHARES. EXAMPLE – ₹10,00,000 /11,00,000 = 0. ₹10,00,000 /8,00,000 = 1.  To increase promoters holdings.  To support share price.  To pay surplus cash to shareholders.

SEBI GUIDELINES FOR

BUYBACK OF SHARES :-

 Debt-Equity ratio test – after buy back debt equity ratio test cannot be more than 2:1.  All the shares must be fully paid up.  (^) Free reserves also include security premium.  Buy back can be out of either free reserves or fresh issue.

THANK YOU