Question

Write a one-page short essay on one of these topics: H3.1 Many large companies have been...

Write a one-page short essay on one of these topics:
H3.1 Many large companies have been buying back shares in recent years. What are the consequences of this for the company’s balance sheet? What does it mean for shareholders?

H3.2 There has been a lot of discussion about the inversion of the yield curve this year. What is the significance of this?

Homework Answers

Answer #1

H3.1 One of the main consequences of buy back of shares on company's balance sheet is consequent to repurchase of shares of the company the cash holdings of the company will reduce and thus it will ultimately reduce the overall assets total in the balancesheet on the otherhand the shareholders equity will be shrink with the same amount which leads to reduction in the equity and libility side of the balance sheet.

For shareholders buy back is great thing as after buy back they own a bigger proportion of the company which means more earnings and cash flows to the shareholders.

H3.2 It represents thta the long term debts instruments are yielding lower than short term debt instruments having same credit quality.It is an indicator of pending economic recession which suggests long term outlook of the economy is poor in comparison to the short term period.

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