As we know,companies can reward their shareholders in two main ways;
i)By paying Dividends
ii)By buy back of shares.
A share buyback refers to the purchase by a company of its shares from the marketplace.The biggest benefit of shares buyback is that it reduces the number of shares outstanding for a company.Shares repurchase usually increases per share measure of profitability like EPS(Earning per share) and cash flow per share and also improve performance measures like return on equity.These improved metrics will generally drive the shares price higher over time,resulting in capital gains for the shareholders.However,these profits will not be taxed until the shareholders sells the shares and realize the gains made on the shareholdings.
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