Question

The characteristics of stock repurchases and dividends and their impact on financial metrics

Answer 1

STOCK REPURCHASE AND DIVIDENDS

Share repurchasing can be considered as the company buyback its shares from the market incase of share get undervalued or that kind of problem. If the company feels that the share doesn't have enough value in the market then they will go for buyback of shares. This is known as stock repurchase.The main advantage of buyback is company can reduce its outstanding share in the market. Mainly the company doing the process in two different way. Sometimes company directly purchase their shares from the market or company ask share holders for delicate the shares to the company. By this way company will able to repurchase their share and they hold it with their hand for incresing the demand of the shares and they will issue it when the shares have more demand in the market. But we should consider other think that there is always a risk is there that the company share price may fall after the buyback. Anyway it will help the company for making their financial records more perfectly or they can improve their financial statements. This is why companies doing share repurchase.

Shareholders are the owners of the company and they are providing the funds for the functioning of business. So company should give return to them. Companies usually gives return in terms of dividend or by buyback of shares. Some companies are doing in both way. Dividends are the part of profit that for the shareholders of the company. It may be in the form of cash and cash dividends are common in everywhere.There are some differents with paying dividends and using buyback. That is dividend payment always have a proper return and we should pay tax on the dividend recieved but for buyback the return can not identified because it is uncertain till the shares are sold. These are the differences with both this method of payment of return.

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