Question

the share buyback program beneficial to the community at large.

could you please tell me some idea. can I write " share buyback may result in decreasing share price and help consumers to have the ability to buy Apple product and improve their economic issue? but I can't find the source. "the community at large" is mean that the benefit of the social. right!

have a good day

Answer 1

Share buyback refers to the purchasing of own shares i.e company purchases its own shares.

The share buyback program is beneficial to the community at large but it depends upon the circumstances like if the company in future is on the verge of winding up or liquidate then the buyback is the best option and is beneficial for the community at large. The indications of liquidation or winding up can be obtained from the company's performance and its inability to recover the cost of equity.

Apart from the above mentioned reason buyback initially or for short term results in an increment in stock price due to increase in Earning per share. EPS increases because the number of shareholders reduces but in the long term it goes down.

Let us illustrate this with an example.

For Example

XYZ Ltd. bought back 2 million shares for $ 5 billion dollars at an average price of $2.5 per share

With fewer shares out there, earnings per share increased resulting in the decrease in the book value per share Although each shareholder got a bigger share of the amount, the amount itself became smaller when XYZ Ltd. spent a lot of money on the buybacks.