Question
XYZ Ltd. plans a buyback of 10 lakh equity shares at
₹200 each. Face value is ₹10. The company will use reserves for this. What impact will it have on share capital and reserves?Solution
Buyback reduces share capital (to the extent of face value) and reserves (to the extent of premium paid). Here, ₹10 crore goes from share capital and ₹190 crore from reserves.
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