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    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?
    A Both increase Correct Answer Incorrect Answer
    B Share capital remains unchanged, reserves increase Correct Answer Incorrect Answer
    C Share capital and reserves decrease Correct Answer Incorrect Answer
    D Only reserves decrease Correct Answer Incorrect Answer

    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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