A company has accumulated a significant amount of excess cash which is not required for...

CIMA F3 Question Answer

A company has accumulated a significant amount of excess cash which is not required for investment for the foreseeable future.

It is currently on deposit, earning negligible returns.

The Board of Directors is considering returning this excess cash to shareholders using a share repurchase programme.

The majority of shareholders are individuals with small shareholdings.

Which THREE of the following are advantages of the company undertaking a share repurchase programme?

Individual shareholders can realise their investment if they wish.

The earnings per share should increase for the shareholders who do not sell their shares.

It reduces excess cash which might have been attractive to predators.

It reduces the amount of cash for potential future investment opportunities.

Institutional investors generally prefer a constant predictable income in the form of dividends.

CIMA F3 Summary

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