1. (a) Explain Why the companies buy back their own shares. How it is different from issue of bonus shares Answer: Buy back of shares means purchase of its own shares by a company. When shares are bought back by a company, they have to be cancelled by the company. Thus, shares buy back results in decrease in share capital of the company. A company cannot buy its own shares for the purpose of investment. A company having sufficient cash may decide to buy back its own shares. The following may be the Objectives/Advantages of Buy-Back of shares: (a) to increase earning per share if there is no dilution in company’s earnings as the buy-back of shares reduces the outstanding number of shares. (b) to increase promoters holding as the shares which are bought back are cancelled. (c) to discourage others to make hostile bid to take over the company as the buy back will increase the promoters holding. (d) to support the share price on the stock exchanges when the share price, in the opinion of