NISM Certifications · NISM-Series-XV: Research Analyst · Terminology in Equity and Debt Markets
Which term describes the practice of a company buying back its own shares from the market or shareholders, thereby reducing the number of shares outstanding?
The practice is called a share buyback. The company repurchases its own shares, reducing the number outstanding. Rights issues, bonus issues and stock splits all increase the share count rather than reducing it.
- AShare buybackCorrect
- BRights issue
- CBonus issue
- DStock split
Explanation
A buyback reduces outstanding shares by the company repurchasing them. Rights and bonus issues increase shares, and a split increases the number of shares by reducing face value without any repurchase.
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