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About this document
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- 2 pages
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- $2 one-time, yours to keep
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- Subject
- Accounting, Business, Ethics
This case study discusses the ethical implications of a share buyback proposal. It explores how a buyback can affect earnings per share, and who would be affected by such a decision. It is useful for studying business ethics and accounting principles.
What's inside
- Share buyback and EPS
- Ethical dilemma of share buyback
- Stakeholders affected by share buyback
- Alternative use of funds
- Impact of share buyback on financial statements
Who it is for: Students taking ACC 306, or studying business ethics and accounting. (Undergraduate)
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Summary
Share buybacks involve a company repurchasing its own shares. Students learn how this can affect earnings per share and consider the ethics of such a move.
Background: International Network Solutions
The company has grown fast. The growth has slowed. The company's earnings and profits are flat. Two senior executives consider a share buyback.
Immediate effects of a buyback
A repurchase of shares can increase earnings per share. The timing of the buyback affects this. The effect is lessened the closer it is to the end of the year.
Ethical considerations
The company could use the money for other purposes. A share buyback might not be the best use of funds. The executives consider the ethics of the decision.
Who would be affected
The decision would affect many groups. These include managers, shareholders, potential shareholders, employees and creditors.
Key terms
- share buyback
- A company repurchasing its own shares.
- earnings per share
- A company's profit divided by the number of shares.
- time-weighted
- A way of calculating the effect of a buyback over time.
- ethical dilemma
- A difficult choice between two options, both of which have ethical considerations.
- European expansion
- Growing the company's business in Europe.
- issue notes
- Raise money by selling debt.
Questions this document helps with
- How does a share buyback affect earnings per share?
- Who makes money from a share buyback?
- What are the ethical issues in a share buyback?
Summary written with AI from the document's text.
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