MCQ on Buy Back of Shares
[Multiple Choice Questions and Answers]
In this page, you will get MCQ on Buy Back of Shares which are useful for AHSEC and CBSE Class 12, B. Com and Various Professional Exams Like CA/CMA and CS.
We update this page frequently to add new questions. Chapter wise Corporate Accounting MCQs are also included in this post.
In this page, you will get MCQ on Buy Back of Shares which are useful for AHSEC and CBSE Class 12, B. Com and Various Professional Exams Like CA/CMA and CS.
We update this page frequently to add new questions. Chapter wise Corporate Accounting MCQs are also included in this post.
Introduction to Buy Back of Shares
MCQ on Buy Back of Shares
Choose the correct
answer to the following questions from the given alternatives:
1. As per section 68 of the Companies Act,
2013, a company can buy back its own shares out of:
a)
Free Reserves which are available for distribution as dividend.
b)
Securities premium account.
c)
Proceeds of fresh issue of shares or other specified securities.
d)
All of the above.
Ans: d) All of the
above.
2. Maximum buy back limit in any year
is ______ of total paid up equity capital and free
reserves of the company.
a)
25%.
b)
10%.
c)
20%.
d)
No limit.
Ans: b) 10%.
3. Maximum buy back limit in any year
is ______ of total paid up equity capital.
a)
25%.
b)
10%.
c)
20%.
d)
No limit.
Ans: a) 25%.
4. According to Sec. 68(5) of the
Companies Act, 2013, the buyback can be made from:
a)
From the existing shareholders on a proportionate basis.
b)
From open market.
c)
From employee to whom shares are issued under stock option or sweat equity
share.
d)
All of the above.
Ans: d) All of the
above.
5. Further issue of shares after buy
back can be made for:
a)
Conversion of debentures or preference shares into equity shares.
b)
Bonus issue and Conversion of warrants.
c)
Stock option schemes.
d)
All of the above.
Ans: d) All of the
above.
6. A company cannot buy back its
shares:
a)
Through its subsidiary.
b)
Through investment or group of investment companies.
c)
If default in repayment of debt or interest is subsist.
d)
All of the above.
Ans: d) All of the
above.
7. If shares are bought back out of
free reserves then a sum equal to nominal value of the shares so bought back is
transferred to:
a)
Capital reserve account.
b)
Capital redemption reserve account (CRR).
c)
General reserve account.
Ans: b) Capital
redemption reserve account (CRR).
8. Premium payable on buy back is
adjusted out of:
a)
Securities premium account.
b)
Free reserves.
c)
Both of the above.
d)
None of the above.
Ans: c) Both of the
above.
Also Read: Corporate Accounting MCQs Chapterwise
Issue and Redemption of Debentures MCQs
Redemption of Preference Shares MCQs
Amalgamation and External Reconstruction MCQs
MCQs on Liquidation of Companies
9. For cancellation of shares at the
time of buy back:
a)
Equity share capital a/c is debited and shareholders account is credited.
b)
Shareholders account is debited and Equity share capital account is credited.
c)
Equity share capital is debited and CRR is credited.
d)
Equity share capital is debited and Shares Surrendered is credited.
Ans: b) Shareholders
account is debited and Equity share capital account is credited.
10. Which of the following statement
is false?
a)
Buy back must be authorised by articles of company.
b)
A special resolution must be passed for buy back.
c)
Shares can be partly paid up.
d)
The ratio of debt owed by the company is not more than twice the capital and
its free reserves after such buy back.
Ans: c) Shares can be
partly paid up.
11. When a company completes buyback
of its shares, it cannot further issue same kind of shares within a period of:
a)
6 moths
b)
1 year
c)
2 years
d)
5 years
Ans: a) 6 months
12. Which of the following is not a
free reserve for the purpose of buyback of shares?
a)
General reserves
b)
Surplus
c)
Dividend equalisation reserves
d)
Revaluation reserve
Ans: d) Revaluation reserve
13. The company should open which
account with bank to provide fund for buyback?
a)
Demat Account
b)
Bank Account with merchant banker
c)
Escrow Account
d)
None of the above
Ans: c) Escrow
Account
14. Before buyback the company shall
file with the Registrar and SEBI:
a)
A declaration of solvency
b)
A declaration of Insolvency
c)
A prospectus
d)
MOA and AOA
Ans: a) A declaration
of solvency
15. The debt equity ratio after
buyback must not be more than:
a)
1:1
b)
2:1
c)
1:2
d)
5:2
Ans: b) 2:1
16. Which of the following are methods
of buy back?
a)
Open market offer
b)
Tender offer
c)
Both a & b
c)
None of the above
Ans: c) Both a &
b
17. Which of the following reserves
are not available for buy back?
a)
Capital redemption reserve
b)
Share forfeited account
c)
Profit prior to incorporation
d)
all of the above
Ans: d) all of the
above
18. Which of the following is not a
condition of buy-back of securities?
a)
Both fully and partly paid-up securities can be bought back.
b)
Buy-back must be authorised by the articles of association.
c)
Buy-back must be authorised by passing a special resolution in general meeting.
d)
Buy-back should be completed within 1 year from the state of passing of special
resolution.
Ans: a) Both fully
and partly paid-up securities can be bought back.
[Note: The proviso to Section 68(1) specifies that “no buy-back of any kind of shares or other specified securities shall be made out of the proceeds of an earlier issue of the same kind of shares or same kind of shares or same kind of other specified securities.”]
19. The amount paid in excess of face
value of shares bought back should be debited to:
a)
General reserve account
b)
Securities premium reserve account
c)
Buy back premium account
d)
Capital redemption reserve account
Ans: c) Buy back
premium account
20. Buy back premium is adjusted with:
a)
Securities premium reserve
b)
General reserve account
c)
Surplus account
d)
All of the above
Ans: d) All of the above
21. According to sec. 68 (4), the buy-back
can be made from:
a) From the existing shareholders on a proportionate basis
b) From open market
c) From employee to whom shares are issued under stock option or sweat
equity share
d) All of the above
Ans: d) All of the
above
22. Further issue of shares after buy back
can be made for:
a) Conversion of debentures or preference shares into equity shares
b) Bonus issue and Conversion of warrants
c) Stock option schemes
d) All of the above
Ans: Ans: d) All of the
above
23. For cancellation of shares at the time of
buy back:
a) Equity share capital a/c is debited and shareholders account is
credited
b) Shareholders account is debited and Equity share capital account is
credited
c) Equity share capital is debited and CRR is credited
d) Equity share capital is debited and Shares Surrendered is credited
Ans: b) Shareholders
account is debited and Equity share capital account is credited
24. As per SEBI Guidelines, modes of
Buy-Back: Buy-back is permissible:
a) From the existing security holders on a proportionate basis through
the tender offer; or
b) From the open market through i. Book-building process, ii. stock
exchange;
c) From odd lots, that is to say, where the lot of securities of a
public company whose shares are listed on a recognized stock exchange is
smaller than such marketable lot as may be specified by the stock exchange:
or
d) By purchasing the securities issued to employees of the company
pursuant to a scheme of stock option or sweat equity.
e) All of the above mentioned statements are correct
Ans: e) All of the above mentioned statements are
correct
25. If shares are bought back out of free
reserves then a sum equal to nominal value of the shares so bought back is
transferred to:
a) Capital reserve account
b) Capital redemption reserve account (CRR)
c) General reserve account
d) Forfeited shares account
Ans: b) Capital redemption reserve account (CRR)
MCQ on Buy back of shares
State the following statements
whether ‘true’ or ‘false’
1.
Maximum one buy back is allowed in a period of 365 days. True
2.
A company cannot purchase its own shares. True
3.
Declaration of solvency is required to be submitted to SEBI and Registrar before
making buy back. True
4.
After buy back, further issue of same kind of shares or specified securities
can be made within 24 months. False
5.
Buy back of shares is allowed out of fresh issue of shares of the same kind. False
6.
The ratio of the debt owned by the company is not more than twice the capital
and its free reserves after such buyback. True
7.
Buying shares is the most common way to become member of the company. True
8.
Partly paid-up shares can be bought back. False
9.
A company cannot buyback the shares issued to employees of the company under
ESOP. False
10.
Buyback of shares can be made if there is no authorization in the article but
with a special resolution to be passed in the general meeting. False
11.
Surplus cash may be utilized by the company for
buy-back and avoid the payment of dividend
tax. True
12. Where a company purchases its own shares out of free reserves, then
a sum equal to the nominal value of the share so purchased shall be transferred
to the capital redemption
reserve. True
13. Buy back must be authorised by its
articles. True
14. A special resolution has been passed in the general meeting of
the company authorising the buy-back. True
15. No special resolution is necessary if buyback is or less than ten
percent of the paid up capital and free reserves. True
16. Only fully paid-up
share can be bought
back. True
17. Buy back must be
completed within 3 months from the date of passing of the special resolution or
resolution passed by the board. False, 12
Months
18. A company after buy
back shall not make a further issue of the same kind of shares or other
securities. True
19. Price at which shares
shall be bought back has to be determined by shareholders through a special
resolution. True
20. As per SEBI Guideline,
Buy-back offer shall remain open for not less than 15 days and not more than 30
days. True
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