Case study 5:

Scenario 1:

ABC S.A.O.G was incorporated with an authorized capital of 300 million shares, ordinary shares of 500 baiza each. The company has in issue 100 million shares. On 15-january-2017 the company has repurchased 8 million shares at the rate of 3.250 each after the completion of all the requirements posed by capital market Authority-CMA. The company re issued such shares in the march 2018 @ rate of 4.000 R.O per share. The general rules set by CMA is that the company cannot repurchase more than 10% of its share capital at one time and there should be a minimum gap of 2 years between any repurchase. On 13-february-2020, the company again has repurchased 10 million shares at the rate of R.O 4.550 each.

Analyse the above situation and answer the following questions:

1. Explain in your own words impact of each repurchase on companys share capital? Justify it with proper calculations? (1.5 marks-Min 75 words)
2. Has the company carried out the procedure of repurchase within the guidelines of CMA or not? Justify your answer with necessary data? (1.5 marks-Min 75 words)
3. What is the impact on corporations financial statements if all of such repurchased stock is reissued in the year 2020 @ R.O 4.000 each (2 marks-Min 100 words)