Deal of The Day! Hurry Up, Grab the Special Discount - Save 25% - Ends In 00:00:00 Coupon code: SAVE25
Welcome to Pass4Success

- Free Preparation Discussions
Mail Us support@pass4success.com
Location US
Mob_nav_barsMENU

CIMAPRA19-F03-1 Exam - Topic 1 Question 128 Discussion

A listed company is planning a share repurchase.The following data applies:* There are 10 million shares in issue* The share repurchase will involve buying back 20% of the shares at a price of $0.75* The company is holding $2 million cash* Earnings for the current year ended are $2 millionThe Directors are concerned about the impact that this repurchase programme will have on the company's cash balance and current year earnings per share (EPS) ratio.Advise the directors which of the following statements is correct?
B) The cash balance will decrease by 75% and EPS will increase by 25%.
A) The cash balance will decrease by 75% and EPS will decrease by 25%.
C) The cash balance will decrease by 20% and the EPS will decrease by 25%.
D) The cash balance will decrease by 20% and the EPS will increase by 25%.

CIMAPRA19-F03-1 Exam - Topic 1 Question 128 Discussion

Actual exam question for CIMA's CIMAPRA19-F03-1 exam
Question #: 128
Topic #: 1
[All CIMAPRA19-F03-1 Questions]

A listed company is planning a share repurchase.

The following data applies:

* There are 10 million shares in issue

* The share repurchase will involve buying back 20% of the shares at a price of $0.75

* The company is holding $2 million cash

* Earnings for the current year ended are $2 million

The Directors are concerned about the impact that this repurchase programme will have on the company's cash balance and current year earnings per share (EPS) ratio.

Advise the directors which of the following statements is correct?

Show Suggested Answer Hide Answer
Suggested Answer: B

by Daren at Jun 28, 2026, 01:47 PM

Limited Time Offer

25%

Off

Get Premium CIMAPRA19-F03-1 Questions as Interactive Web-Based Practice Test or PDF

Contribute your Thoughts:

0/2000 characters
Submit Cancel
Alex
9 hours ago
I feel the directors need to focus on EPS improvement.
upvoted 0 times
...
Leonora
6 days ago
So, option D sounds correct. Cash down 20%, EPS up 25%.
upvoted 0 times
...
Barbra
11 days ago
Exactly! EPS should actually increase if they reduce shares.
upvoted 0 times
...
Tina
16 days ago
Right! They’re buying back 20% of shares, so it’s not 75%.
upvoted 0 times
...
Phuong
21 days ago
Yeah, I agree. The cash balance will only decrease by 20%.
upvoted 0 times
...
Diane
26 days ago
I think option A is misleading. The cash balance won't drop that much.
upvoted 0 times
...
Shelia
1 month ago
Totally agree, buybacks can boost EPS if done right!
upvoted 0 times
...
Kerry
1 month ago
20% of 10 million shares is 2 million shares at $0.75 each.
upvoted 0 times
...
Nada
1 month ago
Wait, how can EPS increase if they're spending so much cash?
upvoted 0 times
...
Vannessa
2 months ago
I think EPS will actually go up, less shares means higher earnings per share!
upvoted 0 times
...
Audria
2 months ago
The cash balance will drop to $1.25 million after the buyback.
upvoted 0 times
...
Makeda
2 months ago
I’m a bit confused about the percentages. If they buy back 20% of shares, does that mean the cash balance drops by 20% of the total cash? I need to double-check that.
upvoted 0 times
...
Malcom
2 months ago
I practiced a similar question where the EPS increased after a buyback because fewer shares meant higher earnings per share. I wonder if that applies here too.
upvoted 0 times
...
Cristen
2 months ago
I think the cash balance will decrease by the total amount spent on the buyback, which is 20% of 10 million shares at $0.75 each. That sounds like $1.5 million, not 75%.
upvoted 0 times
...
Ryan
2 months ago
I remember that a share repurchase reduces the number of shares outstanding, which can affect EPS, but I'm not sure how it impacts cash balance directly.
upvoted 0 times
...

Save Cancel