What effect will the acquisition of treasury stock have on a company's earnings per share? (NIE 12) There is not enough information provided to answer this question Decrease No effect Increase
Answer:-
increase
Explanation:-
The acquisition of treasury stock will typically have the effect of increasing a company's earnings per share (EPS).
Treasury stock is stock that a company has repurchased from its shareholders and is holding in its treasury. When a company acquires treasury stock, it reduces the number of outstanding shares, which means that the company's earnings are spread over a smaller number of shares. This, in turn, increases the earnings per share for the remaining shares.
Example:-
For example, if a company has earnings of $1,000,000 and 1,000,000 outstanding shares, its earnings per share would be $1.00. If the company uses $100,000 to buy back 100,000 shares, it would then have 900,000 outstanding shares. The earnings per share would increase to $1.11 ($1,000,000 ÷ 900,000 shares).
So, the answer to the question is "Increase."
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
