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What effect does stock repurchase have on earnings per share?

幫考網(wǎng)校2020-10-12 17:16:01
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Stock repurchase reduces the number of outstanding shares, which in turn increases the earnings per share (EPS) of the company. This is because the same amount of earnings is now divided among a smaller number of shares. For example, if a company has 1,000 shares outstanding and earns $10,000, the EPS would be $10. However, if the company repurchases 100 shares, the number of outstanding shares would reduce to 900 and the EPS would increase to $11.11 ($10,000/900). Therefore, stock repurchase can have a positive impact on a company's EPS.
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