When a company acquires treasury stock, what effect does this transaction have on earnings per share and legal capital, respectively?
A) decrease, increase
B) increase, decrease
C) decrease, decrease
D) increase, none

Question

Quizplus · Accepted Answer

Acquiring treasury stock reduces the number of shares outstanding, which can increase earnings per share if all other factors remain constant. It does not affect legal capital because treasury stock transactions are equity transactions, not involving the company's legal capital.

When a Company Acquires Treasury Stock, What Effect Does This