All other things equal, what is the effect on earnings per share when a corporation acquires shares of its own stock on the open market?
A) Decrease.
B) No effect if the shares are held as treasury shares.
C) Increase only if the shares are considered to be retired.
D) Increase.

Question

Quizplus · Accepted Answer

Acquiring its own shares on the open market reduces the number of shares outstanding, which, all other things being equal, increases earnings per share (EPS) because the same amount of earnings is distributed over fewer shares.

All Other Things Equal, What Is the Effect on Earnings