All other things being equal,when companies repurchases its common stock:
A) EPS decreases and ROE increases.
B) EPS increases and ROE stays the same.
C) EPS increases and ROE decreases.
D) EPS and ROE both increase.

Question

Quizplus · Accepted Answer

When a company repurchases its common stock, the number of outstanding shares decreases, which typically increases the Earnings Per Share (EPS) as the same earnings are distributed over fewer shares. Additionally, the reduction in equity can lead to an increase in Return on Equity (ROE) since ROE is calculated as net income divided by shareholders' equity.

All Other Things Being Equal,when Companies Repurchases Its Common Stock