The repurchase of common stock results in a type of reverse dilution,since the earnings per share increases as the number of shares outstanding falls.

Question

Quizplus · Accepted Answer

When a company repurchases its common stock, the number of shares outstanding decreases, which in turn increases the earnings per share. This is because earnings are spread across a smaller number of outstanding shares. As a result, the repurchase of common stock results in a type of reverse dilution, rather than dilution, as stated in the question.

The Repurchase of Common Stock Results in a Type of Reverse