When a company buys shares of its own stock and holds them as treasury stock,________.
A)its earnings per share are not affected
B)its earnings per share will increase
C)its earnings per share will decrease
D)the market price of its stock will decrease

Question

Quizplus · Accepted Answer

When a company buys back its own shares and holds them as treasury stock, the number of shares outstanding decreases. Since earnings per share (EPS) is calculated by dividing the company's earnings by the number of outstanding shares, a decrease in the number of shares increases the EPS, assuming earnings remain constant.

When a Company Buys Shares of Its Own Stock and Holds