Community Forex Questions
What is the impact of treasury stock on a company's earnings per share (EPS)?
The impact of treasury stock on a company's earnings per share (EPS) depends on whether the shares are retired or held as treasury stock.
When a company purchases its own shares and retires them, it reduces the total number of outstanding shares. As a result, the earnings are divided among a smaller number of shares, which increases the EPS.
However, when a company holds its own shares as treasury stock, the shares are not retired, and the total number of outstanding shares remains the same. In this case, the EPS is not affected by the treasury stock since the number of shares used in the EPS calculation is based on the outstanding shares, excluding the treasury stock.
It's important to note that holding treasury stock can have indirect effects on EPS, such as influencing the market perception of the company's financial health and increasing the potential for future stock buybacks or dilution.
When a company purchases its own shares and retires them, it reduces the total number of outstanding shares. As a result, the earnings are divided among a smaller number of shares, which increases the EPS.
However, when a company holds its own shares as treasury stock, the shares are not retired, and the total number of outstanding shares remains the same. In this case, the EPS is not affected by the treasury stock since the number of shares used in the EPS calculation is based on the outstanding shares, excluding the treasury stock.
It's important to note that holding treasury stock can have indirect effects on EPS, such as influencing the market perception of the company's financial health and increasing the potential for future stock buybacks or dilution.
Mar 22, 2023 10:54