All else equal,when companies make stock repurchases:
A)EPS falls and ROE rises.
B)EPS rises and ROE stays the same.
C)EPS rises and ROE falls.
D)EPS and ROE both rise.

Question

Quizplus · Accepted Answer

Stock repurchases reduce the number of outstanding shares, which increases EPS (Earnings Per Share) as the same earnings are distributed over fewer shares. Additionally, repurchasing shares reduces equity, which can increase ROE (Return on Equity) as net income is divided by a smaller equity base.

All Else Equal,when Companies Make Stock Repurchases