Question

a company announces that it is buying back 10% of its common shares in the open market. the company currently pays no dividends to common shareholders. assuming that net income and the share price remain the same as before, what will be the impact of this buy-back on the company's p/e ratio?

Answer 1

P/E choice decrease

When companies buy rear their own stock, it decreases the numbers of claims outstanding. Earnings per share are computed as net income divided by number of shares great. If the number of shares outstanding declines while net revenue stays the same, EPS will increase. If EPS increases while the stock price stays the identical, the price/earnings ratio (P/E) will fall.

What are stock earnings?

Earnings refer to a company's earnings in a given quarter or fiscal year. Earnings are a key figure used to select a stock's value. A company's profits are used in many standard ratios. Payments have a big influence on stock price, and as a consequence, the numbers are subject to potential manipulation.

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