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Share repurchase

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Share repurchase

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  • November 24, 2018 at 10:29 pm #485857
    sm8980
    Participant
    • Topics: 48
    • Replies: 38
    • ☆☆

    Hi,

    Please could you let me know how a share repurchase scheme can increase earnings per share and gearing? ?

    Thank you

    November 25, 2018 at 10:01 am #485908
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54654
    • ☆☆☆☆☆

    If shares are repurchased they are then cancelled. So there are then fewer shares in issue, therefore the earnings per share will be higher.
    Since there are fewer shares in issue, the total equity is smaller and therefore the gearing ratio will be higher.

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