All Other Things Equal, What Is the Effect on Earnings

question 14

Multiple Choice

All other things equal, what is the effect on earnings per share when a corporation acquires shares of its own stock on the open market?

• A) Decrease.
• B) No effect if the shares are held as treasury shares.
• C) Increase only if the shares are considered to be retired.
• D) Increase.

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Definitions:

Mechanized Work

Work processes that are performed using machinery and equipment to enhance efficiency and productivity.

Plantwide Overhead Rate

A single overhead rate calculated by dividing total factory overhead by the total base units used by all products, applied throughout the entire manufacturing plant.

Overhead Allocation Base

A measure or factor used to distribute overhead costs to products or services, such as machine hours or labor costs.

Machine Hours

A metric used in manufacturing to allocate costs based on the number of hours a machine is operated.