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Share repurchase

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Definition of Share repurchase

Share Repurchase Image 1

Share repurchase

Program by which a corporation buys back its own shares in the open market. It is usually
done when shares are undervalued. Since it reduces the number of shares outstanding and thus increases
earnings per share, it tends to elevate the market value of the remaining shares held by stockholders.



Related Terms:

American shares

Securities certificates issued in the U.S. by a transfer agent acting on behalf of the foreign
issuer. The certificates represent claims to foreign equities.


authorized share capital

Maximum number of shares that the company is permitted to issue, as specified in the firm’s articles of incorporation.


Authorized shares

Number of shares authorized for issuance by a firm's corporate charter.


Authorized shares

The number of shares of stock that the company is legally authorized to sell.


basic earnings per share (EPS)

This important ratio equals the net
income for a period (usually one year) divided by the number capital
stock shares issued by a business corporation. This ratio is so important
for publicly owned business corporations that it is included in the daily
stock trading tables published by the Wall Street Journal, the New York
Times, and other major newspapers. Despite being a rather straightforward
concept, there are several technical problems in calculating
earnings per share. Actually, two EPS ratios are needed for many businesses—
basic EPS, which uses the actual number of capital shares outstanding,
and diluted EPS, which takes into account additional shares of
stock that may be issued for stock options granted by a business and
other stock shares that a business is obligated to issue in the future.
Also, many businesses report not one but two net income figures—one
before extraordinary gains and losses were recorded in the period and a
second after deducting these nonrecurring gains and losses. Many business
corporations issue more than one class of capital stock, which
makes the calculation of their earnings per share even more complicated.



book value and book value per share

Generally speaking, these terms
refer to the balance sheet value of an asset (or less often of a liability) or
the balance sheet value of owners’ equity per share. Either term emphasizes
that the amount recorded in the accounts or on the books of a business
is the value being used. The total of the amounts reported for
owners’ equity in its balance sheet is divided by the number of stock
shares of a corporation to determine the book value per share of its capital
stock.


Book value per share

The ratio of stockholder equity to the average number of common shares. Book value
per share should not be thought of as an indicator of economic worth, since it reflects accounting valuation
(and not necessarily market valuation).


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Book Value per Share

The book value of a company divided by the number of shares
outstanding


Cash flow per common share

Cash flow from operations minus preferred stock dividends, divided by the
number of common shares outstanding.


Common Shares

Are equity instruments that take no security against assets, have no fixed terms of repayment and pay no fixed dividends.


diluted earnings per share (EPS)

This measure of earnings per share
recognizes additional stock shares that may be issued in the future for
stock options and as may be required by other contracts a business has
entered into, such as convertible features in its debt securities and preferred
stock. Both basic earnings per share and, if applicable, diluted
earnings per share are reported by publicly owned business corporations.
Often the two EPS figures are not far apart, but in some cases the
gap is significant. Privately owned businesses do not have to report earnings
per share. See also basic earnings per share.


Dividends per share

Amount of cash paid to shareholders expressed as dollars per share.


Dividends per share

Dividends paid for the past 12 months divided by the number of common shares
outstanding, as reported by a company. The number of shares often is determined by a weighted average of
shares outstanding over the reporting term.


Earnings per Share

A measure of the earnings generated by a company on a per
share basis. It is calculated by dividing income available for
distribution to shareholders by the number of common shares
outstanding.


Earnings per share (EPS)

EPS, as it is called, is a company's profit divided by its number of outstanding
shares. If a company earned $2 million in one year had 2 million shares of stock outstanding, its EPS would
be $1 per share. The company often uses a weighted average of shares outstanding over the reporting term.


earnings per share (EPS)

See basic earnings per share and diluted earnings per share.


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Earnings per share of common stock

How much profit a company made on each share of common stock this year.


Fully diluted earnings per shares

Earnings per share expressed as if all outstanding convertible securities
and warrants have been exercised.



Issued share capital

Total amount of shares that are in issue. Related: outstanding shares.


Issued shares

The number of shares that the company has sold to the public.


issued shares

shares that have been issued by the company.


Management/closely held shares

Percentage of shares held by persons closely related to a company, as
defined by the Securities and exchange commission. Part of these percentages often is included in
Institutional Holdings -- making the combined total of these percentages over 100. There is overlap as
institutions sometimes acquire enough stock to be considered by the SEC to be closely allied to the company.


Outstanding share capital

Issued share capital less the par value of shares that are held in the company's treasury.


Outstanding shares

shares that are currently owned by investors.


Outstanding shares

The number of shares that are in the hands of the public. The difference between issued shares and outstanding shares is the shares held as treasury stock.


outstanding shares

shares that have been issued by the company and are held by investors.


Performance shares

shares of stock given to managers on the basis of performance as measured by earnings
per share and similar criteria. A control device used by shareholders to tie management to the self-interest of
shareholders.


Preferred shares

Preferred shares give investors a fixed dividend from the company's earnings. And more
importantly: preferred shareholders get paid before common shareholders. See: preferred stock.



Preferred Shares

Are equity instruments that take no security against assets, have flexible terms of repayment and pay fixed or floating dividends.


Repurchase agreement

An agreement with a commitment by the seller (dealer) to buy a security back from
the purchaser (customer) at a specified price at a designated future date. Also called a repo, it represents a
collateralized short-term loan, where the collateral may be a Treasury security, money market instrument,
federal agency security, or mortgage-backed security. From the purchaser (customer) perspective, the deal is
reported as a reverse Repo.


Repurchase of stock

Device to pay cash to firm's shareholders that provides more preferable tax treatment
for shareholders than dividends. Treasury stock is the name given to previously issued stock that has been
repurchased by the firm. A repurchase is achieved through either a dutch auction, open market, or tender offer.


Share

The minimum unit of ownership in a corporation.


Shareholder

Owner of one or more shares of stock in a corporation.


Shareholder's Equity

Represents the total assets of a corporation less liabilities.


Shareholder value

Increasing the value of the business to its shareholders, achieved through a combination of
dividend and capital growth in the value of the shares.


Shareholders' equity

This is a company's total assets minus total liabilities. A company's net worth is the
same thing.


Shareholders' equity

The total amount of contributed capital and retained earnings; synonymous with stockholders' equity.


Shareholders' Equity

The residual interest or owners' claims on the assets of a corporation
that remain after deducting its liabilities.


Shareholders’ funds

The capital invested in a business by the shareholders, including retained profits.


Shareholders' letter

A section of an annual report where one can find jargon-free discussions by
management of successful and failed strategies which provides guidance for the probing of the rest of the
report.


Shares

Certificates or book entries representing ownership in a corporation or similar entity


Stock repurchase

A firm's repurchase of outstanding shares of its common stock.


stock repurchase

Firm buys back stock from its shareholders.


Targeted repurchase

The firm buys back its own stock from a potential bidder, usually at a substantial
premium, to forestall a takeover attempt.


Money market fund

A mutual fund that invests only in short term securities, such as bankers' acceptances,
commercial paper, repurchase agreements and government bills. The net asset value per share is maintained at
$1. 00. Such funds are not federally insured, although the portfolio may consist of guaranteed securities
and/or the fund may have private insurance protection.


Treasury stock

shares that were sold to the public but have since been repurchased by the company in the open market. Treasury stock is deducted from the equity section, and is therefore a contraequity account.



 

 

 

 

 

 

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