Home : Terms : Article : Calculators Advertising : Contact us
Home > Terms > Accounting > Accretive

Term: Accounting -> Accretive
Term:

Accretive

Definition:

If a company acquires another and says the deal is 'accretive to earnings', it means that the resulting PE ratio (price/earnings) of the acquired company is less than the acquiring company. Example: Company 'A' has an earnings per share (EPS) of $1. The current share price is $10. This gives a P/E ratio of 10 (current share price is 10 times the EPS). Company 'B' has made a net profit for the year of $20,000. If company 'A' values 'B' at, say, $180,000 (P/E ratio=9 [180,000 valuation/20,000 profit]) then the deal is accretive because company 'A' is effectively increasing its EPS (because it now has more shares and it paid less for them compared with its own share price).

Related terms:

Loss per share

Intellectual Capital Statement

Useful articles:
»4 Quick Promotional Tips for your Business that work!
»Does Moving Up Makes Dollars And Sense?
»Dick and Jane Revisited 
»Increasing Sales With the Right Words


Cost Spreading
Car Cost Compare
Spouse Work


Browse by categories
Accounting
Advertising
Banking
Bankruptcy
E-Commerce
Economics
Finance
Law
Investment
Insurance
Marketing
Real estate
Statistic
Trade
Purchasing


ABCDEFGHIJKLMNOPQRSTUVWXYZ

Featured Articles:
Customer Servces
The complaining customer - we just can’t stand them!

Well, most of us can’t stand them.  The reality is that business organizations should love them.  You see, ... [ more... ]

E-commerce
With the rapid down fall of world economy and dot-com companies in recent years many brick-and-mortar companies and new start-ups ask themselves: To Be Online or Not to Be Online?

Not ... [ more... ]

Negotiation
According to Webster, "to intend" means to stretch out for, to aim at.  An intent is a purpose, object or aim.

"Communicate" means to exchange information, ide... [ more... ]

  Disclaimer | Privacy | Terms of useCopyright © 2004-2005 E-terms.com