Financial Terms / accretion

Unlock the Power of Accretion!

Accretion is the process of growth or enlargement, helping things get bigger and better!


Accretion = (EPSafter - EPSbefore) ÷ EPSbefore

How do I calculate the accretion?

When evaluating the potential impact of a merger or acquisition, it is important to calculate Accretion to determine if the move is accretive or dilutive. Accretion can be calculated by subtracting the acquirer's earnings per share (EPS) before the acquisition from the acquirer's EPS after the acquisition, and then dividing this number by the acquirer's EPS before the acquisition. This gives a percentage of the EPS change due to the acquisition. To calculate the Accretion, use the following formula: Accretion = (EPSafter - EPSbefore) ÷ EPSbefore. Sourcetable can be used to quickly and easily calculate Accretion.

What is Accretion?

Accretion is the growth of assets and earnings due to business expansion, a company's internal growth, or a merger or acquisition. It is also the accumulation of additional income an investor expects to receive after purchasing a bond at a discount and holding it until the bond matures.

What are the most well-known applications of financial accretion?

The most well-known applications of financial accretion include zero-coupon bonds and cumulative preferred stock.

How does Accretion work?

Accretion adjusts the cost basis from the purchase amount to the anticipated redemption amount at maturity. It can also occur when an organization acquires assets that are anticipated to grow in value after the transaction.

Key Points

How do I calculate accretion?
Accretion = (EPSafter - EPSbefore) ÷ EPSbefore
Accretion is the Growth of Assets and Earnings Over Time
Accretion is the growth of assets and earnings that occurs over time due to internal business expansion, mergers or acquisitions, or the increase in value an investor expects to receive after purchasing a bond at a discount and holding until maturity.
Accretion Rate
The accretion rate is determined by dividing a bond's discount by the number of years until maturity. This rate helps investors understand the expected return of a bond investment.
Bond Accretion
Bond accretion is the growth in value due to organic growth or through a transaction. Investors look for bonds with higher accretion rates because it increases the potential for higher return.

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