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What is accretive?

“Accretive” is a term used to describe a transaction, investment, or action that is expected to increase the value, earnings, or financial metrics of a company. It implies that the addition or integration of a particular element will enhance the overall financial position or performance of the entity.

When an acquisition, investment, or strategic move is considered accretive, it means that it is expected to contribute positively to the company’s earnings per share (EPS), revenue, profitability, cash flow, or other key financial indicators. The addition is anticipated to be beneficial and increase the company’s overall value or the value per share for shareholders.

For example, if a company acquires another company with higher profit margins and growth prospects, the acquisition may be deemed accretive because it is expected to increase the acquiring company’s earnings and potentially enhance its market position.

Similarly, an investment or business decision that has the potential to generate higher returns or improve financial ratios can be described as accretive.

On the other hand, a transaction or action that is “dilutive” has the opposite effect, meaning it reduces the company’s earnings or financial metrics.

Overall, the term “accretive” signifies a positive impact on financial performance or value and is commonly used in finance, investment analysis, and corporate finance contexts.