Albert Company was experiencing financial difficulty late in the current year. The company’s income was sluggish, and the market price of its common stock was tumbling. On December 21, the company began to buy back shares of its own stock in an attempt to boost its market price per share and to improve its earnings per share.
a. Is it unethical for a company to purchase shares of its own stock to improve measures of financial performance? Defend your answer.
b. Assume that the company classified the shares of treasury stock as short-term investments in the current asset section of its balance sheet. Is this appropriate? Explain.