Are the treasury stock and conventional approaches equally applicable to all mutual holdings? Explain.
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In situations in which a subsidiary holds stock in the parent both the conventional and treasur...View the full answer
Advanced Accounting
ISBN: 9780132568968
11th Edition
Authors: Floyd A. Beams, Joseph H. Anthony, Bruce Bettinghaus, Kenneth Smith
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Treasury stock refers to shares of a company\'s own stock that the company has bought back from its shareholders and now holds as a form of asset on its balance sheet. When a company buys back its own stock, it reduces the number of outstanding shares in the market, which can potentially increase the value of the remaining shares. Treasury stock can be acquired through a variety of methods, such as open market purchases, negotiated transactions, or as a result of converting convertible securities. Companies may buy back their own shares for a number of reasons, including to return capital to shareholders, to signal confidence in the company\'s future, or to use the shares for employee stock option plans. While treasury stock does not pay dividends, it can be reissued by the company at a later time, which could dilute the value of the remaining shares. Companies are required to report their treasury stock holdings in their financial statements.
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