Kellogg Company is the world??s leading producer of ready-to-eat cereal products. In recent years, the company has
Question:
Kellogg Company is the world??s leading producer of ready-to-eat cereal products. In recent years, the company has taken numerous steps aimed at improving its profitability and earnings per share. Presented below are some basic facts for Kellogg.
Instructions(a) What are some of the reasons that management purchases its own stock?(b) Explain how earnings per share might be affected by treasury stock transactions.(c) Calculate the ratio of debt to total assets for 2008 and 2009, and discuss the implications of thechange.
2009 2008 $12,575 $12,822 1,148 10,946 9,491 Net sales Net earnings Total assets Total liabilities Common stock, $0.25 par value Capital in excess of par value Retained earnings Treasury stock, at cost Number of shares outstanding (in millions) 1,212 11,200 8,925 105 105 472 438 5,481 1,820 4,836 1,790 419 419
Step by Step Answer:
a Management might purchase treasury stock to provide to stockholders a taxefficient method for rece...View the full answer
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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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