Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 11 - Reporting and Analyzing Stockholders' Equity - Questions: 9

Answer

The Treasury Stock i.e. the corporations' own stock is purchased for the following reasons:

Work Step by Step

a) To reissue the shares to officers and employees under bonus and stock compensation plans. b) If the company believes the stock is underpriced, which they hope will increase the market price of the share. It will increase the trading in shares. c) To have additional shares available for use in acquiring other companies. d) To reduce the number of shares outstanding and thereby increase earnings per share.
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