Treasury Stock – Fundamentals of Stock

Those corporations doing well and flush with cash sometimes buy back stock from their investors. Once purchased back by the company the stock is called treasury stock. In large corporations the buy back often involves a small percentage of stockholders and rarely affects the voting rights or ownership structure. However, in small business, buying back stock can significantly alter the entire corporate control ownership and impact the long-term outcome and direction of the company.

This article explains the fundamentals of treasury stock; why and how it happens, and how it is reported on the balance sheet. In addition the fundamentals can affect ownership in a small business and a section calculating a buy back’s effect is illustrated.

As an owner of small business treasury stock fundamentals are an essential piece of knowledge that if not used properly or misunderstood can greatly affect your ability to direct the company’s future.

Treasury Stock – A Buy Back of Existing Shares

Sometimes, during its growth cycle a company comes to a crossroads of sorts and must decide on expanding operations significantly or

© 2015 – 2022, David J Hoare MSA. All rights reserved.

error: Content is protected !!