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Treasury Stock represents those shares of stock that have been issued by the company, and purchased, or reacquired, by the company. When accounting for these shares, they are not shown as assets on the balance sheet. A company cannot own part of itself. When a company holds treasury stock, it has effectively reduced the capitalization of the company; therefore treasury stock is not an asset.
The most common reasons for a company to purchase back its stock include:
- To increase earnings per share
- To meet the needs of a merger or employee stock plan
- To establish a market for its stock
- To reduce the size of the business
- To reduce the exposure to a takeover attempt
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