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Business Glossary


Business Definition for: treasury stock
treasury stock

issued shares that have been reacquired by the company. Treasury shares may be resold or cancelled. Dividends are not paid on treasury shares nor are voting fights associated with them. The two acceptable methods of accounting for treasury stock are the cost method and par value method. Under the cost method, treasury stock is shown at thecost to reacquire the shares. Under the par value method, treasury stock is recorded at the par value of the reacquired stock. Treasury stock is shown as a deduction in arriving at stockholders' equity. Under either method, there is an appropriation of retained earnings equal to the cost of the treasury stock held.

treasury stock

stock reacquired by the issuing company and available for retirement or resale. It is issued but not outstanding. It cannot be voted and it pays or accrues no dividends. It is not included in any of the ratios measuring values per common share. Among the reasons treasury stock is created are (1) to provide an alternative to paying taxable dividends, since the decreased amount of outstanding shares increases the per share value and often the market price; (2) to provide for the exercise of stock options and warrants and the conversion of convertible securities; (3) in countering a tender offer by a potential acquirer; (4) to alter the debt-to-equity ratio by issuing bonds to finance the reacquisition of shares; (5) as a result of the stabilization of the market price during a new issue . Also called reacquired stock and treasury shares.

See also unissued stock , issued and outstanding
treasury stock

previously issued shares of stock repurchased and held by the issuer. In banking, treasury stock, whether carried at cost or par value, is deductible from a bank's equity capital, and is reportable under undivided profits in the report of condition .

treasury stock

common or preferred stock that had been issued by a company and later reacquired. The stock may be used for a variety of corporate purposes, such as a stock bonus plan for management and employees or to acquire another company.

Copyright © 2005, 2000, 1995, 1987 by Barron's Educational Series, Inc., Reprinted by arrangement with Publisher.
Copyright © 2006, 2003, 1998, 1995, 1991, 1987, 1985 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
Copyright c 2006, 2000, 1997, 1993, 1990 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
Copyright © 2007, 2000, 1997, 1987, by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.


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