Treasury Stock

Posted in Finance, Accounting and Economics Terms, Total Reads: 837

Definition: Treasury Stock

The part of the stock which is not issued to the public which is usually kept reserved with the company. It is devoid of any voting rights.  It can also be used to serve following purposes.

  • Treasury stock can be en-cashed when the need arises.
  • It can reduce the available number of shares since by open buyback which can help it in improving the financial ratios.
  • If the value of the firm decreases because of stock re-buy then it indicates the firm has been undervalued and any loss in these transactions is reflected in the equity for the purpose of accounting.
  • However there is an argument under the company’s bill where a company is not allowed to buy the shares of its subsidiary because these stocks movement are manipulated i.e. bought when they are low and sold off at a higher price. This is precisely wrong because the management has already contemplated the highs and lows of the stock in this way.



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