StockSignal
Treasury stock is the value of the company's own shares it has bought back and holds instead of cancelling. It reduces total equity and indicates past share repurchases.
How it relates
Common Stock (Book)Common stock (book) reflects the value of shares issued to investors recorded at their accounting value, not market price. It forms part of shareholders' equity.+Retained EarningsRetained earnings are the accumulated profits the company has kept rather than paid out as dividends. They show how much profit has been reinvested back into the business over time.−Treasury Stock=Total Shareholders' EquityTotal shareholders' equity is the residual value of the company after all liabilities are subtracted from assets. It represents the book value belonging to the company's owners.
Treasury stock is the value of the company's own shares it has bought back and holds instead of cancelling. It reduces total equity and indicates past share repurchases.
How treasury stock works:
- Repurchased shares: Company buys its own shares from the market
- Not cancelled: Shares are held by the company rather than retired
- No voting rights: Treasury shares cannot vote
- No dividends: Treasury shares don't receive dividend payments
Balance sheet treatment:
- Contra-equity: Shown as a negative number in shareholders' equity
- Cost method: Most common; recorded at the purchase price
- Reduces total equity: Equity = Assets - Liabilities - Treasury Stock
Why treasury stock matters:
- Buyback history: Shows cumulative share repurchases retained
- Future uses: Treasury shares can be reissued for acquisitions, compensation, or capital raising
- EPS impact: Treasury shares are excluded from shares outstanding calculations
- Flexibility: Holding shares in treasury provides options for future transactions
Analysis considerations:
- Growing treasury stock: Indicates ongoing buyback activity
- Declining treasury stock: Treasury shares being reissued
- Cost vs. current value: Compare to current market price to assess buyback effectiveness