Treasury Stock
Sometimes companies buy back their own shares in the open market. The money spent on buying back shares is netted against the common stock and APIC via an account called treasury stock.
Treasury stock is a negative (contra) account. Increases in the treasury stock reduce shareholders’ equity.
Companies repurchase stock for various reasons:
To boost earnings per share (EPS) (repurchase of shares reduces total shares outstanding; see above equation)
To change the company’s capital structure (more debt/less equity)
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