Treasury Stock (Treasury Shares)

Treasury stock (also called treasury shares) are shares of a company's stock that have been repurchased by the company. Treasury stock is not considered an asset because it is not available for sale or issuance. Treasury stock can be created when a company buys back its own shares on the open market. The company can then sell these shares back to the public at a later date, or it can hold onto them indefinitely.

There are a few reasons why a company might buy back its own shares. One reason is to reduce the number of shares outstanding. This can increase the earnings per share (EPS) and make the company more attractive to investors. Another reason is to use treasury stock as a source of capital. The company can sell treasury stock to raise cash, which it can then use to invest in new projects or to pay off debt.

Treasury stock can also be used to offset the dilutive effects of stock options and other employee stock compensation plans. When a company issues stock options, it is essentially giving employees the right to buy shares of the company's stock at a certain price. This can dilute the value of the company's existing shares, because there will be more shares outstanding after the options are exercised. Treasury stock can be used to offset this dilution by reducing the number of shares outstanding.

There are a few things to keep in mind when a company buys back its own shares. First, the company will have to pay cash for the shares. This can be a significant expense, especially if the company is buying back a large number of shares. Second, the company's earnings per share will increase as a result of the share repurchase. This can make the company more attractive to investors, but it can also make it more difficult for the company to issue new shares in the future. Third, the company's debt-to-equity ratio will decrease as a result of the share repurchase. This can make the company more attractive to investors, but it can also make it more difficult for the company to borrow money in the future.

Overall, treasury stock can be a valuable tool for companies to use to manage their capital structure and improve their financial performance. However, it is important to weigh the costs and benefits of a share repurchase before making a decision.