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Encyclopedia > Treasury stock
Financial markets

Bond market
Fixed income
Corporate bond
Government bond
Municipal bond
Bond valuation
High-yield debt
This article does not cite any references or sources. ... Download high resolution version (480x640, 110 KB)Blockade in front of NYSE. Picture taken in April 2004. ... The bond market, also known as the debit, credit, or fixed income market, is a financial market where participants buy and sell debt securities usually in the form of bonds. ... This article does not cite any references or sources. ... A corporate bond is a bond issued by a corporation. ... A government bond is a bond issued by a national government denominated in the countrys own currency. ... In the United States, a municipal bond or muni is a bond issued by a state, city or other local government, or their agencies. ... Bond valuation is the process of determining the fair price of a bond. ... In finance, a high-yield bond (non-investment grade bond or junk bond) is a bond that is rated below investment grade at the time of purchase. ...

Stock market
Stock
Preferred stock
Common stock
Stock exchange
A stock market is a market for the trading of company stock, and derivatives of same; both of these are securities listed on a stock exchange as well as those only traded privately. ... This article does not cite any references or sources. ... A preferred stock, also known as a preferred share or simply a preferred, is a share of stock carrying additional rights above and beyond those conferred by common stock. ... Common stock, also referred to as common shares, are, as the name implies, the most usual and commonly held form of stock in a corporation. ...

Foreign exchange market
Retail forex
The foreign exchange (currency or forex or FX) market exists wherever one currency is traded for another. ... The Retail Forex (Retail Currency Trading or Retail Forex or Retail FX) market is a subset of the much larger Foreign exchange market. ...

Derivative market
Credit derivative
Hybrid security
Options
Futures
Forwards
Swaps
A derivatives market is any market for a derivative security, that is a contract which specifies the right or obligation to receive or deliver future cash flows based on some future event such as the price of an independent security or the performance of an index. ... // A credit derivative is a financial instrument or derivative (finance) whose price and value derives from the creditworthiness of the obligations of a third party, which is isolated and traded. ... Definition A hybrid security, as the name implies, is a security that combines two or more different financial instruments. ... In finance options are types of derivative contracts, including call options and put options, where the future payoffs to the buyer and seller of the contract are determined by the price of another security, such as a common stock. ... In finance, a futures contract is a standardized contract, traded on a futures exchange, to buy or sell a certain underlying instrument at a certain date in the future, at a specified price. ... This article does not cite any references or sources. ... This article or section is in need of attention from an expert on the subject. ...

Other Markets
Commodity market
OTC market
Real estate market
Spot market
Chicago Board of Trade Futures market Commodity markets are markets where raw or primary products are exchanged. ... Over-the-counter (OTC) trading is to trade financial instruments such as stocks, bonds, commodities or derivatives directly between two parties. ... Real estate is a legal term that encompasses land along with anything permanently affixed to the land, such as buildings. ... Template:The Spot Market The Spot Market or Cash Marketis a commodities or securities market in which goods are sold for cash and delivered immediately. ...

Valuation and Theories
Market Valuation
Financial market efficiency
Financial market efficiency is an important topic in the world of Finance. ...


Finance series
Financial market
Financial market participants
Corporate finance
Personal finance
Public finance
Banks and Banking
Financial regulation
This article does not cite any references or sources. ... This article does not cite any references or sources. ... There are two basic financial market participant catagories, Investor vs. ... Domestic credit to private sector in 2005 Corporate finance is an area of finance dealing with the financial decisions corporations make and the tools and analysis used to make these decisions. ... Personal finance is the application of the principles of finance to the monetary decisions of an individual or family unit. ... Public finance (government finance) is the field of economics that deals with budgeting the revenues and expenditures of a public sector entity, usually government. ... “Banker” redirects here. ... Financial supervision is government supervision of financial institutions by regulators. ...

v d

A treasury stock or reacquired stock is stock which is bought back by the issuing company, reducing the amount of outstanding stock on the open market ("open market" including insiders' holdings). This article does not cite any references or sources. ... Look up company in Wiktionary, the free dictionary. ... Outstanding stock is common stock that has been authorized and issued by a corporation and purchased by investors. ...


Stock repurchases are often used as a tax-efficient method to put cash into shareholders' hands, rather than pay dividends. Sometimes, companies do this when they feel that their stock is undervalued on the open market. Other times, companies do this to provide a "bonus" to incentive compensation plans for employees. Rather than receive cash, recipients receive an asset that might appreciate in value faster than cash saved in a bank account. It has been suggested that ex-dividend date be merged into this article or section. ...


The United Kingdom equivalent of treasury stock as used in the United States is treasury share. Treasury stocks in the UK refers to government bonds or gilts. Gilts are bonds issued by the UK Government. ...

Contents

Limitations of Treasury Stock

  • Treasury stock does not pay a dividend
  • Treasury stock has no voting rights
  • Total treasury stock can not exceed the maximum proportion of total capitalization specified by law in the relevant country

It has been suggested that ex-dividend date be merged into this article or section. ...

Buying Back Shares

Benefits

If you believe in efficient market theory, a company buying back its stock should have no effect at all on its stock price. If the market fairly prices a company's shares at $50/share, if a company buys back 100 shares for $5000, it now has $5000 less cash but there are 100 fewer shares outstanding; the net effect should be that the value per share is unchanged. However, buying back shares does improve certain per-share ratios, such as price/earnings (earnings per share is increased due to fewer shares outstanding), but that is only because valuing a company's shares according to those ratios is not accurate when a company is holding a lot of cash. If a company's shares are underpriced, then a company can benefit its other shareholders by buying back shares. If a company's shares are overpriced, then a company is actually hurting its remaining shareholders by buying back stock. Efficient fuked up market theory is a field of economics which seeks to explain the workings of capital markets such as the stock market. ... The P/E ratio (price-to-earnings ratio) of a stock (also called its earnings multiple, or simply multiple, P/E, or PE) is used to measure how cheap or expensive its share price is. ... Earnings per share (EPS) are the earnings returned on the initial investment amount. ...


Incentives

One other reason for a company to buy back its own stock is to reward holders of stock options. Option holders are hurt by dividend payments, since, typically, they are not eligible to receive them. A share buyback program may increase the value of remaining shares (if the buyback is executed when shares are underpriced); if so, option holders benefit. A dividend payment short term always decreases the value of shares after the payment, so, on the day shares go ex-dividend, option holders always lose. Finally, if the sellers into a corporate buyback are actually the option holders themselves, they may directly benefit from temporarily unrealistically favorable pricing. A stock option is a specific type of option with a stock as the underlying instrument (the security that the value of the option is based on). ...


After Buyback

The company can either retire the shares (however, retired shares are not listed as treasury stock on the company's financial statements) or hold the shares for later resale. Buying back stocks reduces the number of outstanding shares. To see this, note that accompanying the decrease in the number of shares outstanding is a reduction in company assets, in particular, cash assets, which are used to buy back shares.


Accounting for Treasury Stock

On the balance sheet, treasury stock is listed under shareholder equity as a negative number. This article needs additional references or sources for verification. ... In business and accounting, the shareholders equity refers to the amount of assets that are owned by a companys shareholders. ...


One way of accounting for treasury stock is with the cost method. In this method, the paid-in capital account is reduced in the balance sheet when the treasury stock is bought. When the treasury stock is sold back on the open market, the paid-in capital is either debited or credited if it is sold for more or less than the initial cost respectively.


Another common way for accounting for treasury stock is the par value method. In the par value method, when the stock is purchased back from the market the books will reflect the action as a retirement of the shares. Therefore, common stock is debited and treasury stock is credited. However, when the treasury stock is resold back to the market the entry in the books will be the same as the cost method. Par value has several meanings depending on the context, whether used in the equities market, or in the bond markets, and partially also dependent on where in the world the par value term is used. ...


In either method, any transaction involving treasury stock cannot increase the amount of retained earnings. If the treasury stock is sold for more than cost, then the paid-in capital treasury stock is the account that is increased not retained earnings. In auditing financial statements, there is a common practice to check for this error to detect possible attempts to "cook the books". In accounting, retained earnings refers to the portion of net income from a period which is retained by the corporation, rather than distributed to its owners. ... In accounting, retained earnings refers to the portion of net income from a period which is retained by the corporation, rather than distributed to its owners. ... Historical financial statement Financial statements (or financial reports) are formal records of a business financial activities. ...


United States Regulations

In the United States, buybacks are covered by multiple laws.


According to Rule 10b-18:

  • One Broker-Dealer per Day: The company repurchasing shares may not use more than one broker and/or dealer to acquire the shares per each day.
  • Timing of Purchase: A repurchase may not be the first trade of the day. Repurchases may not be made in the last ten minutes of the trading day. These rules do not apply to over-the-counter securities.
  • Purchase Price: A repurchase may not be bid at a price higher than the highest independent bid or last price of the last trade.
  • Volume: Repurchases per day may not exceed 25% of the average daily volume of the previous 4 calendar weeks. Block purchases not effected by a broker-dealer are excluded from this restriction.

In commerce, a broker is a party that mediates between a buyer and a seller. ... Look up dealer in Wiktionary, the free dictionary. ... Over-the-counter (OTC) trading is to trade financial instruments such as stocks, bonds, commodities or derivatives directly between two parties. ... Securities are tradeable interests representing financial value. ... Bid (Medical) (a medical abbreviation commonly seen on prescriptions) Bid price (a financial term) Efforts to get any thing or to get the right to celebrate an event. ...

United Kingdom Regulations

In the UK, the Companies Act of 1955 disallowed companies from holding their own shares. However, the Companies Act of 1993 later repealed this.


See also

Topics in finance include: // Finance an overview Arbitrage Capital (economics) Capital asset pricing model Cash flow Cash flow matching Debt Default Consumer debt Debt consolidation Debt settlement Credit counseling Bankruptcy Debt diet Debt-snowball method Discounted cash flow Financial capital Funding Financial modeling Entrepreneur Entrepreneurship Fixed income analysis Gap financing... In business, the shares outstanding (example) is all company shares less eventual treasury stock (example). ... Shares authorized is the maximum number of shares that a company can issue. ...

External Links

  • Stock Buyback Database


Stock Market v d
Types of Stocks
Stock | Common stock | Preferred stock | Outstanding stock | Treasury stock
Trading Stock
Participants: Market maker
Exchanges: Stock exchange | List of stock exchanges | New York Stock Exchange | NASDAQ
Toronto Stock Exchange | London Stock Exchange | Euronext | Frankfurt Stock Exchange
Tokyo Stock Exchange | Hong Kong Stock Exchange | Australian Securities Exchange
Warsaw Stock Exchange | Botswana Stock Exchange | Zimbabwe Stock Exchange
Palestine Securities Exchange | Kyrgyz Stock Exchange | Chittagong Stock Exchange
Stock Valuation
Trading Theories: Dow Theory | Elliott Wave Theory | Fundamental analysis | Technical analysis
Mark Twain effect | January effect | Efficient market hypothesis Arbitrage_pricing_theory
Stock Pricing: Dividend yield | Gordon model | Income per share | Book value | Earnings yield | Beta coefficient
Ratios: Financial ratio | P/CF ratio | PE ratio | PEG ratio | Price/sales ratio | P/B ratio
Stock Related Terms
Dividend | Stock split | Growth stock | Investment | Speculation | Trade | Day trading

  Results from FactBites:
 
SK Telecom - Investor Information>Shareholder Information>Treasury Stock (64 words)
With respect to the merger with Shinsegi Telecomm, the purpose of treasury stock disposal which was implemented on the 17th of January 2002, is to assign the merged company's stock to Shinsegi Telecomm's shareholders.
Due to the treasury stock disposal, cash was not come into SK Telecom.
The stock disposal price per share was 214,414 won.
Company and Shareholder Agreement Treasury Stock (955 words)
The ability to re-issue treasury shares quickly and cost- effectively should give companies sufficient flexibility in the management of their capital base to allow them to run, on average, with a higher level of debt/equity gearing and a consequently lower cost of capital.
The 10% limit shall apply to both the cumulative quantity of treasury shares held in stock at any time and the cumulative number of shares able to be purchased into treasury stock in any financial year.
The Association regards it as essential that the framework within which a treasury stock programme is conducted is well understood by shareholders, managers and institutional investors and it is therefore supportive of detailed guidelines being made available before companies seek approval of their shareholders for any treasury stock programme.
  More results at FactBites »

 
 

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