Q: Give four reasons why a company might purchase treasury stock.

Question

Question

business finance

Answer 1

Answer #1

Some major reasons why companies purchase treasury stock are

a)

If there is a pending merger or acquisition, the stock can be made available for it

b)

The additional stock can be used for various purposes like Stock options, convertibles, stock dividend etc

c)

The purchase of treasury stock can eliminate the risks of ownership interest of the stock holder

d)

It can potentially increase the earnings per share as the number of shares outstanding are decreased.

Answer 2

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