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Order of Asset Distribution upon Liquidation:
Reasons a company would repurchase its own stock:
1. to increase Earnings per Share
2. to finance future acquisitions (i.e. a stock for stock acquisition)
3. to provide stock for employee stock option plans
4. to fight a takeover attempt
Formula to calculate number of
Issued Stock - Treasury Stock = Outstanding Shares
Outstanding Shares are the only shares that Vote
Used to Calculate Earnings per Share
(or Repurchased Stock)
Only the Board of Directors makes the decision to repurchase shares).
Important Points to Remember:
1. does not vote
2. does not receive dividends
3. is not used in the Earnings Per Share (EPS) calculation
4. appears on the balance sheet as a deduction from issued stock
Which is the riskiest form of stock?
Common Stock - as it is always paid last
Basics of Equity Securities