Treasury shares represent a company’s own stock that has been reacquired from shareholders. Determining the quantity or value of these shares generally involves subtracting the number of shares currently outstanding from the number initially issued. For instance, if a corporation initially issued 1,000,000 shares and now reports 900,000 shares outstanding, the entity holds 100,000 shares as treasury stock. The financial value is determined by multiplying the number of reacquired shares by the price originally paid for them.
The practice of holding these shares allows a company flexibility in its capital structure. These shares can be reissued for employee stock options, acquisitions, or to increase earnings per share by reducing the number of outstanding shares. Historically, the use of this mechanism has provided businesses with a means of managing their equity, signaling confidence in their financial health, and offering strategic advantages in corporate transactions.
