business and finance question

User Generated

cnffvbalnu28

Business Finance

Description

Why do corporations buy back their own stock? What is this stock called? How does the company record this type of stock, and how is it shown on the balance sheet?

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Explanation & Answer

Companies buy their own stock sometimes to because it may be used for employee incentive programs, and future merger with other companies. Companies usually record it on the balance sheet and company statements showing its debits and credits wit the amount of the balance and each transaction. Usually a stock is called a "Common Stock" which is bought back by the issuing company. This may also be called a treasury stock because when it is bought back it serves as an investment for that company by the end of the day.


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