What is Treasury Stock?

Treasury stock refers to shares that were once a part of the outstanding shares of a corporation but have been repurchased by the company itself. When a corporation buys back its own stock, these shares are removed from circulation, thus reducing the total number of outstanding shares in the market. This reacquisition can occur for various reasons, such as improving financial ratios, providing shares for employee compensation, or attempting to increase the value of remaining outstanding shares by reducing supply.

The characteristics of treasury stock are important because, while these shares can be reissued in the future, they do not carry voting rights or pay dividends while held in the treasury. Understanding treasury stock is crucial for analyzing a company's financial health and management strategies, as it reflects the company's decisions regarding equity management and capital structure.