Final answer:
When a company purchases its own stock, it decreases its assets by using its cash to buy back shares from shareholders.
Step-by-step explanation:
When a company purchases its own stock, it reduces its assets. This is because the company is using its cash to buy back its own shares from shareholders. By purchasing its own stock, the company decreases the amount of cash it has on hand and reduces its overall asset value.
For example, let's say a company has $1 million in cash and decides to buy back $200,000 worth of its own stock. After the purchase, the company will now have $800,000 in cash, which is a decrease in assets.
It's important to note that when a company buys back its own stock, it typically does so to return value to shareholders or to improve its financial position, such as reducing the number of outstanding shares.