Final answer:
Treasury stock is a corporation's stock that was previously issued and outstanding but has been reacquired by the company. It represents a portion of the company's ownership held in its treasury, usually to influence stock value or prevent takeovers.
Step-by-step explanation:
When a corporation purchases its stock from shareholders, it becomes treasury stock. This stock is no longer outstanding and no longer has voting rights or entitlement to dividends. Treasury stock can be held by the corporation for various reasons, such as to reissue it to employees as part of a compensation plan, to enhance the company's financial ratios, or to ultimately retire it.
For example, if a corporation buys back 1,000 shares of its stock, those shares will become treasury stock and will be removed from the market.
A corporation's stock, which it has issued and which was at one time outstanding, that the firm reacquires is known as treasury stock. Public firms may decide to buy back shares for various reasons, such as to increase the value of remaining shares or to prevent other companies from taking control. When a public company issues stock, it raises capital to finance operations or new investments, and this stock is owned by shareholders who then have a slice of the company's ownership.