Equity Financing Module 3

These flashcards cover key concepts and definitions related to equity financing, specifically focusing on treasury stock and its implications on financial statements.

Treasury Stock

Shares of a company’s own stock that had been issued but then re-acquired by the company.

Contra Equity Account

An account that is used to reduce the total equity shown on the balance sheet.

Normal Balance of Treasury Stock Account

Debit.

Voting Rights

Treasury stock does not have voting rights.

Dividends

Treasury stock cannot receive dividends.

Re-acquisition Cost

The amount paid to buy back the treasury stock.

Issued Stock vs Outstanding Stock

Treasury stock is considered issued stock but not outstanding stock.

Income Statement Impact of Treasury Stock Transactions

NONE – Transactions involving our own stock never affect the income statement.

Balance Sheet Impact of Treasury Stock

Decrease assets and decrease equity due to treasury stock being a contra equity account.

Cash Flow Impact of Re-acquiring Stock

Cash paid to re-acquire stock is a financing cash outflow.