Jon Rivoli
I am the Devil.
- Joined
- Aug 3, 2003
- Posts
- 2,338
Incorrect
Uh, brush up on the accounting chief........ they used cash (an asset) to repurchase stock (owners equity), resulting a net cash loss as its tied up in OE.
Actually, it is you that needs to brush up on your accounting. You are confusing the balance sheet with the income statement.
A stock repurchase is a balance sheet transaction, a loss occurs on an income statement.
The balance sheet is the accumulated assets and liabilities; what is owned and who owns it. A stock repurchase is simply a transfer of some of the ownership from stockholder to retained equity for a sum of zero. The cash balance goes down, retained earnings goes up. It has the same effect as paying down debt, a reduction in future expenses, either interest in the case of debt or dividends in the case of stock.
An operating loss means that for a given reporting period expenses exceeded revenue. That loss is then made up by transferring asserts from the balance sheet; the cash balance goes down by the amount of the loss. When a profit is made it is transferred to the balance sheet and the cash balance goes up.
Your welcome.
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