Lenders may restrict the amount of treasury stock a corporation may purchase in order to ensure a minimum level of stockholders' equity.

Question

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Lenders may impose restrictions on a corporation's treasury stock purchases to protect the stockholders' equity by ensuring that the corporation maintains a minimum level of equity. This helps the corporation to avoid financial instability and bankruptcy. Therefore, to ensure financial stability, lenders may limit the amount of treasury stock that a corporation can buy back.

Lenders May Restrict the Amount of Treasury Stock a Corporation