Walk me through how a $100 share buyback (for cash) flows through the three statements.

Income statement: no impact — a buyback is a capital transaction, not an expense. (It can raise EPS by shrinking the share count, but it doesn't touch net income.) Cash flow statement: financing OUTFLOW −$100 (repurchase of stock). Balance sheet: cash (asset) −$100; on the equity side, treasury stock (a contra-equity account) increases by $100, reducing total shareholders' equity by $100. Assets −$100 = Equity −$100 → balances. Note: if funded with new debt rather than cash on hand, you'd also add $100 of debt and the cash effect nets out — a leveraged buyback raises leverage and can increase EPS but also risk.

⚠ Common wrong answer: "Treasury stock is recorded as an asset — the company now owns its own shares." Why it fails: A company cannot hold itself as an asset. Treasury stock is a CONTRA-EQUITY account that reduces total shareholders' equity, and the buyback never touches the income statement.