A holding company owns shares of other companies to control them but does not produce goods or services itself. It allows ownership and control of multiple companies to reduce risk for owners. A holding company controls a subsidiary's board or holds over half its equity shares. Consolidating financial statements combines the holding company and subsidiaries' income statements and balance sheets, eliminating intercompany transactions and investments to show the group's overall operating results and financial position.
The document discusses key differences between private and public companies. It states that private companies have restrictions on the number of members and cannot invite the public to subscribe to its shares, while public companies can have an unlimited number of members and can invite public subscription. Additionally, private companies have restrictions on the transfer of shares while public companies do not.
The document discusses accounting treatments for various aspects of issuing and accounting for debentures by a company. It defines debentures and outlines their key features. It also describes different types of debentures based on security, redemption, records, convertibility, priority, and coupon rate. The document then explains accounting entries for issuing debentures for cash at par, premium, and discount. It also covers entries for interest on debentures, writing off discounts, and accrued interest.
This document discusses different types of business branches including home branches, foreign branches, and dependent vs independent branches. It provides details on home branches, which are those located in the same country as the head office, and can be dependent or independent. Dependent branches do not maintain full transaction records, while independent branches do. The document also covers important terms like inter-branch transactions, goods in transit, and cash in transit. Finally, it discusses three methods for keeping accounting records for dependent branches: the debtors system, final account system, and stock and debtors system.
This document discusses accounting concepts for managers, including:
1. The trading account is used to calculate gross profit by subtracting the cost of goods sold from sales. Opening and closing inventory are debited and credited, respectively, and purchases less returns are debited.
2. The profit and loss account calculates net profit by subtracting expenses from gross profit. Expenses are debited whether paid or not, and incomes are credited whether received or not.
3. Capital expenditures provide long-term benefits while revenue expenditures only benefit the current year and are debited to the profit and loss account. Trading and profit and loss accounts determine profit or loss over a period.
its my first !
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it is according to class 12 syllabus ! hopefully it will weak students like me ! it contains all fundamentals of partnership firm.
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class 12 / completeguide
Preference shares are shares that have preferential rights to dividends and repayment of capital compared to common shares. There are several types of preference shares: cumulative vs non-cumulative, participating vs non-participating, convertible vs non-convertible, and redeemable vs non-redeemable. Preference shares provide benefits like helping companies raise long-term capital and guaranteeing fixed returns, but also have drawbacks like lack of trading and lower returns.
The document discusses various aspects of new issue markets, including the meaning, functions, and methods of floating new issues. It describes the main functions of new issue markets as facilitating the transfer of resources from savers to users and mobilizing funds from savers to borrowers. The key methods of floating new issues discussed are public issues, rights issues, private placements, and preferential issues. It also covers various other topics related to new issue markets such as pricing of issues, offer documents, listing of securities, and participants in securities markets.
A holding company owns shares of other companies to control them but does not produce goods or services itself. It allows ownership and control of multiple companies to reduce risk for owners. A holding company controls a subsidiary's board or holds over half its equity shares. Consolidating financial statements combines the holding company and subsidiaries' income statements and balance sheets, eliminating intercompany transactions and investments to show the group's overall operating results and financial position.
The document discusses key differences between private and public companies. It states that private companies have restrictions on the number of members and cannot invite the public to subscribe to its shares, while public companies can have an unlimited number of members and can invite public subscription. Additionally, private companies have restrictions on the transfer of shares while public companies do not.
The document discusses accounting treatments for various aspects of issuing and accounting for debentures by a company. It defines debentures and outlines their key features. It also describes different types of debentures based on security, redemption, records, convertibility, priority, and coupon rate. The document then explains accounting entries for issuing debentures for cash at par, premium, and discount. It also covers entries for interest on debentures, writing off discounts, and accrued interest.
This document discusses different types of business branches including home branches, foreign branches, and dependent vs independent branches. It provides details on home branches, which are those located in the same country as the head office, and can be dependent or independent. Dependent branches do not maintain full transaction records, while independent branches do. The document also covers important terms like inter-branch transactions, goods in transit, and cash in transit. Finally, it discusses three methods for keeping accounting records for dependent branches: the debtors system, final account system, and stock and debtors system.
This document discusses accounting concepts for managers, including:
1. The trading account is used to calculate gross profit by subtracting the cost of goods sold from sales. Opening and closing inventory are debited and credited, respectively, and purchases less returns are debited.
2. The profit and loss account calculates net profit by subtracting expenses from gross profit. Expenses are debited whether paid or not, and incomes are credited whether received or not.
3. Capital expenditures provide long-term benefits while revenue expenditures only benefit the current year and are debited to the profit and loss account. Trading and profit and loss accounts determine profit or loss over a period.
its my first !
please #follow so that i will make more for all
it is according to class 12 syllabus ! hopefully it will weak students like me ! it contains all fundamentals of partnership firm.
it also usefull in xam times as revision notes!
for more just follow me !
fb@venuankush
class 12 / completeguide
Preference shares are shares that have preferential rights to dividends and repayment of capital compared to common shares. There are several types of preference shares: cumulative vs non-cumulative, participating vs non-participating, convertible vs non-convertible, and redeemable vs non-redeemable. Preference shares provide benefits like helping companies raise long-term capital and guaranteeing fixed returns, but also have drawbacks like lack of trading and lower returns.
The document discusses various aspects of new issue markets, including the meaning, functions, and methods of floating new issues. It describes the main functions of new issue markets as facilitating the transfer of resources from savers to users and mobilizing funds from savers to borrowers. The key methods of floating new issues discussed are public issues, rights issues, private placements, and preferential issues. It also covers various other topics related to new issue markets such as pricing of issues, offer documents, listing of securities, and participants in securities markets.
This presentation is about corporate financial reporting and it covers the following topics under it :
- Meaning
- Objectives
- Purpose
- Advantages
- Meaning of Annual Report
- Content of Annual Report
Valuation of shares, nature of shares, factors affecting shares, need for valuation of shares, method of valuation of shares, net asset based method, yield based method, fair value method
This document discusses methods for valuing goodwill and shares. It defines goodwill as a company's reputation and brand value that allows it to earn above-average profits. Methods for valuing goodwill described include the average profit method, super profit method, capitalization of profit method, and annuity method. These methods calculate goodwill based on adjusting a company's historical profits. The document also defines shares and discusses methods for valuing shares not publicly traded, including the net asset method, yield method, and earning capacity method. The net asset method values shares based on a company's net assets, the yield method based on expected dividend returns, and earning capacity method based on rate of profits earned.
Leverage refers to using debt, borrowed money, or derivative instruments to amplify gains and losses from investments or business operations. There are two types of leverage: operating leverage, which is the use of fixed operating costs, and financial leverage, which is the use of fixed financing costs. The document defines various leverage metrics such as degree of operating leverage (DOL), degree of financial leverage (DFL), and degree of combined leverage (DCL) which measure how changes in sales, operating income, and earnings per share are amplified through the use of leverage.
The document discusses various types of ratios used in ratio analysis for evaluating the financial performance and position of a business. It provides definitions and interpretations for liquidity ratios like current ratio and quick ratio, solvency ratios like debt-equity ratio and proprietary ratio, activity ratios like stock turnover ratio and debtor turnover ratio, and profitability ratios like gross profit ratio, net profit ratio, and return on capital employed. Formulas and ideal ratios are given for each type of financial ratio.
The document defines and explains different types of share capital that a company may have:
Authorized capital is the maximum capital allowed by the company's Memorandum of Association. Issued capital is the shares offered to the public. Called-up capital is the issued capital that shareholders are required to pay. Paid-up capital is the amount actually paid by shareholders, while uncalled capital is the remaining amount that can be called later. Reserve capital refers to the portion of uncalled capital that can only be called in the event of winding up.
The document discusses funds flow statements and their preparation. It provides definitions of key terms like working capital and flow of funds. It explains that a funds flow statement depicts changes in working capital between two balance sheet dates by analyzing changes in current assets and current liabilities. The summary also shows how to prepare schedules of changes in working capital and sources and uses of funds statements to analyze the flow of funds.
Credit ratings are evaluations of a debtor's ability to pay back debt, conducted by credit rating agencies. They use both public and private qualitative and quantitative information to assess risk of default. Credit ratings indicate the likelihood that bond obligations will be paid back and are used by investors to determine risk-return tradeoffs. Higher credit ratings indicate lower risk while lower ratings suggest higher risk of default. The document outlines the meaning and purpose of credit ratings, benefits to investors and companies, types of ratings, major credit rating agencies, and their methodology.
Accounting for Partnership- Fundamentals.pptxPankaj Saikia
The document discusses key aspects of partnerships, including:
1) A partnership is an agreement between two or more people to carry out a business and share profits and losses. The business can be run jointly or by some partners on behalf of others.
2) A partnership deed outlines the terms of the partnership agreement but is not required by law. It typically specifies profit sharing ratios, capital contributions, management roles, and other details.
3) Partnership accounts include capital accounts to track each partner's balance over time as well as appropriation accounts to distribute profits and losses according to the partnership agreement.
1) The document discusses various aspects of issuing shares by a company including types of share capital, kinds of shares, over/under subscription of shares, allotment of shares, calls on shares, and accounting entries for issuing shares.
2) It provides definitions for terms like authorized capital, issued capital, subscribed capital, called up capital, paid up capital, and reserve capital.
3) Issuing shares can be for immediate full consideration or consideration receivable in installments through application, allotment, and calls. Journal entries are provided for various scenarios of share issuance.
How to create value for your organization? Why TSR is the best metric for value creation? Why is it difficult to create sustainable value? How to build sustainable value creation strategy & create value for a longer period of time? Why CSR & brand value change not consider as a part of TSR? Why multiple compressions are so difficult to beat? Why investors & analyst discounts valuation multiple? How to transit majority investors without eroding TSR? How to create value in low growth economy? How to play your strategy with sustainable TSR matrix as per investors eye? Why investors communication is so important for value creation? Which strategy you should use for value creation? How to use value creation scenarios? Why cash strategy is so important in low growth economy?
If all these question bothers you before developing your company’s corporate strategy/value creation strategy then you must see your New Year’s
complimentary gift presentation
“A handy e-book on how to create sustainable shareholders value”
Portfolio revision, securities, New securities, existing securities, purchases and sales of securities, maximizing the return, minimizing the risk, Transaction cost, Taxes, Statutory stipulations, Intrinsic difficulty, commission and brokerage, push up transaction costs, reducing the gains, constraint, Taxes, capital gains, long-term capital, lower rate, Frequent sales, short-term capital gains, investment companies, constraints, established, objectives, skill, resources and time, substantial adjustments, mispriced, excess returns, heterogeneous expectations, better estimates, generate excess returns, market efficiency, little incentive, predetermined rules, changes in the securities market, Performance measurement, Performance evaluation, superior or inferior, small investors, better performance, prompt liquidity, comparative performance, purchase and sale of securities.
The document provides an overview of financial statement analysis. It discusses that financial analysis identifies the financial strengths and weaknesses of a firm by establishing relationships between balance sheet and profit/loss statement items. The key objectives of financial analysis are to evaluate a firm's profitability, debt servicing ability, business risk, and growth. Various techniques of financial analysis are also outlined, including comparative statements analysis, common-size analysis, trend analysis, and ratio analysis. The document aims to explain the concepts and applications of financial statement analysis.
This document discusses the cost of capital. It defines cost of capital as the minimum rate of return that a firm must earn on its investments to maintain its value. Cost of capital has several components, including the return at zero risk, and premiums for business risk and financial risk. The document also discusses the different types of capital like debt, equity and retained earnings, and how to compute the cost of each. It explains weighted average cost of capital is calculated by weighting the costs of different sources of capital by their proportions.
Ratio analysis involves calculating relationships between financial statement items to interpret a firm's financial condition and performance. Ratios can be classified into liquidity, capital structure, profitability, and activity ratios. Liquidity ratios measure short-term solvency, capital structure ratios measure long-term solvency, profitability ratios measure operating efficiency and returns, and activity ratios measure asset utilization and efficiency. Ratios are compared over time, against industry standards, or between firms to identify strengths, weaknesses, and trends.
Hire purchase is a transaction where goods are purchased through installment payments, with ownership transferring upon final payment. Some key points:
- The buyer receives immediate possession but not ownership of the goods, paying a down payment (typically 20%) and installments that include interest.
- If installments are missed, the seller can repossess the goods. Ownership fully transfers after the last installment is paid.
- It allows consumers to spread costs over time while purchasing goods. However, it offers less tax benefits than leasing and the buyer assumes more risk if installments are missed.
Capital and revenue expenditures and receipts must be distinguished to determine which items appear in which financial statements. Capital items appear on the balance sheet, while revenue items appear on the profit and loss account. This distinction is also important for determining net profit, which equals revenue receipts minus revenue expenses. Capital receipts include contributions of capital and loans, while revenue receipts are generated from a firm's regular activities like sales. Capital expenditures acquire or improve long-term assets, increasing earning capacity, while revenue expenditures maintain assets and earnings over a single accounting period.
The document provides information on fund flow statements, including their meaning, definition, purpose, and preparation. It defines a fund flow statement as a report on the movement of funds or working capital during an accounting period. It explains how working capital is raised and used. The summary then outlines some key points on the meaning of funds, items that constitute sources and uses of funds, and the objectives and limitations of fund flow statements.
This document discusses the valuation of goodwill in business. Goodwill represents a competitive advantage such as a strong brand or reputation. It is the amount a buyer is willing to pay over the net tangible assets for an acquired company. Goodwill valuation is needed for sole proprietorships, partnerships, and when a company is sold. Common methods include the average profit method, super profit method, and capitalization methods. The average profit and super profit methods multiply average or excess profits by years of purchase. Capitalization methods determine goodwill by deducting the capitalized value of profits from total capital employed.
This document discusses the valuation of goodwill. It defines goodwill as the present value of a firm's anticipated excess earnings above a normal rate of return. Goodwill is an intangible asset that arises from factors like business reputation, customer loyalty, and trade name. The document outlines several reasons why goodwill needs to be valued, such as when a business is sold, partners are added or retired, or a firm is converted to a company. It then describes different methods that can be used to value goodwill, including average profits methods, super profits methods, and capitalization methods.
This presentation is about corporate financial reporting and it covers the following topics under it :
- Meaning
- Objectives
- Purpose
- Advantages
- Meaning of Annual Report
- Content of Annual Report
Valuation of shares, nature of shares, factors affecting shares, need for valuation of shares, method of valuation of shares, net asset based method, yield based method, fair value method
This document discusses methods for valuing goodwill and shares. It defines goodwill as a company's reputation and brand value that allows it to earn above-average profits. Methods for valuing goodwill described include the average profit method, super profit method, capitalization of profit method, and annuity method. These methods calculate goodwill based on adjusting a company's historical profits. The document also defines shares and discusses methods for valuing shares not publicly traded, including the net asset method, yield method, and earning capacity method. The net asset method values shares based on a company's net assets, the yield method based on expected dividend returns, and earning capacity method based on rate of profits earned.
Leverage refers to using debt, borrowed money, or derivative instruments to amplify gains and losses from investments or business operations. There are two types of leverage: operating leverage, which is the use of fixed operating costs, and financial leverage, which is the use of fixed financing costs. The document defines various leverage metrics such as degree of operating leverage (DOL), degree of financial leverage (DFL), and degree of combined leverage (DCL) which measure how changes in sales, operating income, and earnings per share are amplified through the use of leverage.
The document discusses various types of ratios used in ratio analysis for evaluating the financial performance and position of a business. It provides definitions and interpretations for liquidity ratios like current ratio and quick ratio, solvency ratios like debt-equity ratio and proprietary ratio, activity ratios like stock turnover ratio and debtor turnover ratio, and profitability ratios like gross profit ratio, net profit ratio, and return on capital employed. Formulas and ideal ratios are given for each type of financial ratio.
The document defines and explains different types of share capital that a company may have:
Authorized capital is the maximum capital allowed by the company's Memorandum of Association. Issued capital is the shares offered to the public. Called-up capital is the issued capital that shareholders are required to pay. Paid-up capital is the amount actually paid by shareholders, while uncalled capital is the remaining amount that can be called later. Reserve capital refers to the portion of uncalled capital that can only be called in the event of winding up.
The document discusses funds flow statements and their preparation. It provides definitions of key terms like working capital and flow of funds. It explains that a funds flow statement depicts changes in working capital between two balance sheet dates by analyzing changes in current assets and current liabilities. The summary also shows how to prepare schedules of changes in working capital and sources and uses of funds statements to analyze the flow of funds.
Credit ratings are evaluations of a debtor's ability to pay back debt, conducted by credit rating agencies. They use both public and private qualitative and quantitative information to assess risk of default. Credit ratings indicate the likelihood that bond obligations will be paid back and are used by investors to determine risk-return tradeoffs. Higher credit ratings indicate lower risk while lower ratings suggest higher risk of default. The document outlines the meaning and purpose of credit ratings, benefits to investors and companies, types of ratings, major credit rating agencies, and their methodology.
Accounting for Partnership- Fundamentals.pptxPankaj Saikia
The document discusses key aspects of partnerships, including:
1) A partnership is an agreement between two or more people to carry out a business and share profits and losses. The business can be run jointly or by some partners on behalf of others.
2) A partnership deed outlines the terms of the partnership agreement but is not required by law. It typically specifies profit sharing ratios, capital contributions, management roles, and other details.
3) Partnership accounts include capital accounts to track each partner's balance over time as well as appropriation accounts to distribute profits and losses according to the partnership agreement.
1) The document discusses various aspects of issuing shares by a company including types of share capital, kinds of shares, over/under subscription of shares, allotment of shares, calls on shares, and accounting entries for issuing shares.
2) It provides definitions for terms like authorized capital, issued capital, subscribed capital, called up capital, paid up capital, and reserve capital.
3) Issuing shares can be for immediate full consideration or consideration receivable in installments through application, allotment, and calls. Journal entries are provided for various scenarios of share issuance.
How to create value for your organization? Why TSR is the best metric for value creation? Why is it difficult to create sustainable value? How to build sustainable value creation strategy & create value for a longer period of time? Why CSR & brand value change not consider as a part of TSR? Why multiple compressions are so difficult to beat? Why investors & analyst discounts valuation multiple? How to transit majority investors without eroding TSR? How to create value in low growth economy? How to play your strategy with sustainable TSR matrix as per investors eye? Why investors communication is so important for value creation? Which strategy you should use for value creation? How to use value creation scenarios? Why cash strategy is so important in low growth economy?
If all these question bothers you before developing your company’s corporate strategy/value creation strategy then you must see your New Year’s
complimentary gift presentation
“A handy e-book on how to create sustainable shareholders value”
Portfolio revision, securities, New securities, existing securities, purchases and sales of securities, maximizing the return, minimizing the risk, Transaction cost, Taxes, Statutory stipulations, Intrinsic difficulty, commission and brokerage, push up transaction costs, reducing the gains, constraint, Taxes, capital gains, long-term capital, lower rate, Frequent sales, short-term capital gains, investment companies, constraints, established, objectives, skill, resources and time, substantial adjustments, mispriced, excess returns, heterogeneous expectations, better estimates, generate excess returns, market efficiency, little incentive, predetermined rules, changes in the securities market, Performance measurement, Performance evaluation, superior or inferior, small investors, better performance, prompt liquidity, comparative performance, purchase and sale of securities.
The document provides an overview of financial statement analysis. It discusses that financial analysis identifies the financial strengths and weaknesses of a firm by establishing relationships between balance sheet and profit/loss statement items. The key objectives of financial analysis are to evaluate a firm's profitability, debt servicing ability, business risk, and growth. Various techniques of financial analysis are also outlined, including comparative statements analysis, common-size analysis, trend analysis, and ratio analysis. The document aims to explain the concepts and applications of financial statement analysis.
This document discusses the cost of capital. It defines cost of capital as the minimum rate of return that a firm must earn on its investments to maintain its value. Cost of capital has several components, including the return at zero risk, and premiums for business risk and financial risk. The document also discusses the different types of capital like debt, equity and retained earnings, and how to compute the cost of each. It explains weighted average cost of capital is calculated by weighting the costs of different sources of capital by their proportions.
Ratio analysis involves calculating relationships between financial statement items to interpret a firm's financial condition and performance. Ratios can be classified into liquidity, capital structure, profitability, and activity ratios. Liquidity ratios measure short-term solvency, capital structure ratios measure long-term solvency, profitability ratios measure operating efficiency and returns, and activity ratios measure asset utilization and efficiency. Ratios are compared over time, against industry standards, or between firms to identify strengths, weaknesses, and trends.
Hire purchase is a transaction where goods are purchased through installment payments, with ownership transferring upon final payment. Some key points:
- The buyer receives immediate possession but not ownership of the goods, paying a down payment (typically 20%) and installments that include interest.
- If installments are missed, the seller can repossess the goods. Ownership fully transfers after the last installment is paid.
- It allows consumers to spread costs over time while purchasing goods. However, it offers less tax benefits than leasing and the buyer assumes more risk if installments are missed.
Capital and revenue expenditures and receipts must be distinguished to determine which items appear in which financial statements. Capital items appear on the balance sheet, while revenue items appear on the profit and loss account. This distinction is also important for determining net profit, which equals revenue receipts minus revenue expenses. Capital receipts include contributions of capital and loans, while revenue receipts are generated from a firm's regular activities like sales. Capital expenditures acquire or improve long-term assets, increasing earning capacity, while revenue expenditures maintain assets and earnings over a single accounting period.
The document provides information on fund flow statements, including their meaning, definition, purpose, and preparation. It defines a fund flow statement as a report on the movement of funds or working capital during an accounting period. It explains how working capital is raised and used. The summary then outlines some key points on the meaning of funds, items that constitute sources and uses of funds, and the objectives and limitations of fund flow statements.
This document discusses the valuation of goodwill in business. Goodwill represents a competitive advantage such as a strong brand or reputation. It is the amount a buyer is willing to pay over the net tangible assets for an acquired company. Goodwill valuation is needed for sole proprietorships, partnerships, and when a company is sold. Common methods include the average profit method, super profit method, and capitalization methods. The average profit and super profit methods multiply average or excess profits by years of purchase. Capitalization methods determine goodwill by deducting the capitalized value of profits from total capital employed.
This document discusses the valuation of goodwill. It defines goodwill as the present value of a firm's anticipated excess earnings above a normal rate of return. Goodwill is an intangible asset that arises from factors like business reputation, customer loyalty, and trade name. The document outlines several reasons why goodwill needs to be valued, such as when a business is sold, partners are added or retired, or a firm is converted to a company. It then describes different methods that can be used to value goodwill, including average profits methods, super profits methods, and capitalization methods.
The document provides an overview of complex organizational structures that can result from business combinations and investments in other entities. It discusses the different forms a business combination can take, such as a statutory merger, statutory consolidation, or stock acquisition. The accounting considerations for each type are driven by questions around whether assets or stock were acquired, if the acquired company was dissolved or continued operating, and if there was a change in ownership control. The document also covers topics like purchase price accounting, valuation of assets and liabilities, calculation of goodwill, and disclosure requirements.
Valuation of goodwill & shares with solution of problemsafukhan
The document discusses various methods for valuing goodwill, including:
1) Future Maintainable Profits Method - Which values goodwill based on the future profits a business is expected to maintain. It calculates average past profits over several years to estimate future profits.
2) Super Profits Method - Which values goodwill based on "super profits", the amount of profits earned above a business's normal rate of return on capital employed. Super profits are multiplied by the number of years of purchase to value goodwill.
3) Number of Years Purchase Method - Which values goodwill as the future maintainable profits multiplied by the number of years those profits are expected to continue into the future.
The document provides examples
Everything you need to know about the valuation reportResurgent India
A business valuation report is an attempt to thoroughly document and analyze the value of a company or a group of assets by considering all relevant market, industrial, and economic aspects.
This document discusses different methods for valuing goodwill, which is an intangible asset that arises when one company acquires another at a premium. The key methods discussed are:
1) Future Maintainable Profits method - Goodwill is valued based on the future maintainable profits of the business multiplied by a number of years purchase.
2) Super Profits method - Goodwill is valued based on "super profits", which are profits above a normal rate of return, multiplied by a number of years purchase.
3) Capitalization method - Goodwill is valued by capitalizing the super profits at a certain rate.
Worked examples are provided to demonstrate calculating goodwill using the super profits and
This document discusses different methods for valuing goodwill of a business. Goodwill represents the excess of purchase price over the fair value of identifiable net assets of an acquired company. It is an intangible asset that arises in acquisitions. The document outlines the future maintainable profits method, super profits method, and number of years purchase method to calculate the value of goodwill. It also discusses concepts like capital employed, normal rate of return, weighted and simple average profits that are relevant for goodwill valuation.
Notes on Valuation of Goodwill and Shares For BBA/B.com studentsYamini Kahaliya
the document contains Notes on Valuation of Goodwill and Shares
{Goodwill may be described as the aggregate of those intangible attributes of a business which contributes to its superior earning capacity over a normal return on investment}
{The share capital is the most important requirement of a business. It is divided into a ‘number of indivisible units of a fixed amount. These units are known as ‘shares’. }
1) Intangible assets are non-physical assets that provide long-term benefits to a company such as patents, copyrights, and goodwill.
2) The costs of intangible assets are capitalized and amortized over the shorter of their legal or economic useful life. Amortization expense is recorded systematically over time.
3) Examples of intangible assets include patents, copyrights, trademarks, goodwill, franchises, and research and development costs. The accounting treatment depends on whether the asset was internally generated or purchased.
Long term financing provides capital for periods over one year through equity like stock issuances or debt. It is used to finance fixed assets, permanent working capital needs, expansions, and large construction projects. Common stock represents ownership in a company and allows for transfer of shares. While stocks provide growth potential, the original investment is at risk and returns depend on company performance. Key financial terms for common stock include authorized shares, issued shares, par value, additional paid-in capital, retained earnings, and capital surplus which represent amounts paid beyond par value.
A closely held firm is characterized by having relatively few owners and no ready public market for ownership interests. There are several reasons for valuing a closely held firm, including legislated reasons related to taxes, business reasons like selling the company or obtaining financing, and personal reasons. Key techniques for valuing a closely held firm include capitalizing income, capitalizing cash flows, capitalizing dividends, and capitalizing sales. Factors like marketability, control, transferability, and restrictions can influence the valuation.
The document discusses acquisitions, which are when one company buys another to gain control of it. There are two main types: friendly acquisitions, which have agreement from the target company, and hostile acquisitions, which do not. Companies make acquisitions to achieve economies of scale, expand operations, find growth opportunities, or eliminate competition. Acquisitions can be financed through private equity, equity financing, bank loans, or asset-based loans. The document also discusses the impacts, advantages, and disadvantages of acquisitions, as well as examples of Tata Steel acquiring Corus and Bharti Airtel acquiring Zain Africa.
Ratio analysis involves evaluating a company's performance and financial health by comparing financial data over time and against industry benchmarks. There are several types of ratios that provide different insights. Liquidity ratios like the current ratio measure a company's ability to pay short-term debts, with a higher ratio indicating better coverage of current liabilities. Profitability ratios like return on assets indicate how efficiently a company generates profits relative to its assets, with a higher ratio generally being preferable. Ratio analysis is a key tool for fundamental analysis of a company's financial strength and operating efficiency.
The document discusses the meaning and characteristics of goodwill. It states that over time, an established business develops advantages like a good reputation and connections that help it earn more profits compared to a new business. The monetary value of these advantages is called goodwill. Goodwill represents the value of expected future excess profits over normal profits due to factors like reputation, location, management etc. It is an intangible asset that fluctuates in value. The document also lists factors that affect the value of goodwill like efficient management, location, quality of products and services. Valuation of goodwill is needed for events like admission of a partner or sale of business. There are different methods to value goodwill such as average profits method and capital
The document discusses acquiring an established business venture through purchasing an existing business. It notes that buying an existing business can represent less risk than starting a new business from scratch. However, one must perform due diligence to understand the terms of the purchase. The document provides advice on evaluating business opportunities and established ventures through examining financial records, operations, competition, and viability factors. It also discusses different business valuation methods like asset-based, earnings-based, and market-based approaches.
Common stocks represent partial ownership in a company. Holders of common stock can vote on corporate policies and elect board members. In the event of liquidation, common stockholders are paid out after bondholders, preferred shareholders, and debtholders. A stock certificate provides legal documentation of stock ownership in a corporation. Voting shares give stockholders voting rights on corporate matters. There is typically a separation of ownership and control in corporations, with shareholders electing board members who oversee management.
The document discusses factors influencing investment vehicle (SPV) decisions for structuring project funding. An SPV is a legal entity set up to manage risk, cost of capital, and control structure for a project. Investors in securitized instruments seek credit enhancements to reduce risk. Credit enhancements include internal mechanisms like credit tranching (senior/subordinate structures) and over-collateralization, as well as external guarantees or letters of credit. The document outlines various types of internal credit enhancements used in SPVs like credit tranching, over-collateralization, cash collateral accounts, spread accounts, and triggered amortization.
The document discusses various issues related to acquisition valuation, including considering synergy and control premium. It outlines 5 steps for an acquisition valuation: 1) establish acquisition motive, 2) choose target, 3) value target with motive, 4) decide on payment method, 5) choose accounting method. Synergy can come from cost savings, growth opportunities, or tax/debt benefits. Control premium reflects additional value from improving management.
Introduction to business finance by Ayesha Noor Ayesha Noor
Here is an introduction to what business finance is and what are the roles and responsibilities of financial manager. Includes various other business related terms.
Accounting for issue of shares and loan notesItisha Sharma
The document discusses various aspects of accounting for share capital including:
1) Definitions of types of share capital such as authorized, issued, subscribed, called up, and paid up capital.
2) The process of issuing shares which includes issuing a prospectus, receiving applications, and allotting shares.
3) The nature and classes of shares including preference shares which have preferential rights to dividends and repayment of capital, and equity shares which do not have preferential rights.
4) Journal entries for various transactions related to share capital such as receiving application money, allotting shares, calling capital, and receiving call money.
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MEANING OF COMPUTERISED ACCOUNTING
TRADITIONAL/MANUAL SYSTEM OF ACCOUNTING
PROCESS OF COMPUTERISED ACCOUNTING
FEATUERES OF COMPUTERISED ACCOUNTING
ADVANTAGES AND DISADVANTAGES OF COMPUTERISED ACCOUNTING
PROCESS/STEPS IN COMPUTERISED FINANCIAL ACCOUNTING
ADVANTAGES OF THE COMPUTERISED FINANCIAL ACCOUNTING SYSTEM
VARIOUS COMPONENTS OF A COMPUTERISED FINANCIAL ACCOUNTING SYSTEM
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Features of Hire Purchase
Advantages and Disadvantages of Hire Purchase
Contents of Hire Purchase agreement
Installment Purchase
Important Definitions
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Lease
Features of Lease
Merits and Demerits of Lease
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Thinking of getting a dog? Be aware that breeds like Pit Bulls, Rottweilers, and German Shepherds can be loyal and dangerous. Proper training and socialization are crucial to preventing aggressive behaviors. Ensure safety by understanding their needs and always supervising interactions. Stay safe, and enjoy your furry friends!
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Odoo provides an option for creating a module by using a single line command. By using this command the user can make a whole structure of a module. It is very easy for a beginner to make a module. There is no need to make each file manually. This slide will show how to create a module using the scaffold method.
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This is part 1 of my Java Learning Journey. This Contains Custom methods, classes, constructors, packages, multithreading , try- catch block, finally block and more.
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This presentation was provided by Steph Pollock of The American Psychological Association’s Journals Program, and Damita Snow, of The American Society of Civil Engineers (ASCE), for the initial session of NISO's 2024 Training Series "DEIA in the Scholarly Landscape." Session One: 'Setting Expectations: a DEIA Primer,' was held June 6, 2024.
2. Topics Covered
What is Goodwill?
Concept of Goodwill
Features of Goodwill
Types of Goodwill
Factors affecting goodwill
Methods of calculating goodwill
3. Meaning of Goodwill
Goodwill is an intangible asset linked to and established
business built over time, as business gains favorable
reputation for maintaining good customers – supplier
relationship and effective branding as it is expected to make
profit year after year.
4. Concept of Goodwill
When one company buys another company, the purchasing company may pay more for
the acquired company than the fair market value of its net identifiable assets (tangible
assets plus identifiable intangibles, net of any liabilities assumed by the purchaser).The
amount by which the purchase price exceeds the fair value of the net identifiable assets is
recorded as an asset of the acquiring company. Although sometimes reported on the
balance sheet with a descriptive title such as “excess of acquisition cost over net assets
acquired”, the amount is customarily called goodwill.
Goodwill arises only part of a purchase transaction. In most cases, this is a transaction in
which one company acquires all the assets of another company for some consideration
other than an exchange of common stock.The buying company is willing to pay more
than the fair value of the identifiable assets because the acquired company has a strong
management team, a favorable reputation in the marketplace, superior production
methods, or other unidentifiable intangibles.
The acquisition cost of the identifiable assets acquired is their fair market value at the
time of acquisition. Usually, these values are determined by appraisal, but in some cases,
the net book value of these assets is accepted as being their fair value. If there is evidence
that the fair market value differs from net book value, either higher or lower, the market
value governs.
5. Features of Goodwill
1. Goodwill is an intangible asset. It is non-visible but it is not a fictitious
asset.
2. It cannot be separated from the business and therefore cannot be sold
like other identifiable and separable assets, without disposing off the
business as a whole.
3.The value of goodwill has no relation to the amount invested or cost
incurred in order to build it.
4.Valuation of goodwill is subjective and is highly dependent on the
judgment of the valuer.
5. Goodwill is subject to fluctuations.The value of goodwill may fluctuate
widely according to internal and external factors of business.
6. Types of Goodwill
Purchased Goodwill: Purchased goodwill arises when a business
concern is purchased and the purchase consideration paid exceeds
the fair value of the separable net assets acquired.The purchased
goodwill is shown on the assets side of the Balance sheet.
Non-PurchasedGoodwill/Inherent Goodwill: Inherent goodwill is
the value of business in excess of the fair value of its separable net
assets. It is referred to as internally generated goodwill and it arises
over a period of time due to good reputation of a business.The
value of goodwill may be positive or negative. Positive goodwill
arises when the value of business as a whole is more than the fair
value of its net assets. It is negative when the value of the business
is less than the value of its net assets.
7. Factors Affecting Goodwill
1. Outstanding quality of products/services.
2. Locational factors—if a business is located at a favorable place; it enhances the value of goodwill.
3.The period for which the business has been in business.
4. Special advantages—A company that enjoys special advantages such as favorable contracts, assured
supply of raw material at low rates, possession of trademarks, patents, copyrights, technical knowhow and
research and development, well known collaborators etc. contribute to higher value of goodwill.
5. Nature of Business—a business having stable continuous demand for its products such as consumer goods
is able to earn more profits and hence has more goodwill. If the business is risky, profits will be uncertain.
The monopoly condition or limited competition enables the enterprise to earn higher profits which leads to
higher value of goodwill.
6. Good relations with customers, suppliers, labour and government.
7. Efficiency of Management— a firm having efficient management enjoys advantages of high productivity
and cost of efficiency.This leads to higher profits which in turn increases the value of goodwill.
8. Capital required— if two businesses have same rate of profit, the business which requires lesser amount of
capital tends to enjoy more goodwill.
8. Need forValuation of Goodwill
(a) In the Case of a Sole-Proprietorship Firm:
If the firm is sold to another person;
If it takes any person as a partner and
If it is converted into a company
(b) In the Case of a Partnership Firm:
If any new partner is taken;
If any old partner retires from the firm;
If there is any change in profit-sharing ratio
among the partners;
If any partner dies;
If different partnership firms are amalgamated; If any firm is sold;
If any firm is converted into a company.
9. (c) In the Case of a Company:
If the goodwill has already been written-off in the
past but value of the same is to be recorded
further in the books of accounts.
If an existing company is being taken with or
amalgamated with another existing company; If the Stock Exchange
Quotation of the value of shares of the company is not available in
order to
compute gift tax, wealth tax etc.; and
If the shares are valued on the basis of intrinsic
values, market value or fair value methods.
11. Methods ofValuing Goodwill- Average
Profit Method
Average Profit =Total Profits for all the years/Number of
years
Value of Goodwill = Average Profit ×Years’ Purchase.
12. Illustration 1:
Sumana, Suparna and Aparna are partners in a firm.They share
profits and losses in the ratio of 3: 2: 1.The partnership deed
provides that, on the retirement of a partner, Goodwill shall be
calculated on the basis of 5 years’ purchase of the average net
profits of the preceding 8 years. Aparna retires from the
business on 31.12.1993.
The net profits for the last 8 years are as follows: 1996 Rs. 6,000;
1997 Rs. 12,000; 1998 Rs. 20,000; 1999 Rs. 16,000; 2000 Rs.
25,000; 2001 Rs. 30,000; 2002 Rs. 36,000; 2003 Rs. 31,000.
Compute the Goodwill of the firm which is payable to Aparna.
13. Total value of Goodwill = Rs. 22,000 × 5 = Rs. 1, 10,000
Aparna’s share of Goodwill Rs. 1, 10,000 × 1/6 = Rs. 18,333
Say, Rs. 18,300
24. Methods ofValuing Goodwill- Super
Profit Method
Super-Profit = Average Profit (Adjusted) – Normal Profit
Value of Goodwill = Super -Profit XYears’ Purchase