Sheep and Me

The advantages of asset purchase for the management team are that they retain ownership of the shares of stock of the business because only assets and liabilities, which are specifically identified in the purchase agreement, are transferred to the buyer. They can still control the operation and employees assignment. However, the transactions of Asset purchase are generally more complicated because ownership of the assets and liabilities and any related contracts must actually

In general, using external funds, i.e. debt or equity, to finance increasing growth is riskier to the corporation. When issuing debt the company needs to be certain to cover both the repayment of the principal and the interest payments on time (because if they do not this could cause them to have problems securing financing in the future). When issuing additional shares of stock (equity) the value of existing traded stock is diluted (in proportion) and as such the current ownership might lose control (and may even be voted out by shareholders if dilution is substantial enough). Furthermore, with both debt and equity financing, a fast growing company needs to be aware that payments to either may hamper future expansion because payments that need to be send out in the forms of dividends or interest cannot be retained and invested in future projects.

The value of fixed assets typically decreases over time. The amount of the decrease each year is accounted for and is called depreciation. Depreciation for the year is expensed on the income statement and added to the accumulated depreciation account on the balance sheet. So the value of the fixed assets on the balance sheet is reduced by the accumulated depreciation.

| In Year 1, depreciation is $5,000 plus 15% of the asset’s outlayFrom Year 2, depreciation is either * 30% of the asset’s book value; or * if the asset’s book value is less than $6,500, depreciation is the asset’s book value (i.e. asset is depreciated to zero once book value < $6,500)

Depreciation is inevitable once you purchase a fixed asset. Microsoft uses the straight-line method to calculate depreciation as most other companies do. The main point is that MS uses the straight-line method over the shorter of the estimated life

* Taking on debt gives the company the ability to use cash for projects and short term investments.

Furthermore, by adopting a historical cost approach the assets will be depreciated over that useful life which has been estimated. With the useful life of an asset being so subjective it is hard to apportion a useful figure to depreciation. By increasing the useful life of an asset you are effectively spreading the depreciation expense over a longer period of time resulting in lower depreciation expenses and vice versa. In fact, Zheng et al. (2012) go one step further and consider depreciation to be a strategy for managers to manipulate profits.

An investment company makes revenue by sharing profit and loss with their clients, and a gain or loss would be recognized when a security was sold. Auditor’s due care is to make sure every transaction is recorded

Depreciation involves spreading the cost of an item over several years or over its useful lifetime. This is an accounting of the reduction in value of the merchandise and it will be reflected as an expense on the company’s income statement. Therefore, this is important because nothing holds its full value over time and organizations need to account for the devaluation. Accountants and financial officers follow GAAP guidelines to determine depreciation. The depreciation of an item is an estimated guess not a proven reality.

It is very interesting how the IRS uses depreciation as an investment vehicle to help businesses with their expenses and cash flow situation. Depreciation encourages business to purchase machinery and building which fuel economic expansion. The yearly expense recovery positively impact corporation bottom line; for equipment and vehicles it is usually 3 to 5 years and for buildings it runs longer between 15 to 30 years. Depreciation recapture is usually mandatory for assets that fall under the IRC Sec. 1231, Sec.1245 and Sec.1250,

* A broader capital base gives the company more access to credit which gives the company an option to venture into new business opportunities

In order to finance through debt, the companies will get the opportunities or may allows you to pay for new buildings, equipment and other some other crucial assets used to cultivate your business before you get or earn the essential finances or funds. However, this can be a huge way to chase an aggressive growth approach, this occurs particularly; if a company has access to get lower interest rates. Intimately related is the benefit of paying off your debt in installments over a period of time. Relative to equity financing, you also benefit by not relinquishing any ownership or control of the business (Bharath, Sunder & Sunder,

This paper will explore and discuss the topics that entail shareholder’s equity which results have been drawn from and conducted from several scholarly articles and offline resources. The paper will cover the definitions and specifications of paid-in capital, retained earnings, treasury stock, and the accumulated other comprehensive income which comprise what stockholder’s equity looks like within the accounting of a corporation, business, and or personal finances. Paid-in capital stock or contributed stock will be discussed under paid-in capital. Net earnings concerning dividends paid out or to use for financial activities

This paper explores and analyzes the different aspects of an investment in a company. Two different corporations were analyzed and a decision was made regarding which corporation would be given an investment. The acquisition of two corporations was not allowed, as there was a spending limit among the two. I made substantial analysis for the two corporations, as this is very significant for possible growth of our own company. I analyzed a five-year projected income statement and a five-year projected cash flow. I also determined the Net Present Value, and Internal Rate of Return among the two companies to make a decision. This paper also includes three peer-reviewed sources to combine with the theoretical explanations.

Firms raise this capital when they are short of other options. The firm has a basic model, but it lacks the capital that will take it to complete heights. This is especially so to a firm that has an interest to trade in the markets in the future. The firm approaches another reputable and stable company for help. The situation is advantageous where especially where the reputable firm is within the same field. The smaller firm approaches the potential financier with the idea stage and then if the company approves of it, the firm receives finances in the form of capital. The conditions that are most imperative in the raising of this capital are that the business model needs to be extremely elaborate (Brooke 2009). The financier should get the plan easily, and the amount of finances has to be large enough because many of them do not appreciate small investments. The investors should have full conviction of the plan for them to consider any channeling of finances.