Corporations can acquire a treasury stock by not selling all of the shares of the original stock. By keeping some of the share for the company itself, a treasury stock is created. When a company buys shares of its own stock it will actually increase the value of its stock because the shares will be taken out of the marketplace. By having a treasury stock it also can allow a company to generate cash if it is needed. A treasury stock can affect stockholders because if the company decides to sell the stock then the equity will decrease and the overall assets will also
Address his issues point by point: 1. Outright purchase of Smithon stock: a. Should Mr. Jones purchase the stock of Smith outright, leaving Smithon intact? What about issuing debt in his Johnson Services company to pay for the Smith Company-would that raise debt to equity
Hint Sheet Arundel Partners: The Sequel Project This case is a vehicle for applying option pricing techniques to a corporate capital budgeting problem. In preparation for the case, students can refer to the HBS note “Exhibit 1: Option-Pricing Table” for background. Please address the following questions in your case writeup. • Why do the principals of Arundel Partners think they can make money buying movie sequel rights? Why do they want to buy a portfolio of rights in advance rather than negotiating film by film to buy the rights?
Then it will show the calculations that will show the gains that Mason Machining, Inc. will get from this transaction. Next, will be an explanation of how Mason will recognize the gains. Next, the tax liability that will be incurred by Mason Machining, Inc. from this transaction will be explained. The next process will be to calculate the amount of gain the shareholder’s from Mason Machining, Inc. will be able to realize and recognize from the transfer of stocks and assets between the two corporations. The next process will be to explain how much tax liability the shareholder’s will incur from the transfer of stocks between the corporations.
INTERMEDIATE ACCOUNTING II/ Intermediate Accounting, Spiceland/Sepe/Nelson Re: Judgment Case 18-5 Requirement 1. The two alternatives Alcoa has for accounting for the repurchase of it’s shares are: 1) The shares can be formally retired. 2) The shares can be named treasury stock Either way, total shareholders’ equity remains the same. Cash is used to repurchase common stock so the effect is to reduce both cash and shareholders’ equity. This choice does, however, affect how individual shareholders’ accounts are reported in the balance sheet.
(c) Listing a large firm's stock is often considered to be beneficial to stockholders because the increases in liquidity and reputation probably outweigh the additional costs to the firm. (d) Stockholders have the right to elect the firm's directors, who in turn select the officers who manage the business. If stockholders are dissatisfied with management's performance, an outside group may ask the stockholders to vote for it in an effort to take control of the business. This action is called a tender offer. (e) The announcement of a large issue of new stock could cause the stock price to fall.
Discussion Questions DQ 1 What business entities are available for a new business? What are the tax and nontax advantages of each form? Select two business types and provide an example of when that selection is most appropriate from a tax perspective and from a nontax perspective. DQ 2 Once a business has elected its tax status using check-the-box regulations, what options are available if it needs to change its tax status? What should a business consider before electing to change its tax status?
When is the trial balance prepared? What is the purpose of preparing a trial balance? What does the trial balance tell you? What does the trial balance not tell you? Why not use the Trial Balance to report financial information internally and externally?
shares). In a fundamental sense, the value of a firm’s shares should reflect investors’ expectations of the firm’s future profitability. However, data on expected future profitability is non-existent. Instead, empirical financial studies must use measures such as current income, sales, assets and debt of the firm as explanatory variables. In addition to the general question of how stock markets value firms, a second question is also receiving considerable attention by financial economists in recent years.
Should the U.S. government intervene in any way in the negotiations between U.S. auto companies and the Chinese government? Explain. 1. In your judgment, do the managers of the Robert Hall store have any ethical obligations to change their salary policies? If you do not think they should change, then explain why they have an obligation to change and describe the kinds of changes they should make.