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Articles by Nagasravan Tamma
Page 14 of 27
Differentiate between accounting profit and taxable profit
The term profit will differ from profession to profession. Businessmen will have different perspectives in terms of profit, economists will have different perspectives. According to accounts profit is nothing but excess of revenue over expenses.This profit is called accounting profit. Taxable profit had a different sense, amount taxable as per provisions of income tax act. Taxable profit is calculated by taking accounting profit, non-allowable expenses (added), allowable expenses (subtracted) and the resulting income is credited in a P & L account.Accounting profitIt results from operating activities and non-operating activities of the company. Accounting profit is the financial gain which is ...
Read MoreWhat is an acquisition strategy and explain its types and elements?
Acquisition strategy is the approach of acquiring products, services, and business by considering factors like brand, financial impact, culture, product etc. It plays a significant role in business expansion and plays part in growth of business.ElementsThe elements of an acquisition strategy are as follows −Business strategy − Talks about contracting approach (type of contracts, leasing arrangements etc.)Contracting strategy − Provides analysis and rationale.Major contracts − Identification of contracts and its types.Incentivise − Tells about incentives in detail.Technical data management − Long term technical data needs are assessed.Sustainment − Tells about acquiring integrated product support.StrategiesThe strategies of an acquisition strategy are ...
Read MoreExplain the concept of merger and acquisition
Merger is the process of combining two or more different companies as one company.Acquisition is the process of taking control of one company by another. Consolidation of companies is called merger and acquisition. The main objective is wealth maximization and to create/increase their value.Merger and acquisition can be done by the followingAsset purchasing.Shares purchased.Trade of shares for assets.Trade of shares to share.Important considerations for the merger and acquisition are as follows −Companies must be ready to take risks.Companies must narrow down from multiple bets.Companies should be patient, resilient and adapt to change.StepsThe steps for merger and acquisition are as follows ...
Read MoreExplain the concept of Post-Merger Integration (PMI)
Post-Merger Integration (PMI) is a process of merging two or more firms/organizations/companies to increase synergies and reach their forecasted value.Top executives, stakeholders, team members, Human Resources (HR), new management will take responsibility for post-merger activities. There is no period to complete the deal.Every merger has their own time frame (may be months, years).Post-Merger Integration (PMI) includes the following −Recruiting process − Based on short, long term needs, process and compensations.Overlap − Includes layoffs, benefit forms, securing top employees.Technology − Includes merger systems and new organisation charts.Performance − Includes training to employees, documents for review etc.AreasThe areas that come under the ...
Read MoreDistinguish between pooling of interest and purchase method
According to accounting standards 14, amalgamation is done according to the nature of merger and nature of purchase. Amalgamation is the process of unification between two or more companies involved in similar business to form a new company.If the amalgamation nature of merger, method of accounting is used in pooling of interest method and if amalgamation nature of purchase then purchase method of accounting is used.Pooling of interest methodIn this acquired form the capital account is removed and this removed account is replaced by new stock of the acquiring company. In this method deal is nothing but exchange of equity ...
Read MoreExplain the concept of amalgamation
Amalgamation is the process of combining two or more companies into a single company or absorption of one company by another.In absorption, bigger companies take control over smaller companies. The main difference between an amalgamation and a merger is that in amalgamation, neither of the companies exists. A new company is formed and both company's assets and liabilities are combined.TypesThe types of amalgamation are as follows −MergerIn this, in addition to assets and liabilities, shareholder's interest and business are pooled.The book adjustments are needed, if they want to carry the same business.PurchaseIn this, shareholders do not have proportionate equity shares ...
Read MoreWhat are forward triangular merger and reverse triangular merger?
Subsidiary mergers are divided into following −Forward triangular mergerReverse triangular mergerFirst, let us learn about the forward triangular merger.Forward triangular mergerIn a forward triangular merger, the company acquires another company through its subsidiary company.This type of merger is also called indirect merger.In this, a combination of cash and stock is used for financing. If only cash is used, that amount is taxable.AdvantagesThe advantages of forward triangular merger are as follows −More flexible.Cash and stocks are used for financing.More protection to buyers.DisadvantagesThe disadvantages of forward triangular merger are as follows −Less preferred.Have to reassess all contracts, licenses etc.Increase in costs for ...
Read MoreWhat are the reverse merger, forward merger and subsidiary merger?
The reverse merger, forward merger and subsidiary merger are explained below along with their advantages and disadvantages.Reverse mergerIn reverse merger, A private firm becomes a public company.A smaller company obtains a bigger company.Parent company mergers with its subsidiary.Company in losses obtains the company in profits.AdvantagesThe advantages of reverse merger are as follows −Private firm become public company without IPOTax benefitsDisadvantagesThe disadvantages of reverse merger are as follows −Shareholders value remains the same.Can/sometimes lead to operations inefficiency.Forward mergerForward merger is also called direct merger. In this, two companies are combined directly to form a single company under the name of the ...
Read MoreDifference between vertical integration and horizontal integration
Irrespective of size or its nature every firm or organization needs growth and expansion and these can be done by the way of integration followed by firms or organizations. The main integrations followed by companies or vertical and horizontal integration.Horizontal integration involves integration of two companies in same business line or same chain whereas vertical integration involves integration of various entities in distribution chainHorizontal integrationIf integration is done between companies who are in the same line of business or they have the same business activities is called horizontal integration. They may have the same complementary product, by product or other ...
Read MoreDifferentiate between Asset purchase method and stock purchase method
In business, whether you are buyer or seller, the transactions can be made either in purchase and sale of assets or in purchase and sale of common stock. The buyer or seller can choose their option (there can be various reasons in choosing their option).An asset purchase transaction is the sum of sales of individual assets and agreed upon liabilities. In stock acquisition, ownership transfer will take place and the entity has the same assets and liabilities.Asset purchaseIn this, the legal entity will not change but the buyer will purchase individual assets (equipment's, goodwill, inventory etc.). An asset sale does ...
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