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Questions and Answers
What is the term for the accounting record value of assets shown in the balance sheet?
Which term refers to the cost of purchasing or replacing a new asset of equal utility to the business?
What is the maximum price at which a business can be acquired called?
Which term refers to the sale value of an old asset after its usage?
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In corporate restructuring, what process involves changing the structure of business?
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When pooling resources under a common entity, what is this process known as?
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In the given scenario, what is the amount of capital reduction when the shares are reduced from Rs.10 to Rs.8 each?
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If a creditor with a claim of Rs. 20,00,000 decides to forego 40% of his claim and is allotted 30,000 equity shares of Rs. 40 each, what is the amount transferred to the Capital Reduction account?
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What is the primary aim of working capital management?
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In a lease agreement, what is provided to the lessee?
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In a hire-purchase agreement, when is the ownership of the asset typically transferred to the hirer?
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What is one of the primary reasons for companies to pursue merger and acquisition strategies?
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Study Notes
Key Accounting Terms
- Accounting record value of assets displayed on the balance sheet is known as Book Value.
- The cost of purchasing or replacing an asset of equivalent utility is referred to as Replacement Cost.
- The maximum price for acquiring a business is termed as Maximum Purchase Price.
- The sale value of an old asset after it has been used is known as Salvage Value.
Corporate Restructuring
- The process that involves altering the business structure during corporate restructuring is called Reorganization.
- Pooling resources under a common entity is recognized as Consolidation.
Capital and Share Reduction
- When shares are reduced from Rs.10 to Rs.8 each, the amount of capital reduction equals Rs.2 per share.
- If a creditor with a claim of Rs.20,00,000 foregoes 40% of the claim, the amount of the claim reduced is Rs.8,00,000, and he receives 30,000 equity shares at Rs.40 each, leading to Rs.12,00,000 transferred to the Capital Reduction account.
Working Capital Management
- The primary aim of working capital management is to ensure that a company has sufficient cash flow to meet its short-term obligations and operating expenses.
Lease and Hire Purchase Agreements
- In a lease agreement, the lessee is provided access to the asset without ownership rights.
- In a hire-purchase agreement, the ownership of the asset is typically transferred to the hirer after all payments have been made.
Strategic Business Decisions
- Companies pursue merger and acquisition strategies primarily to achieve growth and enhance competitive advantage.
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Description
Test your knowledge of business valuation terms with this quiz! Identify the correct terms that match the given definitions related to accounting, asset value, and market price.
