Business Acquisitions and Mergers
Calculation
Terms and Definitions
100

When a business expands in size and is able to negotiate a lower interest rate on loans

 financial economies of scale

100

True or false. When calculating profit on dissolution you use the new profit sharing ratio

False

100

When two businesses combine to become one

Merger

200

Two sole traders choose to merge into a limited company to attain this

limited liability

200

Non current asset NBV = 1953, purchase consideration is 2100. How much is added into the new sofp of the new companies statement of financial position

2100

200

When a bigger business buys out a smaller business

takeover

300

The extra value placed on the business above its fair capital value as an appreciation to the brand the previous owners have built

Goodwill

300

Capital account 5467, current account (1203), loss on dissolution (7465), Loan from this partner 4000. How much cash is owed to this partner on dissolution

799

300

 Apple buying out a tin mining factory

vertical integration

400

True or false can goodwill be negative

True

400

Purchase consideration is $100. ABC limited offers the business 130 shares of $0.8. How much is the amount placed in share premium

Trick question there’s no share premium, the owner has to actually pay $4 more

400

Apple buys out huawei

horizontal integration

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