Internal reconstruction is the process of reorganizing affairs of the business in terms of assets revaluation, liability assessment, reducing share capital, restructuring the liability, and varying the rights associated with the equity. Reconstruction is considered when the business makes consistent losses, and there is a need to review the balance sheet if assets/capital is overstated. […]
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Companies involved in the manufacturing process have assets that assist in this process. Usually, these assets include machinery, which helps them alter raw materials into finished goods. Companies acquire machines through capital investments, usually an upfront payment to a supplier. In some cases, they may also feature leased machinery. Regardless of the source, companies need
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A lease is an agreement in which a lessor allows a lessee to use their assets. In this process, the lessor owns the asset and grants a right to use the underlying asset. The lessee, in exchange, pays them for this right. Some several other terms and conditions dictate these contracts. In essence, however, most
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When acquiring an asset, companies have several options to finance it. The most common form of finance is the company’s internal resources. Usually, companies have surplus assets that they can invest into new acquisitions. Most companies track these resources to ensure they can acquire new assets based on them. These assets generate from the company
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Companies take care of their customers in various ways. Previously, companies only sold products and services without any other services. While this process was still profitable, it did not ensure they could retain their customers. However, customers have become more loyal now due to the added-on services and products that companies offer. For companies that
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When a company sells its products and services, it recognizes any proceeds as revenues. In the case of credit transactions, the transaction value will be the agreed or perceived value of the products. For companies, revenues represent the primary income source from operations. However, these revenues do not ascertain that a company will receive its
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Overtrading means planning an aggressive and overambitious growth plan. It results when a business undertakes trading activities more than the resources it possesses. Overtrading is a working capital management problem and its causes and solutions also revolve around it. A business must fully understand the reasons for overtrading to create an effective plan to reduce
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Investors can make an investment in another entity with any amount. If they exercise significant influence and hold substantial shareholding (at least 20%), they will account for the investment with the equity method of accounting. The initial investment, subsequent measurement adjusted for income/loss, and finally the disposal will also be recorded under the equity accounting
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Enterprise value (EV) and market capitalization (or market cap) are important metrics to analyze the value of a company. The market cap figure offers valuable information about the equity value of the firm. Contrarily, the EV calculations consider the equity value, debt incurred, and cash held by a company. Thus, it offers a comprehensive analysis
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Market capitalization is theoretically the market value of the equity of a company or corporation. It represents the equity side of the total valuation of a company. Market cap can be used as a useful tool in the total market valuation analysis. However, unlike the common notion, it does not represent the total market value
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