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Comments: For XYZ Ltd., the working capital c) The finished goods stock is below average.
cycle is below the industry average, including a This may be due to a high demand for the firm's
lower investment in net current assets. goods or to efficient stock control. A low
However, the following points should be noted finished goods stock can, however, reduce sales
about the individual elements of working since it can cause delivery delays.
capital.
d) Debts are collected more quickly than
a) The stock of raw materials is considerably average. The company might have employed
higher than average. So there is a need for stock good credit control procedure or offer cash
control procedure to be reviewed. discounts for early payments.
3. Customer Advances:
Solution 3:
Corporate Restructuring means any change in a new entity is created. Here, the acquired
the business capacity or portfolio that is carried company transfers its assets, liabilities and
out by inorganic route or any change in the shares to the acquiring company for cash or
capital structure of a company that is not in the exchange of shares. For example, merger of
ordinary course of its business or any change in Hindustan Computers Ltd, Hindustan
the ownership of a company or control over its Instruments Ltd, Indian Software Company Ltd
management or a combination of any two or all and Indian Reprographics Ltd into an entirely
of the above. Types of Corporate Restructuring new company called HCL Ltd. Acquisitions and
Takeovers: An acquisition may be defined as an
• Mergers / Amalgamation act of acquiring effective control by one
• Acquisition and Takeover company over assets or management of
another company without any combination
• Divestiture ofcompanies. Thus, in an acquisition two or
more companies may remain independent,
• Demerger (spin off / split up / split off)
separate legal entities, but there may be a
• Reduction of Capital change in control of the companies. When an
acquisition is ‘forced’ or ‘unwilling’, it is called a
• Joint Ventures takeover.
Solution 4:
MBOs involve the acquisition by existing event that borrowed funds alone are
corporate management of a company's shares insufficient, the management team may offer
or operations. As the existing management equity to a collaborative sponsor, such as a
team typically has a limited amount of cash buyout fund or partner.
available, MBOs generally require that funds be
raised to acquired an operation. For this reason,
an MBO may take the form of an LBO. In the