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Corporate finance and Financial Accounting - Essay Example

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Corporate finance and Financial Accounting

However, it is the responsibility of the organization to formulate and implement appropriate strategies to deal with risks. For this case, the management of XYZ opted for acquisition of the company. XYZ sold itself to ABC International in exchange for $8.2 billion. After the acquisition, XYZ estimated that the worth of its shares would be placed at $100 per share. After the acquisition, ABC would take the sole responsibility of selling the XYZ’s stock exchange ventures situated in different countries that include Netherlands, Belgium and Portugal. ABC International’s operations ABC International is a leading global operator that deals with exchanges and the market for various forms of contracts ranging from agriculture to equity index. The corporation is based in the United Kingdom with its operations in Russell, Europe and some parts of the United States. The company operated under ABC Int’l as the trade mark and name. The company is managed by a board of directors, who set high standards that help in day-to-day management of the company. However, there exist guidelines and regulations of the organization that must be followed from time to time, subject to modification by the board of directors. This ensures a fulfillment of the best interests of the organization in line with the rules and regulations of the company. ...
The company’s financial analysis is as presented below: Valuation ratio P/E Current 20.27 P/E Ratio (with extraordinary items) 20.27 P/E Ratio (without extraordinary items) 16.46 Price to Sales Ratio 6.61 Price to Book Ratio 2.46 Price to Cash Flow Ratio 12.39 Enterprise Value to EBITDA 11.19 Enterprise Value to Sales 8.02 Total Debt to Enterprise Value 0.13 Efficiency Revenue/Employee 1.27 Income per Employee 0.51 Receivables Turnover 10.34 Total Asset Turnover 0.04 For the liquidity ratio, the current and the quick ratio both stand at 1.04 while the cash ration remains at 0.05 Profitability ratio Gross Margin 70.00 Operating Margin 60.00 Pretax Margin 57.50 Net Margin 40.00 Return on Assets 1.20 Return on Equity 16.30 Return on Total Capital 12.50 Return on Invested Capital 12.88 Capital Structure Total Debt to Total Equity 30.00 Total Debt to Total Capital 20.50 Total Debt to Total Assets 3.00 Long-Term Debt to Equity 26.50 Long-Term Debt to Total Capital 20.00 Rationale for the acquisition The acquisition would ensure improvement in the ranking of the XYZ Corporation in the stocks exchange market. This is because of the strengthening of products and leadership (Ehrhardt & Brigham, 2011). After the completion of the acquisition, the new company will focus on the improvement of financial services, leading to high growth potential. Diversification of risks will attract more investors to invest in the company, hence growth and expansion of the company (Nofsinger, Kim & Mohr, 2010). In addition, existing investors will be certain of their investments, whereas the same venture will aim at increasing shareholder’s wealth through improved profitability. Acquisition ...Show more


CORPORATE FINANCE University name Introduction During the first meeting with the board of directors of the XYZ Corporation, diversification of idiosyncratic risk formed the main subject of discussion…
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Corporate finance and Financial Accounting
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