ACCT 1A Lecture Notes - Lecture 9: Consolidated Financial Statement, Financial Statement, Capital Structure

• School: Irvine Valley College
• Department: Accounting
• Course: ACCT 1A
• Professor: Bradshaw

Document Summary

Dividends are distributions of profits to shareholders; it will reduce owners" equity (retained profits). Dividends are can be interim or finals. Reserves reflect where certain gains/losses have originated. E. g. revaluation reserve, foreign currency translation reserve, general reserve etc. Recall that when a non-current asset is revalued upwards, revaluation reserve is credited. General reserve is a reserve created to reduce retained profits. A signal to re-investment and thus future growth; General reserve transfers and their natures must be disclosed. Considerations when deciding on financing mix (debt/equity): Capital structure of a company can be used in a takeover defence. Increases market value of the target due to increased expected future cash flows higher price. Increases the number of shares raider needs to withdraw/modify offer to include the new shares. Share splits: new offer to include the new shares. However, since there will be less shares the acquirement might be easier. Issue through private placement: change the balance of voting rights.