RSM424H1 Lecture Notes - Lecture 20: Retained Earnings, Cash Flow, Legal Personality
Document Summary
Lecture 20: domestic and international business expansion, domestic business expansion. International business expansion: must attempt to create an expansion structure that will: Maximize the return of cash to the business for reinvestment: domestic business expansion. Two structural alternatives are available: operated as a division, the expansion activity can be operated as a division of the existing, operated as a separate corporation corporation; or, a subsidiary of the parent corporation. Loss utilization: a major difference between the two structures is the ability to use any losses in the start-up years: Divisional structure all losses incurred can immediately be offset against other divisional income. Corporate structure start-up losses can only be used by the separate corporation. Not available to the other divisions: expansion failure, the losses and related obligations will be funded by the initial capital invested, or, the losses will require further funding to meet the obligations.
