Definition of Acquisition of assets

Acquisition of assets

A merger or consolidation in which an acquirer purchases the selling firm's assets.

Acquisition of stock

A merger or consolidation in which an acquirer purchases the acquiree's stock.

Assets

A firm's productive resources.

Assets requirements

A common element of a financial plan that describes projected capital spending and the
proposed uses of net working capital.

Corporate acquisition

The acquisition of one firm by anther firm.

Current assets

Value of cash, accounts receivable, inventories, marketable securities and other assets that
could be converted to cash in less than 1 year.

Exchange of assets

acquisition of another company by purchase of its assets in exchange for cash or stock.

Financial assets

Claims on real assets.

Horizontal acquisition

Merger between two companies producing similar goods or services.

Long-term assets

Value of property, equipment and other capital assets minus the depreciation. This is an
entry in the bookkeeping records of a company, usually on a "cost" basis and thus does not necessarily reflect
the market value of the assets.

Net assets

The difference between total assets on the one hand and current liabilities and noncapitalized longterm
liabilities on the other hand.

Non-reproducible assets

A tangible asset with unique physical properties, like a parcel of land, a mine, or a
work of art.

Other current assets

Value of non-cash assets, including prepaid expenses and accounts receivable, due
within 1 year.

Publicly traded assets

assets that can be traded in a public market, such as the stock market.

Quick assets

Current assets minus inventories.

Real assets

Identifiable assets, such as buildings, equipment, patents, and trademarks, as distinguished from a
financial obligation.

Reproducible assets

A tangible asset with physical properties that can be reproduced, such as a building or
machinery.

Residual assets

assets that remain after sufficient assets are dedicated to meet all senior debtholder's claims in full.

Return on assets (ROA)

Indicator of profitability. Determined by dividing net income for the past 12 months
by total average assets. Result is shown as a percentage. ROA can be decomposed into return on sales (net
income/sales) multiplied by asset utilization (sales/assets).

Return on total assets

The ratio of earnings available to common stockholders to total assets.

Tax free acquisition

A merger or consolidation in which 1) the acquirer's tax basis in each asset whose
ownership is transferred in the transaction is generally the same as the acquiree's, and 2) each seller who
receives only stock does not have to pay any tax on the gain he realizes until the shares are sold.

Taxable acquisition

A merger or consolidation that is not a tax-fee acquisition. The selling shareholders are
treated as having sold their shares.

Vertical acquisition

acquisition in which the acquired firm and the acquiring firm are at different steps in the
production process.

ASSETS

Anything of value that a company owns.

Current assets

Cash, things that will be converted into cash within a year (such as accounts receivable), and inventory.

RATE OF RETURN ON TOTAL ASSETS

The percentage return or profit that management made on each dollar of assets. The formula is:
(Net income) / (Total assets)

Assets

Things that the business owns.

Current assets

Amounts receivable by the business within a period of 12 months, including bank, debtors, inventory and prepayments.

Fixed assets

Things that the business owns and are part of the business infrastructure – fixed assets may be
tangible or intangible.

Intangible fixed assets

Non-physical assets, e.g. customer goodwill or intellectual property (patents and trademarks).

Tangible fixed assets

Physical assets that can be seen and touched, e.g. buildings, machinery, vehicles, computers etc.

Assets

Items owned by the company or expenses that have been paid for but have not been used up.

Intangible assets

assets owned by the company that do not possess physical substance; they usually take the form of rights and privileges such as patents, copyrights, and franchises.

current assets

Current refers to cash and those assets that will be turned
into cash in the short run. Five types of assets are classified as current:
cash, short-term marketable investments, accounts receivable, inventories,
and prepaid expenses—and they are generally listed in this order in
the balance sheet.

fixed assets

An informal term that refers to the variety of long-term operating
resources used by a business in its operations—including real
estate, machinery, equipment, tools, vehicles, office furniture, computers,
and so on. In balance sheets, these assets are typically labeled property,
plant, and equipment. The term fixed assets captures the idea that the
assets are relatively fixed in place and are not held for sale in the normal
course of business. The cost of fixed assets, except land, is depreciated,
which means the cost is allocated over the estimated useful lives of the
assets.

return on assets (ROA)

Although there is no single uniform practice for
calculating this ratio, generally it equals operating profit (before interest
and income tax) for a year divided by the total assets that are used to
generate the profit. ROA is the key ratio to test whether a business is
earning enough on its assets to cover its cost of capital. ROA is used for
determining financial leverage gain (or loss).

Fixed Assets Turnover Ratio

A measure of the utilization of a company's fixed assets to
generate sales. It is calculated by dividing the sales for the period
by the book value of the net fixed assets.

Return on Total Assets Ratio

A measure of the percentage return earned on the value of the
assets in the company. It is calculated by dividing the net income
available for distribution to shareholders by the book value of all
assets.

Total Debt to Total Assets Ratio

See debt ratio

Other assets

A cluster of accounts that are listed after fixed assets on the balance sheet,
and which contain minor assets that cannot be reasonably fit into any of the other
main asset categories.

acquisition

Takeover of a firm by purchase of that firm’s common
stock or assets.

financial assets

Claims to the income generated by real assets. Also called securities.

real assets

assets used to produce goods and services.

Creative Acquisition Accounting

The allocation to expense of a greater portion of the price
paid for another company in an acquisition in an effort to reduce acquisition-year earnings and
boost future-year earnings. acquisition-year expense charges include purchased in-process research
and development and an overly aggressive accrual of costs required to effect the acquisition.

Policy Acquisition Costs

Costs incurred by insurance companies in signing new policies, including expenditures on commissions and other selling expenses, promotion expenses, premium
taxes, and certain underwriting expenses. Refer also to customer, member, or subscriber
acquisition costs.

Preferred Stock Stock that has a claim on assets and dividends of a corporation that are prior

to that of common stock. Preferred stock typically does not carry the right to vote.

Realizable Revenue A revenue transaction where assets received in exchange for goods and

services are readily convertible into known amounts of cash or claims to cash.

Company Acquisitions

assets acquired to create money. May include plant, machinery and equipment, shares of another company etc.

Current Assets

Cash and other company assets that can be readily turned into cash within one year.

Fixed Assets

Land, buildings, plant, equipment, and other assets acquired for carrying on the business of a company with a life exceeding one year. Normally expressed in financial accounts at cost, less accumulated depreciation.

Longer-Term Fixed Assets

assets having a useful life greater than one year but the duration of the 'long term' will vary with the context in which the term is applied.

Personal Assets

assets, the title of which are held personally rather than in the name of some other legal entity.

Foreign direct investment (FDI)

The acquisition abroad of physical assets such as plant and equipment, with
operating control residing in the parent corporation.

Merger

1) acquisition in which all assets and liabilities are absorbed by the buyer.
2) More generally, any combination of two companies.

Pooling of interests

An accounting method for reporting acquisitions accomplished through the use of equity.
The combined assets of the merged entity are consolidated using book value, as opposed to the purchase
method, which uses market value. The merging entities' financial results are combined as though the two
entities have always been a single entity.

Purchase method

Accounting for an acquisition using market value for the consolidation of the two entities'
net assets on the balance sheet. Generally, depreciation/amortization will increase for this method compared
with pooling and will result in lower net income.

Residual method

A method of allocating the purchase price for the acquisition of another firm among the
acquired assets.

Subordinated Debt

Debt instruments that provide financing for acquisitions, expansion and restructuring, take secondary security against assets, have fixed or flexible terms of repayment and charge fixed or floating interest rates.

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