Hello Sir,
I have two queries regarding the same qs
1)
In P/E ratio method to value the company, I calculated the value of the company correctly. However the company in question (NGN) is not listed so they took 90% of the value of p/e ratio rather than whole of it. Is it necessary to do this or can we take the whole p/e ratio. Will we lose marks if we don't do it?
2)
When we acquire a company, its shares get cancelled so we don't reflect them in our financial statements, but we do reflect any debt it has in our financial statements?
thankyou
Ask the Tutor ACCA FM
KFP Co June 2009
Sir a small query regarding Corhig Co June 2012 part (a)
they have given the answer as $15m (based on first year forecast earnings only)
however in last paragraph of answer they have said that $18.15m is likely to be a better estimate(since it comes from averaging the forecast earnings of three years). Does that mean both values are acceptable?
thankyou
7y ago#2In future please do not ask about different questions in the same thread - start a new thread for each of the questions. The reason is that we do not give private tuition, and our answers are to help everyone - people use the search box in this page to find previous answers to problems they are worried about.
First question: You will not lose marks by not taking 90%, provided that you do mention that the value will be lower because it is not listed. (There is no rule about what % should be applied).
Whether we reflect any debt depends on whether we are taking over the debt or not. Usually they will be taking over the debt, in which case it will appear.
7y ago#3Second question: Yes it does :-)
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