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Mehran march/june 2016 adapted

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › Mehran march/june 2016 adapted

  • This topic has 3 replies, 2 voices, and was last updated 7 years ago by P2-D2.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • April 21, 2018 at 11:15 am #448362
    rimshy
    Member
    • Topics: 95
    • Replies: 91
    • ☆☆

    In the answer for past question mehran it is written there will be an adjustment for the lack of liquidity of the investment which reflects the lesser ability of ordinary shareholder to initiate a sale of erham relative to the preferred shareholder what does this mean ??

    April 28, 2018 at 7:46 pm #449209
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7171
    • ☆☆☆☆☆

    Hi,

    Which part of the question is this? Is it (a), (b) or (c)?

    Thanks

    May 9, 2018 at 9:40 am #450812
    rimshy
    Member
    • Topics: 95
    • Replies: 91
    • ☆☆

    This is related to part c

    May 10, 2018 at 8:58 pm #451135
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7171
    • ☆☆☆☆☆

    Hi,

    It is saying that if we calculate a fair value of the investment an adjustment will need to be made. This adjustment is because the venture capital now have control following the issue of the preferred shares to them, and therefore we have less of an interest than we would have previously. This less of an interest means we have less say on what can be done with regards to the sale of the shares and so this needs to be reflected in the fair value. An investor would pay less given this restraint.

    Try not to worry about minor technicalities as such, they’ll only confuse you and nobody is likely to have made the point in the exam.

    Thanks

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