The Three Most Significant Facts for the Business - Essay Example

Financial Accounting The three most significant facts that I need to find out before I can carry out the business is to ensure that I understand the credibility of the matter. This way, I will be able to get substantive evidence that the acquisition is indeed legal and will be of value to me. The negotiations for acquisitions should be enriched with information, which touches on the various aspects of the company. The other fact, which I need to know, is the profitability of the company. It is very imperative that I should know how the business has been performing for the last three or so years. According to the information, it is known that the company had revenues drastically raisin from $92 million to 127 million, in 2011. This information alone is enough to give me enough reasons to acquire the company. The role of any business is to make profits, or at least break even. Therefore, critical analysis of the statement of financial positions should be done in order to come up with factual information concerning the move. In terms of competition, the company is doing well, to a point of out doing some other better companies. The company is also able to compete favourable with the competitors who directly supply the products to the customers. The other significant information which I want to know is the pricing strategies of the firm. I need to understand the way the company formulates its pricing policies, the way it deals with customers and how it adjusts its prices. One important issue, which is important concerning investment acquisitions, is getting to understand about pricing strategies. If the prevailing price was $10, then the investor cannot come and arbitrarily fix the price at $20 as this will result to loss of customers and the market grip. Looking at the financial statements will furnish me with enough information so that I can make informed decision about the firm. The firm’s historical performance, as shown by the revenues and gross profit margins, is of great help in making valid conclusions. It is also important to analyse the asset base of the company, as this will make me know whether it will be able to produce efficiently. Learning about the needed information The first way to learn about all this information I have listed is to visit the company’s website. Here, much of the company’s information concerning the financial status is obtained. The information will act as a directive of whether to invest or not. Visiting the company website is also helpful as I am able to get updated information concerning the company, the manager, the objective of the company, the company’s annual reports and projected financial performance. Since the company is a prospective seller, I need to approach it with a lot of credibility, in order to get the required discussions. The discussions will be all inclusive as it must include the reason for sale and my intention for investment acquisition. The seller should be able to prove that he has a strong financial backing and that the company he wishes to sell has a good financial history. There must also be a confidentiality agreement between me and the company. Through this way, I will be able to ascertain the commitment of the seller and his or her intention to sell the company. To get the information, I need to be attending the company’s annual meetings, which will enable me to assess the company’s management traditions. The takeover policy should also be clear as to the terms and conditions of the stipulated agreement. This needed information will then suffice me with the correct feedback, which is crucial for the strategic decision making process. For any investment, there is an issue of strategy in decisions. It does not matter the content of information one has concerning the company; if there are no strategic skills in decision making, then the investment will not yield any fruit. I also need to understand the customers of the company, how they relate with the company and how the company treats them. Sometimes acquisitions may not end in good terms as the main reason why the management wants to sell the company is because of poor customer relations, which may have negative implications on the acquirer. The policy implication is that any positive information, which will be provided will enable me to carry out investment initiatives well. The information from the auditors will also present me with enough information which will be provided to the acquiring company. Because I am bidding on behalf of this company, I need to ensure that I consult the company auditors to provide me with their qualified information. The information may include the net income of the company, the share dividends, the accounting standards of the company; the company’s accounting cycle and the company’s remuneration strategies (Corby 67). Reasons for moving forward for this opportunity The reason why I should encourage the development of ties investment idea is because of the future benefits it will bring to me. Looking at the company’s financials, it implies that given the proper management, the company can improve on the sales revenue. The expansion program yields enough revenue to give every reason as to why this investment was worth in the first place. This company was very competitive especially in ties area of operations, which is sale of medical equipment. This business is usually very lucrative since there is large number of competitors who may pose risks to the growth of the firm. Hence, fewer competitors will translate to increased profitability of the company. Another reason why I should move forward is because of the company’s strong financial indicator. The company has a very strong asset base and a high level of operating income, meaning that acquiring this firm will add more value. Every investment is worth being undertaken, but what is more important is to understand the financial position of the company, how the company pays dividends and the way the shareholders treat the company. Another reason is the pricing of the offer. If pricing is very competitive, then this will give me a reason to go for it. The pricing of firms to be acquired usually affects the extent to which investors are willing to buy or acquire the business. If the asking price is high, then it means that Lima tied investors are willing to acquire the company. Reasons for moving against There are some reasons that may make me not move forward towards acquiring the investment. First of all, let me mention something of the cahflows. How frequent is the company making cash inflows, how are financing activities of the company of any help to the financial performance of the company? If the financial strength of the company is not strong, then it is not advisable to move forward. Moreover, if the company’s competition status is weak, it means that loss is inevitable, hence not wise to invest in the company. Sometimes, the government policy might be too strict on acquisitions. If the government policy does not favour this move, then I will not take it. The government policies include taxation and subsidies. Another reason that may make me not move towards undertaking the acquisition is when the company is constantly making losses. Through a mere inspection of financial statement, there is an indication that the company has been making losses. Consecutively, it is not wise to carry out the investment. Moreover, if the agreement is not clear and the terms and conditions are vague, then there is no point but to reject the acquisition idea. Sometimes, the auditor’s qualified reports may never reveal any chances that the company is profitable, so it is wise to look for alternative investments. If the payback period for this company is too long or the returns are less than the costs, then it implies that it will take a longer period before the company can start earning profits. Therefore, in order to consider all the moves, either for or against, one thing is clear, to look out for financial statements closely and draw inferences concerning the company, that is whether the company is able run at a profit or not (Corby 54). Works cited: Corby, Ian. Business decisions. New York, NY: Cengage, 2003. Print. Read More