MBA in finance and accounting part 68 ppt

658 Index Sherwin-Williams Company, 62–63, 64 Silgan Holdings Inc., 408 Sirena Apparel Group, 525 SmithKline Beecham PLC, 576 Snapple Beverage Corp., 568, 569–570 Social Security/FICA, 326 Software, 156–164, 540–541 Sole proprietorship, 226 continuity of life, 234 control, 237 formation, 228–229 liability, 245 out-of-state operation, 231 recognition as legal entity, 232 taxation, 248–249 transferability of interest, 235–236 Southwest Airlines, 53–54 Spin-offs and split-ups, 347–350 Spreadsheet software, 157–160 Standard(s): collecting, 213 cost accounting systems, 217–219 currently attainable, 203 engineering studies, 213–214 fixed costs, 218–219 government accounting, 217–218 motivation, 213–215 past data, 215 setting (by board of directors), 516 time/motion studies, 214 types of, 202–203 valuation, 623 variable costs, 218 Stead, Jerre, 568 Stock(s), 331–335 appreciation rights (SARs), 331–332 vs. cash deals (M&A), 582–583 employee plans (ESOP), 341–343 shareholders, 189, 239–240, 511 substantially disproportionate distributions, 340–341 synthetic, 439 tax issues, 331–335, 340–341 Storage Technology Corp., 376, 377 Story model, 263–265 Straddle, 425 Strategic partners, 281 Strategy, 516–518, 552–553 Streaming media, 170 Strike price, 364 Subchapter S, 227, 252–253, 318–322 Substitution, principle of, 596 Sunk costs, 299 Sustainable earnings, 72–96, 617. See also Earnings Swaps, 361, 433, 434, 447–449 equity, 448 interest rate, 449–451 SWOT, 178 Synthetic cash, 439 Synthetic stock, 439 Systematic risk, 613 Taglines, 263 Takeover, 562 Tax issues: acquisition, 322–324, 578, 580, 583, 585 business decisions, 314–352 business expenses, 325–326 business forms/entities, 228, 248–255 buy-sell agreements, 345–347 case illustration, 315 complete termination of interest, 341 deferred compensation, 326–328 dividends, 26, 339–340 employee stock ownership plans, 341–343 equity sharing, 330–335 estate planning, 343–347 executive compensation, 325–330 family limited partnerships, 344–345 foreign subsidiaries, 405–406 gift tax, 317–318 income tax note (example), 78–79 individual federal income tax rates, 249 interest-free loans, 328–330 like-kind exchanges, 337–339 nonrecurring items, 59–62, 78–79, 90, 93 passive losses, 320–322 pass-through entities, 319–320 reverse triangle merger, 352 sale of corporation, 350–351 shelters, 321 spin-offs and split-ups, 347–350 stock appreciation rights (SARs), 331 stock options, 332–334 subchapter S corporation, 316–322 substantially disproportionate distributions, 340–341 taxable income and income tax, 296 three-corner exchange, 339 unreasonable compensation, 315–316 vacation home rental, 335–338 Team (business plan section), 281–283 advisory boards, 281–283 bios/roles, 281 board of directors, 281 compensation, 283 external members, 281–283 ownership, 283 strategic partners, 281 Technology. See Information technology Teleflex Inc., 359 Telsik, Sarah, 519 Tenneco Inc., 364, 373, 405 Three-corner exchange, 339 Tiger International Inc., 410–413 Index 659 Timeline, 281, 282 Time/motion studies, 214 Time value of money (TVOM) analysis, 299–301 Time Warner/AOL, 561, 563, 586 Titan International Inc., 370–371, 388 Toys “R” Us Inc., 40, 42, 43 Transaction processing, 140–144 Transfer pricing, 404–407 Transfer of risk, 424, 432 Travelers Inc., 575 Trimark Holdings, 45 Turnover ratios, 18 UAL Inc., 364 “Ubiquitous” computing, 538 Underlying earnings. See Sustainable earnings Underwriters, 464–466 United Airlines, 563, 576 United States government restrictions on business practices associated with foreign subsidiaries and governments, 356, 413–415 UNIX operating system, 538 Unsystematic risk, 615 Unusual charges, 85, 94 USAir, 563, 576 Vacation home, renting (tax impact), 335–338 Valuation of business, 593–625 adjustment to earnings for purposes of, 608–609 appraisal of fair market value, 604–606 approaches to value (asset /income/market), 594 band of investment, 607 buyers (different types of), 594–595 comparison to industry averages, 604 control interest, 622 control premium, 619 cost of capital, 606–608 direct equity methodology, 605–606 discounted cash flow method, 609–618 discount for lack of control, 622 discount for lack of liquidity, 621–622 discount for lack of marketability, 622 fair market value, 595, 604–606 financial buyers, 594–596 financial statement analysis, 599–603 guideline companies approach, 618 industry analysis, 597 Internet links, 625 investment risk, 596 marketability, 622 market value of invested capital (MVIC), 608 minority interests, 622–623 “mom and pop” business, 595 principle of alternatives, 596 principle of substitution, 596 process overview, 595–597 publicly traded guideline-companies method, 618–621 ratio analysis, 601–603 reconciliation of methods, 621 standards, 623 strategic/investment buyers, 595 Value creation in M&A, 573–581 Value engineering, 623–624 Varco, 93–94 Variable overhead indices, 211–212 Variance analysis/reports (budgets), 179, 180, 212–213 Veeco Instruments, 43 Vertical integration, 576, 577 Vertical merger, 563 Vishay Intertechnology Inc., 364 Visual fit (method of cost behavior estimation), 118–119 Walker, James, 260 Wal-Mart, 552–553, 554, 559 Warrants, 445 Wealth, maximizing, 291–292 Weighted average cost of capital (WACC), 304–305, 616 Western Digital Corporation, 354 Wide area network (WAN), 165, 166, 537, 547 Windfall profit and windfall tax, 295–296 Wireless modems, 164 Word processing software, 156–157 World Market Watch, 34 World Wide Web, 167–168. See also Internet/intranet/extranets W.W. Grainger, 555 Xerox Palo Alto Research Center, 538 Y2K, 541 York International Corporation, 369 ZETA, 32 Z score, 31–32 . 235–236 Southwest Airlines, 53–54 Spin-offs and split-ups, 347–350 Spreadsheet software, 157–160 Standard(s): collecting, 213 cost accounting systems, 217–219 currently attainable, 203 engineering studies,. processing, 140–144 Transfer pricing, 404–407 Transfer of risk, 424, 432 Travelers Inc., 575 Trimark Holdings, 45 Turnover ratios, 18 UAL Inc., 364 “Ubiquitous” computing, 538 Underlying earnings 283 strategic partners, 281 Technology. See Information technology Teleflex Inc., 359 Telsik, Sarah, 519 Tenneco Inc., 364, 373, 405 Three-corner exchange, 339 Tiger International Inc., 410–413 Index