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A leveraged buyout (LBO) is one company's acquisition of another company using a significant amount of borrowed money (leverage) to meet the cost of acquisition. The assets of the company being acquired are often used as collateral for the loans, along with the assets of the acquiring company. The use of debt, which normally has a lower cost of capital than equity, serves to reduce the overall cost of financing the acquisition. This is done at the risk of magnified cash flow losses should the acquisition perform poorly after the buyout.
In finance, being short in an asset means investing in such a way that the investor will profit if the market value of the asset falls. This is the opposite of the more common long position, where the investor will profit if the market value of the asset rises. An investor that sells an asset short is, as to that asset, a short seller.
Sales are activities related to selling or the number of goods sold in a given targeted time period. The delivery of a service for a cost is also considered a sale. A period during which goods are sold for a reduced price may also be referred to as a "sale".
Transfer pricing refers to the rules and methods for pricing transactions within and between enterprises under common ownership or control. Because of the potential for cross-border controlled transactions to distort taxable income, tax authorities in many countries can adjust intragroup transfer prices that differ from what would have been charged by unrelated enterprises dealing at arm’s length. The OECD and World Bank recommend intragroup pricing rules based on the arm’s-length principle, and 19 of the 20 members of the G20 have adopted similar measures through bilateral treaties and domestic legislation, regulations, or administrative practice. Countries with transfer pricing legislation generally follow the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations in most respects, although their rules can differ on some important details.
Straight-through processing (STP) is a method used by financial companies to speed up financial transactions by processing without manual intervention (straight-through).
Right of first refusal is a contractual right that gives its holder the option to enter a business transaction with the owner of something, according to specified terms, before the owner is entitled to enter into that transaction with a third party. A first refusal right must have at least three parties: the owner, the third party or buyer, and the option holder. In general, the owner must make the same offer to the option holder before making the offer to the buyer. The right of first refusal is similar in concept to a call option.
Market value or OMV is the price at which an asset would trade in a competitive auction setting. Market value is often used interchangeably with open market value, fair value or fair market value, although these terms have distinct definitions in different standards, and differ in some circumstances.
A receipt is a document acknowledging that a person has received money or property in payment following a sale or other transfer of goods or provision of a service. All receipts must have the date of purchase on them. If the recipient of the payment is legally required to collect sales tax or VAT from the customer, the amount would be added to the receipt, and the collection would be deemed to have been on behalf of the relevant tax authority. In many countries, a retailer is required to include the sales tax or VAT in the displayed price of goods sold, from which the tax amount would be calculated at the point of sale and remitted to the tax authorities in due course. Similarly, amounts may be deducted from amounts payable, as in the case of taxes withheld from wages. On the other hand, tips or other gratuities that are given by a customer, for example in a restaurant, would not form part of the payment amount or appear on the receipt.
Front running, also known as tailgating, is the practice of entering into an equity (stock) trade, option, futures contract, derivative, or security-based swap to capitalize on advance, nonpublic knowledge of a large ("block") pending transaction that will influence the price of the underlying security. In essence, it means the practice of engaging in a personal or proprietary securities transaction in advance of a transaction in the same security for a client's account. Front running is considered a form of market manipulation in many markets. Cases typically involve individual brokers or brokerage firms trading stock in and out of undisclosed, unmonitored accounts of relatives or confederates. Institutional and individual investors may also commit a front running violation when they are privy to inside information. A front running firm either buys for its own account before filling customer buy orders that drive up the price, or sells for its own account before filling customer sell orders that drive down the price. Front running is prohibited since the front-runner profits come from nonpublic information, at the expense of its own customers, the block trade, or the public market.
In financial accounting, a gain is when the market value of an asset exceeds the purchase price of that asset. The gain is unrealized until the asset is sold for cash, at which point it becomes a realized gain. This is an important distinction for tax purposes, as only realized gains are subject to tax. Gains are the result of circumstances, events, or transactions which affect the entity independent of revenue or owner investments. They are usually the result of holding gains, exchange transactions, events, or nonreciprocal transactions.
A wash sale is a sale of a security at a loss and repurchase of the same or substantially identical security shortly before or after. Losses from such sales are not deductible in most cases under the Internal Revenue Code in the United States. Wash sale regulations disallow an investor who holds an unrealized loss from accelerating a tax deduction into the current tax year, unless the investor is out of the position for some significant length of time. A wash sale can take place at any time during the year, or across year boundaries.
Basis, as used in United States tax law, is the original cost of property, adjusted for factors such as depreciation. When a property is sold, the taxpayer pays/(saves) taxes on a capital gain/(loss) that equals the amount realized on the sale minus the sold property's basis.
The predecessor to what is now the international fast food restaurant chain Burger King was founded on July 23, 1954, in Jacksonville, Florida, as Instant Burger King. Inspired by the McDonald brothers' original store location in San Bernardino, California, the founders and owners, Keith J. Cramer and his stepfather Matthew Burns, began searching for a concept. After purchasing the rights to two pieces of equipment called "Insta" machines, the two opened their first stores around a cooking device known as the Insta-Broiler. The Insta-Broiler oven proved so successful at cooking burgers, they required all of their franchises to carry the device. After the original company began to falter in 1959, it was purchased by its Miami, Florida, franchisees James McLamore and David R. Edgerton. The two initiated a corporate restructuring of the chain; the first step being to rename the company, Burger King. The duo ran the company as an independent entity for eight years, eventually expanding to over 250 locations in the United States, when they sold it to the Pillsbury Company in 1967.
In the United States, individuals and corporations pay a tax on the net total of all their capital gains. The tax rate depends on both the investor's tax bracket and the amount of time the investment was held. Short-term capital gains are taxed at the investor's ordinary income tax rate and are defined as investments held for a year or less before being sold. Long-term capital gains, on dispositions of assets held for more than one year, are taxed at a lower rate.
A control premium is an amount that a buyer is sometimes willing to pay over the current market price of a publicly traded company in order to acquire a controlling share in that company.
In United States income tax law, an installment sale is generally a "disposition of property where at least 1 loan payment is to be received after the close of the taxable year in which the disposition occurs." The term "installment sale" does not include, however, a "dealer disposition" or, generally, a sale of inventory. The installment method of accounting provides an exception to the general principles of income recognition by allowing a taxpayer to defer the inclusion of income of amounts that are to be received from the disposition of certain types of property until payment in cash or cash equivalents is received. The installment method defers the recognition of income when compared with both the cash and accrual methods of accounting. Under the cash method, the taxpayer would recognize the income when it is received, including the entire sum paid in the form of a negotiable note. The deferral advantages of the installment method are the most pronounced when comparing to the accrual method, under which a taxpayer must recognize income as soon as he or she has a right to the income.
Tag along rights (TARs) comprise a group of clauses in a contract which together have the effect of allowing the minority shareholder(s) in a corporation to also take part in a sale of shares by the majority shareholder to a third party under the same terms and conditions.
Special journals are specialized lists of financial transaction records which accountants call journal entries. In contrast to a general journal, each special journal records transactions of a specific type, such as sales or purchases. For example, when a company purchases merchandise from a vendor, and then in turn sells the merchandise to a customer, the purchase is recorded in one journal and the sale is recorded in another.
Paul Steven Walsh is an English businessman who is the executive chairman of the McLaren Group. He was the chief executive of Diageo, the world's largest whisky company, for twelve years between 2000 and 2013.
A monetized installment sale is a special type of installment sale whereby a seller of appreciated assets attempts to defer U.S. Federal income tax liability over a period of years while currently receiving cash or other liquid assets via a monetization transaction, such as a loan.
References
- ↑ See Donaldson, Samuel A., Federal Income Taxation of Individuals: Cases, Problems and Materials, 734 (2nd. Ed. 2007)
- ↑ "Number: 201451003" (PDF). www.irs.gov. IRS. December 19, 2014.
- ↑ Treas. Reg §15.A453-1(c)(2)(i)
- ↑ Viahos, Lou (January 12, 2015). "Deal Economics: Contingent Purchase Price & Imputed Interest". www.taxlawforchb.com.
- ↑ Treas. Reg. §15.A453-1(c)(3)(i)
- ↑ Treas. Reg. §15.A453-1(c)(4)(i)