AFM373 Lecture Notes - Lecture 10: Capital Structure, Making Money, Cash Flow

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lilacmouse857

28 Jun 2018

School

University of Waterloo

Department

Accounting & Financial Management

Course

AFM373

Professor

Neil Brisley

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Ferrari

February 26, 2018 2:33 PM

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Raises capital, in this case the money raised

isn't for Ferrari but towards FCA.

•

Exit opportunity for FCA •

Listed on exchange (NYSE), able to target

people who just want to focus on Ferrari

shares.

•

Gives liquidity - for shareholders to sell

their stocks

•

We could just give FCA stock to

Ferrari employees but the price isn't

fairly representing Ferrari only

because FCA has other portfolios.

○

Able to issue Ferrari shares/stock options

to employee

•

Marketing differentiation to separate

Ferrari which is more of a luxury product

from the other FCA non-luxury

automobiles.

•

Just being individual and

independent.

○

Being apart there's focus. Managers

can be compensated properly. The

market and ask for exactly what they

want.

○

The IPO is not for the money but it’s the

first step to spin off Ferrari from FCA. How

else is it making money?

•

Publicity/reputation•

Reasons to go public?

Wait until the next equity issuance (seasonal

issuance) which is way bigger than an IPO with

the advantage of knowing the share price.

"4= 3+2"

Sum of the parts is greater than the whole value,

we want to split it up

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Document Summary

Raises capital, in this case the money raised isn"t for ferrari but towards fca. Listed on exchange (nyse), able to target people who just want to focus on ferrari shares. Gives liquidity - for shareholders to sell their stocks. Able to issue ferrari shares/stock options to employee. Ferrari employees but the price isn"t fairly representing ferrari only because fca has other portfolios. Ferrari which is more of a luxury product from the other fca non-luxury automobiles. The ipo is not for the money but it"s the first step to spin off ferrari from fca. The market and ask for exactly what they want. Sum of the parts is greater than the whole value, we want to split it up. Wait until the next equity issuance (seasonal issuance) which is way bigger than an ipo with the advantage of knowing the share price. Go on roadshows to ask investors how much they would buy at certain price.

Related Questions

Record the following transactions for the Scott Company:

November 4	Received a $6,500, 90-day, 6% notefrom Michael Timâs in payment of his account.
December 31	Accrued interest on the Timâsnote.
February 2	Received the amount due from Timâson his note.

Required:

Journalize the abovetransactions. Refer to the Chart of Accounts for exact wording ofaccount titles. Round your answers to two decimalplaces.

Journalize the entry for thetransaction on November 4. Refer to the Chart of Accounts for exactwording of account titles.

PAGE 1

JOURNAL

	DATE	DESCRIPTION	POST.REF.	DEBIT	CREDIT
1
2

Journalize the entry for thetransaction on December 31. Refer to the Chart of Accounts forexact wording of account titles. Round your answers to two decimalplaces.

PAGE 1

JOURNAL

	DATE	DESCRIPTION	POST.REF.	DEBIT	CREDIT
1
2

Journalize the entry for thetransaction on February 2. Refer to the Chart of Accounts for exactwording of account titles. Round your answers to two decimalplaces.

PAGE 1

JOURNAL

	DATE	DESCRIPTION	POST.REF.	DEBIT	CREDIT
1
2
3
4

emeraldmouse721

QUESTION 5 (25MARKS)

You are in charge of the audit of âcash and bankâ at Beachbreak(Pty) Ltd for the financial year â end February 2018. During theinterim audit conducted during late December 2017, you had auditedthe bank reconciliation at 30 November and found it to be correct.During March, as part of your normal year â end procedures, you arepreparing to audit the bank reconciliation prepared by Otis Reddingand presented below.

Page 17 of 17

Bank reconciliation at 29 February 2018 â Beachbreak (Pty)Ltd

Balance as percashbook $127 261.30 Add: outstanding cheques 49378 3 October2017 4 447.35 52133 10 December 2017 15 210.6552876 18 February 2018 9 316.00 53192 22 February2018 943.89 53193 22 February2018 47 209.11 77126.00 204387.30 Add: direct deposit: Note1 18649.30 223036 60 Less: bank charges and fees for February2018 (163.00)Balance as per Bank statement 28 February 2018 222873.60

Note 1: This represents a deposit credited in error by the bank, toBeachbreak (Pty ) Ltdâs account on the 17 February 2018.

YOU ARE REQUIRED TO describe the audit procedures you would conducton the bank reconciliation of Beachbreak (Pty) Ltd at 28 February2018.

pearbear992

Finishing Touches has two classes of stock authorized: 7%, $10par preferred, and $1 par value common. The following transactionsaffect stockholdersâ equity during 2018, its first year ofoperations: (Required: Record the journal entriesfor each of these transactions)

1. January 2 Issues 100,000 shares of common stock for $33 pershare.

2. February 6 Issues 2,800 shares of 7% preferred stock for $13per share.

3. September 10 Repurchases 12,000 shares of its own commonstock for $38 per share.

4. December 15 Reissues 6,000 shares of treasury stock at $43per share.

Required: Record the journal entries for eachof these transactions

amaranthmule130

AFM373 Lecture Notes - Lecture 10: Capital Structure, Making Money, Cash Flow

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