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Case- XYZ ltd an IT company is not an MNC based in the USA.
ABC ltd an IT company is an MNC based in Germany.
The Germany company wants takeover the USA company.When the
ABC ltd scans XYZ ltd company's financial statements it
shows profit (no fraud or infringement was made in accounts
of XYZ ltd).But the finance department of ABC ltd says the
XYZ ltd financial statements show various losses.
Question- Cite four reasons why XYZ ltd shows loss, while it
has made profit?
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Answer Posted / rahul
reasons can be
1. company is paying hight interest
2. large intermidiate costs
3. no tax shield(less debt composition) and heavy taxes in
country.
4. mis-management of funds
5. high gross profit margin and less net profit margin.
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