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Investing in Other Companies

What are some issues to consider before investing in another company? How do you account for the investment activities subsequent to initial acquisition? Why is the income assigned to the noncontrolling interest treated as a deduction in computing consolidated net income?

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Dear student,

What are some issues to consider before investing in another company?
Before investing in another company, the investing company should look at the following issues:
1. Profitability of the company.
2. Nature of industry (growing or stagnant) in which the company is operating.
3. Net worth of the shareholders. i.e, whether the company has huge amount of retained earnings.
4. Market price of the stock in the stock market.
5. Any strike/labour unrest prevailing in the company.
6. Compliance of the company to the Rules and Regulations imposed by the State.
How do you account for the investment activities subsequent to initial acquisition?

Equity method of accounting of investment is the accounting of investment in which value of each stock/share is counted based on the book value of the stock as ...

Solution Summary

This solution outlines issues to consider when deciding to invest in a company in 533 words.

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