Public Utility Companies have different capital structures.
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Why do public utility companies usually have capital structures that are different from those of retail firms?
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Solution Summary
In outline form, the solution explains 8 reasons why public utility companies have different capital structures from other companies. Specific and special circumstances are explained for that industry.
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The main reason they are different is because the industry is regulated. Regulation by a PUC (Public Utility Commission) changes the accounting:
1. There is a uniform system of accounts for public utilities, and it is required to be used by regulated companies.
2. Even the tax returns are required to be presented on a regulatory basis.
3. Allowable assets are depreciated based on guidelines established by the PUC, and those guidelines will differ depending on the type of utility involved. They may also differ from GAAP and tax ...
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