On the purchase of Company SE, Company M caught attention from a lot of people. Purchasing Company SE on cash deal bases created a good opinion in the people’s mind on Company M. $8.5 billion was the total amount paid by Company M; those funds were collected from foreign countries. In order to avoid paying of taxes, the company has to not send back its foreign earning to Country U. Country U firms have collectively $2 trillion in foreign countries that are said to be untaxed profits. The tax rate of Country U is 35%; many companies are doing business throughout the world by keeping the cash unused. For example, Company M has $100 billion cash funds outside Country U; it also includes few low-income tax countries namely Country S, Country I, and Country B. Shareholders are benefited from not paying the income taxes in Country U; this is due to few financial decisions. The company was not able to address how the Country U tax funds were able to benefit the whole country. At this stage, Country U was revising its tax code; therefore, there may be changes in Country’s U corporate tax. Characters in case: Company SE. Company M. Country U. To determine: The reason why the Company M holds so much of cash than paying back to Country U, and the opportunity in holding cash and the potential benefits to shareholders if the cash is returned to Country U. Introduction: A shareholder is an individual, institution, or company who owns at least a share in a company stock. They are the owners of the company. They take part in both success and failure of the company. They are also known as stockholders.

Question

Want to see the full answer?

Answer 1

Question

Chapter IC, Problem 20.3CDQ

Summary Introduction

Case summary:

On the purchase of Company SE, Company M caught attention from a lot of people. Purchasing Company SE on cash deal bases created a good opinion in the people’s mind on Company M. $8.5 billion was the total amount paid by Company M; those funds were collected from foreign countries. In order to avoid paying of taxes, the company has to not send back its foreign earning to Country U.

Country U firms have collectively $2 trillion in foreign countries that are said to be untaxed profits. The tax rate of Country U is 35%; many companies are doing business throughout the world by keeping the cash unused. For example, Company M has $100 billion cash funds outside Country U; it also includes few low-income tax countries namely Country S, Country I, and Country B.

Shareholders are benefited from not paying the income taxes in Country U; this is due to few financial decisions. The company was not able to address how the Country U tax funds were able to benefit the whole country. At this stage, Country U was revising its tax code; therefore, there may be changes in Country’s U corporate tax.

Characters in case:

Company SE.

Company M.

Country U.

To determine: The reason why the Company M holds so much of cash than paying back to Country U, and the opportunity in holding cash and the potential benefits to shareholders if the cash is returned to Country U.

Introduction:

A shareholder is an individual, institution, or company who owns at least a share in a company stock. They are the owners of the company. They take part in both success and failure of the company. They are also known as stockholders.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Please need answer the general accounting question not use ai

Groot Co. (GC) sells $1,200,000 of 6-year, 10% bonds at par plus accrued interest. The bonds are dated January 1, 2026 but due to market conditions are not issued until May 1, 2026. Interest is payable on June 30 and December 31 each year. The market rate of interest at time of issue is the same as the stated rate. Required The issuance of the bonds on May 1, 2026. Assume that GC has adopted a policy of crediting accrued interest payable for the accrued interest on the date of sale. Payment of interest on June 30, 2026. Payment of interest on December 31, 2026.

1. Define working capital and explain its importance in financial health and liquidity management. 2. Assess how the matching concept and accrual basis affect the reporting of current assets and liabilities. 3. Using a hypothetical balance sheet (you may create one), identify at least 5 current assets and 5 current liabilities and analyze how changes in these elements affect liquidity ratios. 4. Recommend at least two strategies VinGrenDom Ltd. can implement to optimize working capital.