The paper "Starbucks Scandal and Corporate Tax" is a great example of a finance and accounting assignment. The consolidated financial statements of Bodey Bodes PLC provide a comprehensive insight into the financial matters of the company. Since the financial statements provide the consolidated view of the financial performance and position of the group as a whole, therefore, there are some areas in the consolidated financial statements which can pose some discretion. The equity position of the group can raise some questions in the minds of the investors regarding the higher portion of equity as a funding source of the total assets of the group.
The total assets of the group include a heavy amount of goodwill which is around £ 700,000. Because of this goodwill, the equity portion in the consolidated financial statement is overstated. This point can mislead the investors because goodwill is not that asset which can provide some economic benefits to the company rather it is the excess amount paid by the company in exchange for the fair value of the assets of the other company acquired. In this way, the consolidated financial statements should be taken into consideration by setting aside the impact of goodwill on the equity portion of the group. Another important consideration that can also be made regarding the equity component of the group is that the retained earnings of the subsidiary company are not taken in the consolidated financial statements.
However, the profit for the year figure is taken in the mainstream calculations to reach the closing retained earnings figure. The rate of return on convertible bonds is generally less than the rate of return on non-convertible bonds.
This happens because the convertible bond has the feature of equity option as well. The investors forego some part of the return in exchange for a higher likely gain in the share price of the company at the time of conversion of debt into equity. However, the investors carry the downside risk of the share prices because of the likelihood of a decrease in the share price.