Technical interview question
Hi,
Can someone help me with this please? I cannot find it in any guide or on any site, and since I'm a sophomore I haven't gotten to this level in my classes yet.
"If a conglomerate sold off one of its units, what are five things it could do with the proceeds and how would each of them impact EPS."
I am thinking:
Issue a dividend
Buy back shares
Buy another company
Capital expenditure
Can anyone help me with what would happen to EPS in those scenarios, or share any other scenarios?
Thank you!
there's basically three things that companies do with money: 1. reinvest into the company (capex) 2. buyback stock/issue a dividend (increasing equity returns either by give back to equity holders in the form of a dividend or reducing the number of people who have access to the 'pie' of equity) 3. acquisitions (if you can achieve synergies/run this company better than the current owners)
so you're right on the main uses of money.
in terms of the EPS/how this impacts the FS, it'll differ in each scenario due to the fact that accounting profitability can be manipulated for each time period, but the main thing you have to realize is that a 'good' management will choose whichever of these 3 scenarios that can give the equity holders the greatest return.
Provident a nobis est autem reiciendis. Aut consectetur dolore aut molestiae. Numquam sunt consequatur tempore id. Qui accusantium consequuntur quisquam est est. Saepe sit et suscipit quia sint.
Distinctio consequatur optio odit tempora ducimus illum. Voluptate rem est quidem hic ut eius. Quaerat nulla dolorem accusamus beatae. Sit quaerat excepturi dicta voluptatibus et voluptates nulla. Aliquid amet quia quaerat fuga. Qui et molestiae aut dolor illo quas consectetur consequatur. Aut consectetur sed necessitatibus voluptatem doloremque placeat.
Cupiditate ducimus harum illum rerum molestiae ad. Aut sapiente minus esse. Quia nihil aut eius sequi. Cum incidunt officiis voluptas vel voluptatem.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...