Make the necessary adjustments to the financial statements

Reference no: EM132736675

Question - Many analysts argue that comparing a company that has grown via acquisitions to a company that has grown organically is difficult. Their main complaint is that the balance sheets of the two Company are not comparable because the company that has grown via acquisitions will recognize goodwill and the fair values of any intangibles it acquired. However, because most internally generated intangibles are not considered assets, the company that grew organically will not have goodwill or many intangibles on its balance sheet even if it has invested heavily in research and development, brand development, etc.

In light of the above, many analysts make adjust the balance sheets of acquisitive companies by removing goodwill and purchased intangibles.

Required -

a. What do you think of the arguments made above? Describe the advantages and disadvantages of making the adjustments describe above?

b. Suppose you think the arguments described above have merit, make the necessary adjustments to the financial statements provided in the Excel file. How do these adjustments affect the KPIs discussed in question three? Does your view of KH's performance change?

Reference no: EM132736675

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