What is meant by related party transactions? Related party transactions are business transaction between two business entities which are already connected by means of a pre-existing special relationship. An example would be a contract awarded by the company to another company which is owned by a
Contingent liabilities
What is meant by a contingent liability? A contingent liability is a liability which the business may incur depending on the outcome of a future event which remains uncertain. An example would be an ongoing Court case, the result of which may or may not be a finding against the company, leading to
Tangible and intangible assets
What is meant by tangible and intangible assets? Tangible assets are the physical assets held by your business. Common examples are property, plant, machinery, IT equipment and motor vehicles. Intangible assets are assets which are not physical in nature but which nonetheless contribute to your
Director drawings
What is meant by director drawings? Director drawings refers to money taken out of the company by directors which is not done via a payroll or as dividends. Why is it important to understand director drawings in a transaction context? A potential buyer of your business will want to understand the
Measures of earnings
What are the commonly-used measures of earnings? The commonly-used measures of earnings are: EBITDA – meaning Earnings before Interest, Tax, Depreciation and Amortisation EBIT – meaning Earnings before Interest and Tax Profit before Tax – meaning Earnings before Tax Why is it
Entrepreneurs’ relief
What is entrepreneurs’ relief? Entrepreneurs’ relief is a lower rate of capital gains tax which may apply when a UK-based business is sold. It was introduced in 2008 to encourage entrepreneurs to invest, grow and eventually sell their businesses. It has therefore been a key feature of the M&A
Surplus assets
What is meant by surplus assets? Surplus assets are considered to be those assets which a business owns but does not utilise in the course of current operations. For example, a company may own land which is not needed for current business purposes. Why is an understanding of surplus assets
Employee incentivisation, including EMI
What is employee incentivisation? Employee incentivisation is the use of a variety of remuneration mechanisms to attract, incentivise and reward employees. Incentivisation packages can take the form of bonuses, commission arrangements or option or share schemes. The Enterprise Management