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(a) Explain the ways in which a company may expand by obtaining new assets. (1 mark)

(a) Explain the ways in which a company may expand by obtaining new assets. (1 mark)

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Answer #1

A company can expand by obtaining assets in following ways

· Purchase assets on cash basis if company is having cash balance

· Purchase of assets on credit basis that is through funding from bank loans. This will increase the total liabilities and debt to total assets ratio should be monitored.

· Purchase of assets through issue of common share or preferred shares

· Purchase of assets through exchange for example: issue long term notes payable in exchange for the assets purchased

· Purchase assets through investment in subsidiaries

· Purchase assets through acquisitions of other firms

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