Purchase Acquisition


DEFINITION of 'Purchase Acquisition'

An accounting method used in mergers and acquisitions with which the purchasing company treats the target firm as an investment, adding the target's assets to its own fair market value.

BREAKING DOWN 'Purchase Acquisition'

If the amount paid for a company is greater than fair market value, the difference is reflected as goodwill. Because goodwill must be written-off against future earnings, this makes the pooling-of-interests method preferable.

  1. Acquisition

    A corporate action in which a company buys most, if not all, ...
  2. Goodwill

    An account that can be found in the assets portion of a company's ...
  3. Acquisition Adjustment

    The difference between the price an acquiring company pays to ...
  4. Upstairs Deal

    A business agreement that is made by upper management, and is ...
  5. Merger

    The combining of two or more companies, generally by offering ...
  6. Fair Value

    1. The estimated value of all assets and liabilities of an acquired ...
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  1. Does working capital include prepaid expenses?

    The calculation for working capital includes any prepaid expenses that are due within one year, since such prepaid expenses ... Read Full Answer >>
  2. How do I read and analyze an income statement?

    The income statement, also known as the profit and loss (P&L) statement, is the financial statement that depicts the ... Read Full Answer >>
  3. Does working capital include short-term debt?

    Short-term debt is considered part of a company's current liabilities and is included in the calculation of working capital. ... Read Full Answer >>
  4. Do dividends affect working capital?

    Regardless of whether cash dividends are paid or accrued, a company's working capital is reduced. When cash dividends are ... Read Full Answer >>
  5. Do prepayments provide working capital?

    Prepayments, or prepaid expenses, are typically included in the current assets on a company's balance sheet, as they represent ... Read Full Answer >>
  6. Does working capital include inventory?

    A company's working capital includes inventory, and increases in inventory make working capital increase. Working capital ... Read Full Answer >>

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