Data Bases • Custom Term Papers • Free Term Papers • Free Research Papers • Free Essays • Free Book Reports • Plagiarism? Links • Top 100 Term Paper Sites • Top 25 Essay Sites • Top 50 Essay Sites • Search 97,000 Papers @ DirectEssays.com • Search 101,000 Papers @ ExampleEssays.com • Search 90,000 Papers @ MegaEssays.com Free Essays • Term Paper Sites • Chuck III's Free Essays • Free College Essays • TermPaperSites.com • My Term Papers • Get Free Essays • Essay World • Planet Papers	Search Lots of Essays Back to Subjects - Economics None Provided1 None Provided1 Barbarians at the Gate is a story of the largest takeover in Wall Street history. Ross Johnson turned CEO of a company, which was the product of three merged companies, Standard Brands, RJ Reynolds, and National Biscuit Company (Nabisco). The newly formed company’s, called RJR Nabisco, stock began to fall and never recover. Johnson along with Shearson executives planned a leverage buyout (LBO), in which a brokerage firm (Shearson) would borrow money from banks and buy up all the outstanding shares from the stockholders to turn the company private. The problem with this is that the company would be put into jeopardy of other companies that can outbid the parent company, which would lead to a takeover. The higher the bid would lead to a bigger debt and lesser profits for the owners of the firm. One of the six accounting principles that was discussed in the book was the expense principle, which helps determine performance of a company by measuring the outflows and inflows of resources. The matching principle guides the recognition of expenses, so good matching will ultimately lead to a better measure of performance. When KKR exercised due diligence of RJR Reynolds, they could not figure out “other uses of cash” in the statements obtained. “The initial projections they had obtained from RJR Nabisco was a heading ‘other uses of cash.’ Beside it was a row of figures stretching out ten years, each year ranging from 300 to 500 million dollars. Was it cash flowing in or out? Should he add it? Subtract it? Ignore it?” (Barbarians 369). Obviously, KKR was trying to figure out whether RJR Nabisco was a good investment or not. The debt accrued by an LBO needed to be paid off using cash from the company acquired. The difference between expensing the millions of dollars or recognizing it as revenues would mean a bid of 92 or 96 dollars per share. The expense recognition method here proved to be helpful for KKR to acquire RJR Nabisco. Bibliography: Word Count: 333
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