The purchase consideration that is lower than the net asset implies that, the buyer has gained the advantage of
Answer Details
When the purchase consideration (i.e., the price paid by the buyer to acquire the business) is lower than the net asset value (i.e., the total value of the assets minus the liabilities), it means that the buyer has gained the advantage of paying less than the actual value of the business.
In other words, the buyer has acquired the business at a bargain price, which can provide several advantages. Firstly, the buyer can benefit from an immediate increase in the value of the business, as the assets can be revalued at the higher fair value, and the buyer can enjoy the appreciation in value. Secondly, the buyer can benefit from the extra cash or capital, which can be used to finance other investments or repay debts. Finally, the buyer can also benefit from the reduced risk associated with the acquisition, as the lower purchase price means a lower financial burden and a more favorable return on investment.
Therefore, the answer to the question is "capital reserve," which refers to the amount of extra capital generated from the bargain purchase. This capital reserve can be used to finance future investments or pay dividends to the shareholders, which can lead to long-term growth and prosperity for the company.