The flashcards below were created by user
akoskey
on FreezingBlue Flashcards.
-
reasons to buy an existing business
- quicker easier start-up
- reduced risk
- bargain potential your knowledge can be beneficial
-
potential pitfalls of buying an existing business
- failure to disclose
- business may be a poor fit
- use due dillagence
- investment requirements
- buying someone elses problems
-
bought business problems
- dissatisfied customers, suppliers, employees, or creditors
- plant or equipment obsolete or inefficient
- lack of innovation or market trends
- patents no longer valid
-
business broker
a company or individual that buys or sells businesses for a fee
-
due dilligence
the exercise of reasonable care in the evaluation of a business opportunity
-
due dilligence proccess
- identify real reason owner is selling
- lack of sufficient cash flow
- unprofitability
- staffing
- change in industry or market conditions
- new competitors
- litigation
-
nondisclosure agreement
a legal document enumerating the type of information that is to remain confidential
-
asset valuation
a method that analyzes the inderlying value of the firms assets as a basis for negotiating price
-
four standards of asset valuation
- book value
- adjusted book value
- liquidation value
- replacement value
-
earnings valuation
a method that assesses the value of the firm based upon a stream of earnings that is multiplied either by an agreed-upon factor (the capitalization factor) or by the p/e ratio (for a publicly traded company)
-
earnings valuation process
- historical earnings
- future earnings under current ownership
- future earnings under new ownership
-
cash flow valuation
a method of calculating the worth of a business by using projected future cash flows and the time value of money
-
how to determine the value of a business
- assset valuation
- earnings valuation
- cash flow valuation
- consider value of nonfinancial factors
- arrive at offer and max price before entering negotiations
-
family business
a firm that has two or more members of the same family managing and or working in it, that is owned or operated for the benefit of that family's members
-
identify and evaluate purchase opportunities
- identify personal goals and objectives to create best match
- use resources available to identify prospective purchases
- due dillegence for most complete and accurate information
-
negotiate and close deal
- recoginize mutual goal despite differing individual goals
- negotiate price and set terms
- holf formal closing and coplete all legal documents with support of qualified legal and accounting counsel
|
|