Verified Document

Buyer Want To See. One Of The Case Study

¶ … buyer want to see. One of the most important things about financial statements is that they are only useful if you know what the inputs are. Thus, financial statements must be completed according to a specific format in order to be understood. In the U.S., that format is the generally accepted accounting principles (GAAP), which are the basis for the construction of financial statements (AICPA, 2013). So while Sly is telling the truth, this is not relevant. For the income statement to be useful, it needs to be produced according to GAAP. This allows the reader to understand the information contained within. The buyer can decide what information is relevant and what is not. The income statement Sly provided is more of an attempted Statement of Cash Flows, whereas under GAAP both would have been produced to a common standard. Gwen needs to ignore this income statement and has the right to receive one based on GAAP. The Schedule C. is much more useful at this point, but it is better that she has all the GAAP financial statements in her possession in order to properly value the company 2.

Without having accurate financial...

The Schedule C. profit is $10,000, and the company had been losing money in years previous. The valuation is probably somewhere south of the asking price. To value a company requires a few things Gwen does not have yet. She needs the net income, the cost structure of the company, the fixed assets, the cash flows and it would help to have a sense of what other, similar companies make. Furthermore, she should talk to the customers and make sure that they would be interested in this product made by a different person. If their willingness to buy is related to a relationship with the present owner, that has to be discounted. So there are a lot of things that Gwen does not yet know that relate to the question of business valuation.
If it is assumed that this business made a profit of $10,000 last year, and that this 10% financing rate offered is at least somewhat indicative of the discount rate, the perpetual value of the firm is around $100,000. The valuation of $250,000 is obviously pricing in a lot of growth that the current ownership had nothing to do with. It also…

Sources used in this document:
Works Cited:

AICPA. (2013). Consistency of application of generally accepted accounting principles. AICPA. Retrieved November 23, 2013 from http://www.aicpa.org/Research/Standards/AuditAttest/DownloadableDocuments/AU-00420.pdf

Zwilling, M. (2009). How to value a young company. Forbes. Retrieved November 23, 2013 from http://www.forbes.com/2009/09/23/small-business-valuation-entrepreneurs-finance-zwilling.html
Cite this Document:
Copy Bibliography Citation

Related Documents

Buyer-Centric, Seller-Centric and Independent B2B
Words: 6739 Length: 15 Document Type: Term Paper

These three strengths of their content methodology, depth of expertise in the Asian manufacturing sector, and commitment to being a leader in electronic enablement and IT form a defensible competitive position. As a result, the company is well positioned to attract investors. In supporting the contention that Global Sources is well positioned to attract investors based on the three unique strengths of a scalable content collection and management methodology, expertise

Buyer Seller Partnership the Buyer Seller Relationship
Words: 1231 Length: 3 Document Type: Essay

Buyer Seller Partnership The buyer seller relationship paradigm is one of great importance, particularly in the 21st century global competitive economy. Most scholars and psychologists actually see the relationship as having three basic levels -- adversarial, barometric and complimentary. It is the goal of organizations to move to the relationship through these stages so that a win-win arrangement is made that becomes a more stable model. Of course, the adversarial portion

Buyer Behavior Buy Services and Buy Products.
Words: 694 Length: 3 Document Type: Term Paper

Buyer Behavior Buy services and buy products. Intangible vs. Tangible. Tangible products are products that you can purchase contain a tangible good or service that you can actually hold. The easiest way to think about such a good is that is undifferentiated and something like a commodity. Basic goods such as food, coffee, corn, certain materials such as steel and aluminum can all be considered commodities. This means that there is very

Fashion Buyer Brand Own Branded Labels Include
Words: 2662 Length: 8 Document Type: Essay

Fashion Buyer Brand Own branded labels include the labels that the stores themselves go on create. Store brands or own products are an array of products that are sold by the retailer less than one marketing identity. The retailer itself designs, produces, packages and markets the goods. All of this is carried out such that there is a strong and a profitable relationship created between the customer's base and the products. On

Race and Racism Race Is One of
Words: 3334 Length: 11 Document Type: Essay

Race and Racism Race is one of the most complicated and interesting topics in the social sciences. In many ways, race is an artificial construct, since there is no single genetic marker differentiating one race from another and racial identities change and bend with cultural norms. On the other hand, even if race is an artificial construct, the fact that racial differentiation exists in a wide variety of cultures and

Eminent Domain Is One of
Words: 2083 Length: 7 Document Type: Term Paper

(4) Bell and Parchomovsky 871) This having been said the demand should rest on the public entity to not only prove the public purpose of the eminent domain ruling but also to fairly compensate the owner(s) with regard not only to market value but based on other interests as well. A takings law permits undercompensation whenever the reserve value of the property owner exceeds market price. Second, many important compensation doctrines require

Sign Up for Unlimited Study Help

Our semester plans gives you unlimited, unrestricted access to our entire library of resources —writing tools, guides, example essays, tutorials, class notes, and more.

Get Started Now