Conducting Thorough Due Diligence Should Always Be Accomplished If Purchasing

question 31

True/False

Conducting thorough due diligence should always be accomplished if purchasing an existing corporation or franchise, but is unnecessary if acquiring a sole proprietorship.

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Definitions:

Cost-Volume-Profit Analysis

A financial approach that analyzes the impact of cost and volume fluctuations on a firm's operational profit and overall earnings.

Break Even

The point at which total costs and total revenues are equal, meaning there is no profit or loss.

Operating Leverage

A measure of how revenue growth translates into growth in operating income, indicating the ratio of fixed costs to variable costs.

Contribution Margin

The amount remaining from sales revenue after variable expenses have been deducted, indicating how much contributes to the fixed costs and profits.