Paul Is Approaching Retirement and Has Decided to Siphon Off

question 21

Multiple Choice

Paul is approaching retirement and has decided to siphon off funds form his company rather than sell it. From his perspective, the advantage of systematically withdrawing cash from the firm is:

• A) retaining control
• B) preserving cash for later reinvestment
• C) greater latitude in seeking out a buyer for the firm
• D) increasing long-term returns from the business

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Definitions:

Cost of Sale

Costs directly related to the production of the goods sold by a company.

Merchandise Inventory

Goods that a retailer, wholesaler, or distributor holds for the purpose of selling to customers in the normal course of business.

Perpetual Inventory System

A method of accounting for inventory that records real-time transactions of goods as they come in and out of stock, thus maintaining a continuously updated inventory balance.