Jasper Is Evaluating a Business for Possible Purchase

question 65

Multiple Choice

Jasper is evaluating a business for possible purchase. He needs to know what a fair offering price should be. One way to do this would be to

• A) ask a business broker for his appraisal.
• B) search the Internet for information about this business.
• C) appraise the value of the assets of this business.
• D) base his offer on the owner's equity stated on the balance sheet.

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Definitions:

Stockholders' Equity

After subtracting liabilities, the remaining interest in a company's resources represents the stake owned by its shareholders.

Net Income

The company's overall earnings following the deduction of all expenses, taxes, and costs from the gross revenue.

Overstated

A condition where the value or quantity of something is represented to be more than it actually is.

LIFO Method

"Last In, First Out" inventory valuation method where the most recent items added to inventory are the first ones considered sold.