As an Employee of a Small Business, DeMonte Has Observed

question 41

True/False

As an employee of a small business, DeMonte has observed the owner's desire to retire. Since DeMonte would like to buy the business, he needs to determine how much the business is worth. In order to determine a fair price for the business, DeMonte should add up the market value of all of the firm's physical assets such as buildings, machinery, equipment, and inventory, and willingly pay this amount for the business.

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Definitions:

Pure Discount Loan

A loan where the borrower receives an amount less than the principal value and repays the principal amount at maturity with no additional interest.

Single Lump Sum

A one-time payment of money, opposed to a series of payments made over time. This term is often used in finance for describing investments or payouts.

Future

A financial contract obligating the buyer to purchase an asset, or the seller to sell an asset, at a predetermined future date and price.

Compounded Monthly

This term describes the process where interest earned is added to the principal, and future interest payments are calculated based on the new total, on a monthly basis.