Short Case Scenario 14-1

question 184

Essay

Short Case Scenario 14-1
Mary Ann has always loved to cook and is interested in starting a catering business. Being aware of the failure rate of new businesses, she is considering buying an existing catering business that is up for sale. The current owners claim that the business is highly profitable, but Mary Ann has her doubts. She wonders why the owners would be so interested in selling the business if it is such a money maker. Furthermore, the price that they are asking seems high to Mary Ann. Without any formal training in accounting, Mary Ann asks a friend, Rolanda, for advice.
-Mary Ann is also reviewing the income statement.What will the income statement reveal?

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Definitions:

Stock Issues

The process by which companies allot new shares to shareholders or the public to raise capital.

Bond Issues

The act of distributing new bonds to investors, typically done by corporations or governments to raise capital.

Glass-Steagall Act

US legislation enacted in 1933 to separate commercial banking from investment banking, aiming to reduce financial market risks.

Underwriting Securities

The process through which investment banks issue new securities to the market, assuming the risk of selling them at a certain price.