Matt Owns a Car Dealership That Is Very Profitable

question 22

Multiple Choice

Matt owns a car dealership that is very profitable.Since he plans to retire in 5-10 years,Matt has decided to retain ownership for now,but without continuing to grow the business.This change would also allow him to invest for retirement some of the cash that the business is now generating.Which harvesting method does this example illustrate?

• A)A delayed sellout
• B)A strategy to release the firm's free cash flows to the owners
• C)Offering stock to the public through an IPO
• D)Issuing a private placement of stock

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Definitions:

Statement of Cash Flows

A document that illustrates the impact of modifications in balance sheet positions and income on cash and cash equivalents, categorized by operating, investing, and financing actions.

Cash Flow Statement

A financial statement that summarizes the amount of cash and cash equivalents entering and leaving a company, showing how well it generates cash to fund its operating expenses and debt obligations.

Accounts Payable

Liabilities of a business that are owed to creditors for goods or services purchased on credit.

Operating Activity

Transactions that relate to the primary business operations, such as revenue from sales and expenses for materials and labor.