The Decision to Buy an Existing Business Should Be Carefully

question 75

Essay

The decision to buy an existing business should be carefully thought out.What are the most important pros and cons that should be weighed?

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Definitions:

ROCE

Return on Capital Employed; an economic metric that evaluates how effectively a firm uses its capital to generate profits.

Variable Costs

Expenses that shift in direct proportion to the amount of production or sales, like labor and materials.

Fixed Costs

Costs that remain consistent for a company irrespective of how much goods or services it produces.

Financial Leverage

Financial leverage is the use of borrowed funds to increase the potential return of an investment.