Your Friend Susan Is Considering Purchasing an Existing Business

question 14

Essay

Your friend Susan is considering purchasing an existing business. How would you explain to her what due diligence is, why it is important, and the critical areas of it?

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Definitions:

Current Year

Refers to the ongoing calendar or fiscal year in context, utilized for reporting, accounting, and planning purposes.

Cost of Goods Manufactured Formula

A calculation used to determine the total production cost of goods completed during a specific period.

Direct Materials

Raw materials that are directly traceable to the manufacturing of a product and considered a variable cost.

Factory Overhead

All indirect costs associated with manufacturing, such as indirect labor, maintenance, and utilities, that cannot be directly traced to specific units produced.