The Most Important Limitation to Consider in Purchasing an Existing

question 75

Multiple Choice

The most important limitation to consider in purchasing an existing business is ________.

• A) a $40,000 payment for goodwill for a successful retail store that was established 10 years ago
• B) a storefront that was renovated 10 years ago
• C) the reason why the existing retailer is seeking to sell the business
• D) a short-term lease on rented property

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Definitions:

Short-term Investments

Financial assets that are expected to be converted into cash or sold within a short timeframe, usually one year or less.

Zero-balance Account

A checking account set up to maintain a balance of zero by automatically transferring funds from a master account in the exact amount of transactions.

Miller-Orr Model

A financial model used for managing cash balances by setting upper and lower limits on cash reserves.

Upper Cash Limit

The maximum cash balance a company sets to hold on hand, beyond which excess funds are usually invested in short-term securities.