When Evaluating the Financial Position of a Business He or She

question 124

Multiple Choice

When evaluating the financial position of a business he or she is considering buying, an entrepreneur should examine:

• A) its income statements and balance sheets from the past three to five years.
• B) its income tax returns for the past three to five years.
• C) the owner's compensation and that of relatives.
• D) All of the above

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Definitions:

Monthly Compounding

The process where interest on an investment or loan is calculated and added to the principal sum every month.

Payments

Money transferred from one party to another in exchange for goods, services, or to fulfill a contractual obligation.

Account

A record or statement of financial expenditure and receipts relating to a specific period or purpose.

Effective Rate

The actual interest rate an investor receives or pays after the effects of compounding interest and all charges are considered.