Which of the Following Statements Concerning Financing the Purchase of an Existing

question 49

Multiple Choice

Which of the following statements concerning financing the purchase of an existing business is true?

• A) It is usually more difficult than securing financing for a start-up business.
• B) Usually, the business seller is not a good source of financing.
• C) The buyer should be able to make the payments on the loans out of the company's cash flow.
• D) All of the above

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Definitions:

Retained Earnings

The portion of a company's profits not distributed as dividends to shareholders but reinvested in the business.

Dividend

A segment of a corporation's profits given out to its shareholders, typically as cash or more shares.

Balance Sheet

A financial statement that displays a company's assets, liabilities, and equity at a specific point in time.

Dividend Controversy

Dividend controversy revolves around the debate on whether companies should distribute profits to shareholders as dividends or reinvest them in the business.