MGT 255 - Chapter 5

What are some advantages to buying a business?

Reduction of risk

Reduction of time and set-up expenses

Reduction od competition

Capitalization of business strength

Possible assistance from the previous owner

Easier planning

What are some disadvantages of purchasing?

Physical facilities



Accounts receivable

Financial condition


Decisions about price

Where can you find businesses for sale?

Classified ads

Government departments

Trade journals

Real estate brokers

Other professionals

Word of mouth

Who can you determine a price/value of a business?

Market value

Asset value - book value/replacement value

Earnings value - capitalization of earnings method/times earning method

Combination Methods - analytical method/historical method