Leverage, business brokerage Flashcards
(16 cards)
What is positive leverage?
When the benefits exceed the cost of borrowing
Positive leverage occurs when the return on investment exceeds the cost of the borrowed funds.
What is negative leverage?
If the borrowed funds cost more than they are producing
Negative leverage can lead to a decrease in overall investment returns.
A _____ is required to deal in business brokerage
real estate license
Why is a real estate license required for business brokerage?
Because the sale of real property or the assignment of a lease is an integral part of a business brokerage transaction
In business brokerage, assets include personal property and ____
goodwill
What is ‘going concern’?
assumes a business will continue to operate in the same way in the future
The value of real estate and the value of ____ ____ may be different
going concern
The geographic market for business brokerage is ____ than real estate
wider
What is the expertise required for business brokerage? (3)
- corporate finance
- business accounting
- valuation of businesses
Corporate finance includes knowledge of what? (4)
- classes & characteristics of corporate stock
- securities analyses & valuation
- management of working capital
- budgeting
Business accounting includes what? (5)
- Income statement analysis
- Balance sheet analysis
- cash-flow analysis
- asset depreciation
- taxation
What document indicates a firm’s financial position at a stated moment in time?
the balance sheet
What are 4 methods for valuation of businesses?
- comparable sales analysis
- cost approach
- income analysis (best approach for valuing a business)
- liquidation analysis
What is the best approach for valuing a business?
income analysis
The steps in the sale of a business are:
- list the business
- identify all the assets of the business
- valuation of the business
- deduct liabilities
- valuation of stock
- legal compliance with all pertinent laws
- market (advertise) the business
- secure a buyer
- enter into a contract with both parties
- due diligence period
- closing preparation
- coordinate a date for closing the transaction
The difference between the adjusted basis of a property and its net selling price is called
capital gain
