My assumption in buying this business is that it will keep making profits after the acquisition. Notably, there is no point in buying a business that keeps making losses. Another assumption is that the business has no debt obligations from financiers or financial institutions. The third assumption is that the seller is selling the business in good faith. Notably, one should only buy a business if they have complete information about its future operations.

In negotiating the purchase price of the business, I would use the fluctuations in profits as a reason for the negotiation. Notably, this business makes an average of $40000 per annum in the last five years. The lowest value per year is $20000 while the highest value is $60000. I would use the lowest value of $20000 to negotiate a better deal since this business may continue making profits off this value for some time.

What is the reply to this discussion? Suppose that a business available for purchase has shown an average net profit of ( $ 40,000 ) for the past five years.

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There are a few key assumptions that must be made in o... View the full answer