This 5-page paper focuses on two young women who want to buy a business. Through examination of the balance sheet and cash flow statement, the paper examines if the business is worth the asking price, and if it should be purchased in the first place.
Name of Research Paper File: D0_MTbuybus.rtf
Unformatted Sample Text from the Research Paper:
School of Fabric Design at Webster University, should purchase a business called Stitch Craft from the owners, Penny and Susan. The reason why Peggy and Susan wanted to sell the
business was because they had overextended themselves in terms of time and resources. The two questions to be addressed are as follows:
First, given the current financial statement and data presented in the case, should Helen and Martha purchase Stitchcraft? This particular franchise has
been in business for only a year, and according to Helen and Martha is doing quite well. Second, if the current asking
price isnt attractive, what counteroffer should Helen and Martha make? The current asking price is the existing balance of the U.S. Small Business Administration (SBA) loan, the invoice price of
the inventor plus $20,000 for fixtures, leasehold improvements and the franchise fee. In this case, the inventors fee is likely the royalty fee, indicated in the balance sheet section of
the information - the royalty fee is $7,436. Meanwhile, the remainder of the SBA loan is $46,025, which is payable over a 7-year period. Therefore, the entire cost to Helen
and Martha would be close to $75,000. Lets examine the balance sheet and see if we cant answer the initial question of
whether this is a viable business or not. As with many small businesses in their initial start-up phase, the expenses during this first year of operation are somewhat larger than
the total expense by about $1,000 (which actually, for a first year of operation, isnt too bad). As can be expected, the operation earns most of its money from fabric