NovarsGroup Business Brokers

----- quick financial analysis summary -----

reviewing the company assets

Current Assets

Selling the company means selling the company assets. The buyer is only going to pay for income-producing assets.

Current assets include the following:

• accounts receivables
• inventory
• short-term notes
• other

The buyer wants to see collectible receivables dated no longer than 30 days or within industry standards. Invoices or receivables dated more than 30 days indicate sloppy management and/or troubled collections.

• You should review your collection policy to ensure that bills and payments are invoiced and collected on time.

The buyer will evaluate your inventory management. Dated inventory may be worthless in the eyes of the buyer, regardless of book value. If you can't sell the inventory, the buyer doesn't want it.

• Get rid of your excess inventory by writing in off or donating it at book value. Keep your inventory at marketable levels.

Short-term notes generally include loans made by the company to the owner or owner's family.

• You should pay off these loans prior to the sale (or state that they are excluded from the sale). The buyer will not assume any short-term notes not directly tied to the operation of the business.

 

Fixed Assets

What are the fixed assets:

— leasehold improvements
— furniture and fixtures
— equipment (machinery and tools)
— company vehicles
— building(s)
— land
— other

Fixed assets that should be included in the sale are those assets that are income-producing:

• Company vehicles used exclusively by the owner or owner's family should not be included and removed.


• Land and building valuation must be supported by an independent appraisal if it is included in the sale.
  
  Note that many buyers will not purchase land and buildings — they don't produce income. Sellers often remove land and buildings from the sale and lease them back to the business.
  
  
• Leasehold improvements that produce income or directly tied to the business operations should be included — other lease improvements that do not produce income should be removed.