Business for Sale! Glancing through the local newspaper recently, you came across the following business Opportunity:

You have $150,000 to invest, and you wonder if this might not be a good business opportunity. Analyze this potential investment and address the following issues:

a. Comment on the qualitative characteristics of the information presented in the ad. Is the information (1) Relevant?
(2) Reliable?
(3) Understandable?
(4) Consistent?

b. Can you determine from the information given what revenue recognition principles were applied?

c. Can you determine what expenses were matched with revenues?

d. What other information would you want so you could make an informed decision about this investment opportunity?

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Type of Business: Location: Market: Population: Overview: Monthly newsletter Isle of Mancala Local residents, upscale, approximately 1.200 subscribers 97.000 residents on the island Owned by an individual on the mainland who devotes part time to the newsletter. The newsletter employs an advertising manager who sells ads, and it contracts with freelance writers to write stories. The subscribers pay $34.95 annually. The newsletter has a renewal rate of 58% to 70%. Price: $150.000 Financial Information: 1998 1999 2000 Gross revenue $57.800 $86,400 $98,300 After-tax cash inflows 18,200 16,500 17,000