subject: Business For Sale In Queensland And Gold Coast [print this page] A potential owner reviewing the performance of a business over the several years may be presented with a substantial difference between the current years EBIT and previous years. They will need to determine the source of the difference, whether it is due to the improved business performance or is a change in the way the business finances have been accounted for.
While a countrys accounting standards have generally prevented the sort of the creative accounting that is very commonplace in China (for example amortising the future earnings). This does not actually mean that the whole of the calculation of the Earning before Interest and Tax (EBIT) or the Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) are not subject to the adjustment depending on who the primary audience is.
As a general rule, the two primary audiences of these figures are the actual owners themselves and the Tax Office. In these particular circumstances, the owners are often prepared to see the numbers legally realigned to provide less revenue to the tax office. However when it comes time to sell, these numbers may not do justice to the business and subsequently devalue the business to a large extent. This is one of the major reasons why preparing a business for sale Gold Coast can take a little longer than many people expect.
Typically a privately owned business will have its financial affairs particularly integrated with the individual owners to minimise the tax without actually exposing the personal assets to the business risk. These structures can be quite complicated and need to be unravelled prior to the selling of the business. Once the business has been isolated in this way, it financial performance may particularly appear to be very different from the previous years.
The challenge for the potential business owners is particularly determining if the newly stated performance is much genuine or if other things need to be brought into consideration. For example is the salary of the owner included in the profit figures or accounted for separately as a business cost. You may also need an accountant to determine what the real profit is, but it is very crucial to understand that there may be a good reason for the significant adjustments to the reported profits, and if there is you may well have found your next accountant. Either way the key question to ask is what are the comparable revenue, the costs, and the margins over the last three to five years and how have they been accounted for. Only then will you know if the profits are real.
