The Journal of Business Cases and Applications A Change


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i need answers to question 1 a-d and 2 of the attachment A Change of Taste.pdf ■ The Journal of Business Cases and Applications ■ A Change of Taste Michael L. Garcia, The University of Tampa Karen D. Squires, Accessible Continuing Education Solutions ABSTRACT: This case is a disguised real world event where students break-even analysis, introduce business valuation issues, fraud, and ethics. The case is appropriate for managerial accounting courses. INTRODUCTION I smiled to myself as I drove south on Interstate 95. I felt like I was joining the retiree migration to Florida. Like other retirees, I was moving back to my home town to be close to elderly relatives, long time friends and with a plan to buy a business to keep me busy and to supplement my retirement income. Many of my friends had their own businesses and were active in the local business community. One in particular, Mel Rivers, thought that he’d found a good opportunity. Mel and I grew up together and was one of my few friends who knew that I had worked for the past 20 years as a revenue agent for the Treasury Department. I generally told people that I worked for the Federal Government without mentioning that I was with the IRS. Mel offered to introduce me to Ronald Zumbado, a business leader and respected individual within the community. Mel told me that he had met Ronald a couple of years ago at a Chamber of Commerce meeting and that Mr. Zumbado specialized in buying troubled companies, turning them around and then selling them. About a month before my official retirement date, Mel had approached Ronald to see if he knew of any businesses which might be fore sale. Ronald said “this is fabulous timing!” And went on to indicate that he was ready to sell his latest venture which was a small retail outlet selling a Spanish custard called Flan. This sweet delicacy is a favorite of local residents and tourists alike. Mel started the meeting by saying, “Ronald, I’d like for you to meet Joe Jimenez, one of my oldest and closest friends.” In our preliminary meeting Ronald told to me that he had been able to improve Tasty Flan’s operations to the point that and he is ready to start something new. Ronald said that when he started the business, most of the revenue came from over the counter sales and that he had expanded sales by finding restaurants willing to put Tasty Flan on their dessert menus. He also had one Spanish market that was selling his product. He said that he felt that there was significant potential for sales growth through the commercial market for flan, but he hadn’t had the chance to fully develop that potential. That was one of the reasons that he wanted to sell the business to someone who could invest the time to develop the commercial side of the business. And right now he didn’t have the time because he’s had to get involved in another company of his. Apparently the current owner needed some help running the business and he wanted to help the new owner make the business flourish. Ronald exclaimed if you are interested in Tasty Flan you can have access to the business’s financial statements and any other documentation necessary in order to complete your due diligence. The business leases all of its fixed assets except for a used delivery vehicle. The selling price for the business is $250,000. If you prove to be an excellent credit risk I will hold paper on the sale with a 20% down payment and the balance in a note with annual payments for 5 years at 12%. Joe, if you find these terms agreeable I will enjoy doing business with you. I assured Ronald that from what I have researched before that his terms were indeed competitive with other financial institutions in the area, but I would have to review the business’s records before I would be willing to agree on the sales price. Ronald agreed in www.jbcaonline.org ■ 77 ■ Winter, 2009 ■ The Journal of Business Cases and Applications ■ spirit, we set up a forthcoming meeti

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