Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

5. Inventory

Merchandising Company vs. Manufacturing Company

Financial Accounting

5. Inventory

Merchandising Company vs. Manufacturing Company

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Multiple Choice

Which of the following is a disadvantage of buying an existing business?

You may inherit existing problems such as poor inventory management or outdated equipment.

There is no established supplier relationship.

It typically takes longer to start operations compared to a new business.

You have to build a customer base from scratch.

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Verified step by step guidance

Understand the context of the question: The problem is asking about the disadvantages of buying an existing business. This requires analyzing the challenges that come with acquiring an already operational entity.

Evaluate the options provided: Carefully read each option and determine whether it aligns with the disadvantages of buying an existing business. For example, inheriting existing problems such as poor inventory management or outdated equipment is a common issue.

Eliminate irrelevant options: Some options, such as 'There is no established supplier relationship' and 'You have to build a customer base from scratch,' are more applicable to starting a new business rather than buying an existing one.

Focus on the correct disadvantage: Buying an existing business often involves inheriting existing problems, such as operational inefficiencies or outdated assets, which can be costly to address.

Conclude the reasoning: Based on the analysis, the correct disadvantage is inheriting existing problems, as this is a unique challenge associated with acquiring an existing business rather than starting a new one.