CBB CBB Transaction Management & Due Diligence

Question 1

What is the primary purpose of due diligence in a business sale transaction?

Accepted Answer

To verify the accuracy of information provided by the seller

Answer

To negotiate a lower purchase price

Answer

To prepare marketing materials for the listing

Answer

To identify potential buyers in the market

Question 2

Which document typically initiates the formal due diligence process in a business sale?

Accepted Answer

Letter of intent (LOI)

Answer

Listing agreement

Answer

Purchase agreement

Answer

Confidentiality agreement

Question 3

What does a CBB broker typically coordinate during the transaction management phase?

Accepted Answer

Managing information flow between buyer, seller, attorneys, and accountants

Answer

Writing the business's employee handbook

Answer

Filing the business's annual tax returns

Answer

Setting the business's retail prices

Question 4

Which financial records are most critical for a buyer to review during due diligence?

Accepted Answer

Three to five years of tax returns and P&L statements

Answer

Employee performance reviews

Answer

Customer satisfaction surveys

Answer

The seller's personal investment portfolio

Question 5

What is a 'contingency' in a business purchase agreement?

Accepted Answer

A condition that must be satisfied for the sale to proceed

Answer

A penalty clause for late closing

Answer

A seller's warranty on future profits

Answer

A broker's commission structure

Question 6

Why is a transition period often included in a business sale agreement?

Accepted Answer

To give the buyer time to learn operations from the seller

Answer

To allow the seller to continue owning the business

Answer

To postpone the payment of the purchase price

Answer

To satisfy a regulatory audit requirement