CBB Marketing & Deal Structuring 3

Question 1

A broker is marketing a service business where 80% of revenue comes from contracts. How should these contracts be addressed in the marketing materials?

Accepted Answer

Highlight contract transferability and average remaining contract duration

Answer

Contract transferability and remaining duration are key value indicators that directly affect business continuity and buyer confidence.

Question 2

In an asset sale, which of the following does NOT typically transfer to the buyer?

Accepted Answer

Seller's pre-existing liabilities

Answer

In an asset sale, pre-existing liabilities remain with the seller's entity, which is one of the primary reasons buyers prefer asset sales over stock sales.

Question 3

A business broker uses a 'teaser' document when marketing a business. The teaser's PRIMARY purpose is to:

Accepted Answer

Generate interest while maintaining confidentiality before NDA execution

Answer

A teaser is a brief, anonymous summary designed to spark buyer interest without revealing the business identity before confidentiality is established.

Question 4

Which deal structure is MOST advantageous for a seller who wants to minimize immediate tax liability while maximizing total consideration?

Accepted Answer

Installment sale with payments spread over multiple years

Answer

An installment sale under IRC Section 453 allows sellers to spread capital gains recognition over multiple tax years, potentially reducing overall tax burden.

Question 5

When calculating Seller's Discretionary Earnings (SDE), which item should be ADDED BACK to net income?

Accepted Answer

Owner's health insurance premiums paid by the business

Answer

Personal benefits like owner health insurance are discretionary expenses that a new owner might not incur, so they are added back to reflect true business earning power.

(CBB) Certified Business Brokers Practice Test

(CBB) Certified Business Brokers Practice Test

CBB Marketing & Deal Structuring 3