The working capital adjustment can have a direct impact on the price paid for the business. Given that price is arguably the most important variable in a transaction, and that the working capital adjustment can impact price, it follows that the working capital adjustment deserves special attention.
A stock purchase agreement is the primary transaction document for a stock acquisition. The purpose of the stock purchase agreement is to confirm the price paid for the securities sought, to control risk to the degree possible and to provide a roadmap for the hold period.
Why not buy Robinhood stock? Why not buy any stock when the company is trading close to the value of the cash it has on the balance sheet?
Exercises can help provide context for abstract concepts. In this post and the associated YouTube Short we are going to explore the balance sheet by walking through a simple example for a startup. More precisely, we will be launching a banana stand business (because “there’s always money in the banana stand”).