Recast Financial Statements

Murphy Business Transfer ReportFinancial statements and tax returns are prepared for tax purposes, not for business sale purposes. The objective of most business owners and their financial advisors is to use all available accepted accounting methods to minimize a company’s taxable net income. This strategy is effective for minimizing taxes, but is entirely inappropriate for business sale purposes. The goal when presenting financial information to a potential buyer is to maximize the presentation of net income and cash flow.

Since the primary factor influencing a company’s value is its earnings, maximizing the presentation of the financials is key. It is imperative that potential buyers are able to “read between the lines” to appreciate the actual cash flow or income generating capability. By recasting or adjusting the financial statements, potential acquirers will recognize the “real” financial capability of the business.

The term “recast financial statements” refers to financial statements that are adjusted to identify owner compensation, owner “perks” or fringe benefits, one-time/extraordinary expenses, non-cash expenses.  There are many potential recasting adjustments that could be applicable when recasting financial statements.

With proper guidance and expertise, a seller can significantly increase the perceived value of the company and ultimately increase the price and terms received.

If you have a topic you would like to know more about, or know anyone who you think would benefit from this kind of information, please email me click

Dan Carelli
Certified Business Intermediary
321 544-9595

Murphy Business & Financial – Florida’s Largest Business Brokerage

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