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When an entrepreneur is considering selling his or her business, the buyer may be more interested...

When an entrepreneur is considering selling his or her business, the buyer may be more interested in giving the seller stock in their business than in giving cash. Why?

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Answer #1

Giving cash means giving a fixed amount of money to the seller irrespective of the future performance of the firm. The price of a business depends on its fundaments and the ability of it to be profitable in the future. While buying a business, a buyer may not be sure about the intrinsic value of the business. So, the buyer would like to compensate the seller on the basis of the future performance of the firm rather than giving a fixed amount of money at the time of the purchase.

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