Mitch plans to retire in 5 to 10 years from his success car dealership.He has decided to retain ownership for now,but will no longer grow the business.This change would also allow him to invest for retirement some of the cash that the business is now generating.Which harvesting method is Mitch using?
A) delaying sellout
B) releasing the firm's free cash flows to the owners
C) offering stock to the public through an IPO
D) issuing a private placement of stock

Question

Quizplus · Accepted Answer

Mitch is retaining ownership of the car dealership for now but is no longer growing the business. Instead, he plans to invest some of the cash generated by the business for his retirement. This indicates that he is releasing the firm's free cash flows to the owners, which is one of the methods of harvesting a business. Delaying sellout is not a method of harvesting, while offering stock to the public through an IPO or issuing a private placement of stock would involve selling ownership of the business, which is not what Mitch plans to do. Therefore, the best choice is B.

Mitch Plans to Retire in 5 to 10 Years from His