i) Raw materials: This is material a business buys in from suppliers which it then uses or converts into something else e.g. maize into maize meal, timber into furniture. ii) Work in progress: On the day of handover from one owner to the next, some jobs will be partly finished, representing work still in progress e.g. unfinished chairs. iii) Finished stock: There will be stock of products which is ready for sale to the consumer, but which remain unsold or unshipped and not invoiced on the day of transfer. Raw material is evaluated at the original cost paid for the stock. If there has been price rises, these can be negotiated. Finished goods stock is normally valued at its selling price at the time, especially on the day of transfer. db Machinery, equipment and vehicles The machinery and equipment necessary to perform the functions of a business will be acquired with it. The type and extend will depend on the business and could include manufacturing plant, commercial equipment, office equipment and vehicles. e) Furniture, fixtures and fittings: Buying an existing business implies that any premises from which it operates will befitted out and furnished. The type of the business will determine the nature of the furniture as well as fixture and fittings e.g. a restaurant will require tables, chairs and other furnishings and décor appropriate to its target market. Intangible assets and goodwill A distinction is drawn between the tangible and intangible assets of a business for sale. The assets discussed so far are tangible in that they can be physically identified and quantified. The intangible assets of a successful business will often be more important for they relate to why these physical assets have any meaning in the marketplace. The intangible assets are the sum of what makes a collection of property, fixtures and fittings, plant equipment and stocks work together to add value to products and services. a) Goodwill Goodwill is a general term which attempts to value the likelihood of success and therefore the future profitability of an enterprise. When a business is advertised for sale, goodwill is often the word used to describe the vendor’s valuation of this future profitability, which is added to any market value of the tangible assets.
