An investor is planning to buy a family owned restaurant in a very good location. When looking at the accounting books, he notices in the balance sheet that there are no labor costs. The answer he gets from the seller and owner of this family owned restaurant is: 'I was the manager, my husband was the cook, my two kids were passing dishes and cleaning tables. It is a family business, you know. We didn't charge ourselves any money to reduce costs and make this restaurant profitable. And as you can see, we have profits since we started the business 5 years ago. It is very profitable, you can do the same and be successful.' Do you agree this restaurant is successful? Would you buy it? Explain both aswers.

Q&A Education