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Understanding Tax Returns/Income

I am looking at buying an existing business and have seen balance sheet and income statements. I of course will be seeing tax returns soon, but what is the best way to truly understand what type of "income" the current owner is pulling out of the business on an annual basis. They are showing little net income and some owners salaries, but not close to the metrics which are considered industry average.
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The owner could get "income" out of the business by receiving rental payments for facilities he/she leases to the business. Or interest on money loaned to the business. There may be some liabilities (on the balance sheet) that are due to the owner. There may be funding to a retirement plan for the owner, etc.
In order to determine if the purchase will work for you, you`ll need to use the business income statement and make a projected income statement including any changes in income and expenses you foresee.
~Roland
vwebworld8/26/2008 1:36 AM