What occurs during an asset sale?

• A. Transfer of ownership for the entire company
• B. Sale of specific assets and liabilities
• C. Issuance of new stocks to shareholders
• D. Acquisition of a competitor's stocks

Answer: (B)

During an asset sale, the transaction involves the sale of specific assets and liabilities of a company rather than the sale of the entire company itself. This means that the buyer acquires particular assets, such as equipment, inventory, and real estate, along with any associated liabilities that are explicitly included in the sale agreement. The seller retains ownership of the remaining parts of the business not included in the transaction. This type of sale can be advantageous for both parties; the buyer can selectively acquire assets that fit their strategic goals, while the seller can liquidate certain aspects of the business while retaining others.

In contrast to an asset sale, ownership of the entire company would involve a stock sale, which transfers all assets and liabilities in conjunction with the company's ownership. The issuance of new stocks to shareholders pertains to capital raising activities and doesn’t relate to asset transactions. Acquiring a competitor's stocks involves stock transactions rather than the direct exchange of specific assets and liabilities.