Series 79 practice questioneasyEarnouts
Which of the following best describes a working capital true-up in an earnout provision?
- AA penalty to the seller if synergies are not realized post-close
- BA bonus to management if specific cost targets are met
- CA requirement to settle all intercompany balances before closing
- DClosing working-capital purchase-price true-up✓ Correct answer
Explanation
Why D — Closing working-capital purchase-price true-up
A working capital true-up adjusts the purchase price to reflect differences between estimated and actual working capital at closing. This avoids disputes, while the other options describe unrelated mechanisms.
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