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    Corporate Valuation

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    Vishal Suri
    Corporate valuation is the process of determining the value of a company by assessing both tangible and intangible assets, as well as recorded and contingent liabilities, to establish a price from the perspective of a going concern. The importance of valuation is to establish a price, increase value, attract capital, aid in estate planning, and facilitate mergers, acquisitions, and employee stock ownership plans. There are four main approaches to valuation: asset-based, earnings-based, market-based, and fair value methods. Selecting a valuation methodology depends on factors like the purpose of valuation and complexity of income/cash flows.

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    Corporate Valuation

    Uploaded by

    Vishal Suri
    78 views2 pages
    Corporate valuation is the process of determining the value of a company by assessing both tangible and intangible assets, as well as recorded and contingent liabilities, to establish a price from the perspective of a going concern. The importance of valuation is to establish a price, increase value, attract capital, aid in estate planning, and facilitate mergers, acquisitions, and employee stock ownership plans. There are four main approaches to valuation: asset-based, earnings-based, market-based, and fair value methods. Selecting a valuation methodology depends on factors like the purpose of valuation and complexity of income/cash flows.

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    Corporate valuation is the process of determining the value of a company by assessing both tangible and intangible assets, as well as recorded and contingent liabilities, to establish a price from the perspective of a going concern. The importance of valuation is to establish a price, increase value, attract capital, aid in estate planning, and facilitate mergers, acquisitions, and employee stock ownership plans. There are four main approaches to valuation: asset-based, earnings-based, market-based, and fair value methods. Selecting a valuation methodology depends on factors like the purpose of valuation and complexity of income/cash flows.

    Copyright:

    Attribution Non-Commercial (BY-NC)
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    Download as docx, pdf, or txt
    78 views2 pages

    Corporate Valuation

    Uploaded by

    Vishal Suri
    Corporate valuation is the process of determining the value of a company by assessing both tangible and intangible assets, as well as recorded and contingent liabilities, to establish a price from the perspective of a going concern. The importance of valuation is to establish a price, increase value, attract capital, aid in estate planning, and facilitate mergers, acquisitions, and employee stock ownership plans. There are four main approaches to valuation: asset-based, earnings-based, market-based, and fair value methods. Selecting a valuation methodology depends on factors like the purpose of valuation and complexity of income/cash flows.

    Copyright:

    Attribution Non-Commercial (BY-NC)
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    Corporate Valuation is the process of determining the value of a company / firm.

    Business or
    corporate valuation is required not only of tangible assets, but also of intangible assets (like
    goodwill, patents, trademark etc.) & also human resources that manage the business. Likewise,
    there is an imperative need to take into consideration recorded liabilities as well as
    unrecorded / contingent liabilities so that the buyer is aware of the total sum payable,
    subsequent to the purchase of business.

    In this sense, business/ corporate valuation is about measuring the continuing value of a
    company’s business in today’s terms. Corporate valuation methodology assumes a “going
    concern” concept for the company.

    The importance of valuation is to:


    – Establish a price
    – Help increase value
    – Attract capital
    – Aid in estate planning
    – Strategic partnership
    – Merger and acquisition
    – Employees stock option plan

    Approaches to Corporate Valuation:

    There are four approaches to appraising the value of the company (with focus on equity share
    valuation). They are:

    1. Asset based approach


    2. Earnings based approach
     Earnings measure based on Accounting-Capitalisation method
     Earnings measure based on Cash Flow basis–DCF Approach
    3. Market value based approach
    4. Fair Value method

    The other approaches to value measurement are:

    1. Market value Added Approach (MVA)


    2. Economic value Added Approach (EVA)

    There are various methodology adopted in order to value a company. Selecting the valuation
    Methodology will depend on various factors like:
    • Purpose of valuation
    • Basis of valuation
    • Complexity and stability of the income stream and/or cash flows
    • Existence of special factors such as intellectual assets
    • Complexity of financing
    • Going concern issues
    • Availability of relevant, reliable information
    • Degree of precision and certainty required

    The factors that are to be considered while applying the valuation techniques are as follows:

    Internal factors
    – Historical performance
    – Profitability / earnings
    – Company management
    – Company ownership
    – Company structure
    – Size of operation and barrier to entry
    – Legal protection of product or services
    – Forecast / projection / budget
    – Written business plan

    External factors
    – Industry
    – Impact of environmental factors
    – Government regulation
    – Economic conditions

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