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Business Valuation

The document discusses business valuation, which is the process of determining the economic value of a business. It outlines several types of valuation approaches, including market-based, income-based, asset-based, and cost-based. The document also discusses protocols for business valuation in the US, the procedure for conducting a valuation, and common reasons to conduct a valuation such as for selling or buying a business, mergers and acquisitions, estate planning, and resolving legal disputes.

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57 views13 pages

Business Valuation

The document discusses business valuation, which is the process of determining the economic value of a business. It outlines several types of valuation approaches, including market-based, income-based, asset-based, and cost-based. The document also discusses protocols for business valuation in the US, the procedure for conducting a valuation, and common reasons to conduct a valuation such as for selling or buying a business, mergers and acquisitions, estate planning, and resolving legal disputes.

Uploaded by

gouthami g
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
Download as pptx, pdf, or txt
Download as pptx, pdf, or txt
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BUSINESS

VALUATION
Content
• Business Valuation
• Types of business valuation
• Use of Business valuation for forensic accoutants
• Protocols for business valuation in USA
• Procedure of business valuation
• When to conduct business valuation
Business Valuation
• The process of determining the economic value of a business or company. It is a
crucial aspect of finance and economics, as it helps in understanding the worth of a
business entity for various purposes.
• Methods used to conduct a business valuation, and the choice of method depends
on the nature of the business, its industry, available data, and the purpose of the
valuation.
Types of business valuation
• Market-Based Approach
• Income-Based Approach
• Asset-Based Approach
• Cost-Based Approach
Market based
• The market-based approach to business valuation is a method that determines the
value of a company by comparing it to similar companies that have recently been
sold or are publicly traded.
• Comparable Company Analysis (CCA)
• Comparable Transaction Analysis (CTA)
Income-based Approach
• The income-based approach to business valuation involves estimating the value of
a business based on its expected future income or cash flows. This approach is
particularly useful for businesses that generate stable and predictable earnings.
• Forecasting Future Cash Flows
• Capitalization of Earnings
Asset-based approach
• The asset-based approach to business valuation involves determining the value of a
company based on its net asset value. This approach is commonly used for
businesses with substantial tangible assets or when the fair market value of the
company's assets is a significant portion of its overall value.
• Asset Accumulation Method
• Adjusted Book Value Method
Cost-based approach
• The cost-based approach to business valuation involves determining the value of a
business by calculating the cost required to recreate or replace its assets. This
approach is most applicable to businesses with substantial tangible assets and is
often used for new businesses or those with minimal intangible assets.
• Book Value Method:
• Replacement Cost Method
Comparable transactions method
• The comparable transactions method, also known as the transaction multiples
method, is a market-based approach to business valuation. It involves analyzing
recent transactions of similar companies to determine a valuation multiple and
then applying that multiple to the financial metrics of the subject company to
estimate its value.
• Information Gathering
• Selecting Comparable Transactions
• Calculating Valuation Multiples
Use of Business valuation for forensic
accountant
• Business Disputes
• Divorce Proceedings
• Estate and Gift Tax Matters
• Fraud Investigations
• Bankruptcy and Insolvency
• Shareholder Disputes
• Intellectual Property Disputes
• Lost Profits and Economic Damages
• Purchase Price Disputes
• Insurance Claims
• Expert Witness Testimony
Protocols for business valuation in USA
• Uniform Standards of Professional Appraisal Practice (USPAP)
• AICPA Statement on Standards for Valuation Services (SSVS)
• American Society of Appraisers (ASA) Business Valuation Standards
• National Association of Certified Valuators and Analysts (NACVA) Standards
• Internal Revenue Service (IRS) and Legal Requirements
• Public Company Accounting Oversight Board (PCAOB) Regulations
Procedure for business valuation
• Engagement and Information Gathering
• Preliminary Analysis
• Selecting Valuation Methods
• Financial Analysis
• Forecasting Future Performance
• Applying Valuation Methods
• Weighting and Reconciliation
• Final Report and Documentation:
• Review and Quality Control
• Communication
When should business valuation be
conducted
• Selling or Buying a Business
• Mergers and Acquisitions
• Obtaining Financing:
• Shareholder Transactions
• Estate Planning and Taxation
• Divorce or Legal Disputes
• Financial Reporting and Compliance
• Strategic Planning
• Bankruptcy and Insolvency
• Intellectual Property and Licensing
• Employee Stock Ownership Plans (ESOPs)

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