Firm Valuation
Several reasons exist as to why an individual or a corporation may need to value a business. Such reasons may include the need to buy a business or execution of a merger and acquisition. The other reasons may be due to loan or taxation purposes. The process of business valuation is usually not easy as coming with a valid figure requires a lot of efforts amidst different challenges.
A true business valuation requires not just looking 'firms' previous year financial statements. The valuation process requires a complete and thorough process of analyzing several years of the firms' business operations and even the option of future business forecasting, the future economy and the various ways in which the firm will cope with the future market competition.
The presence of very many hard to measure variables that are intangible in nature makes the process of business valuation very complex. This spells it out that it is more than a process of summing up various numbers gathered from a variety of financial reports. It is for this reason that the process of business valuation has been referred to be more of an art than science. The process of business valuation therefore has been estimated to be varying to as much as 30% by experts.
There must be a high level of consistency in the methods employed. However there is usually no consistency in the naming of the techniques used. Each technique or method can be referred to using a variety of names.
The main important factor however, is the in every valuation that is undertaken, the technique employed must be relevant to the type of business operations in question. This aids in the realization and achievement of valid and very supportive figures.
The presence of several valuation techniques then makes the process very confusing and hence the need to hire a professional for the process to be a success. Each method has its merits and demerits. It is also worth noting that there is always a new valuation method being discovered now every now and then.
Valuation Methods
Adjusted Book Value
This is based on the assets and liabilities of the business. It is one of the least controversial...
Conclusion There are discrepancies encountered in conducting the valuation and risk of a private company. There arises these factors that if investigated can impact the process accordingly. The first research question that I suggest is investigating if the tax risk and equity market value exhibit a concave association, which is consistent with the optimal tax risk level from a valuation of equity standpoint. The second topic that can be researched upon
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This inexperience and youthfulness, according to these researchers and theorists, led to an overall drop in stock prices for the firms affected by this law as investors became wary about the direction of the firm (Ahern & Dittmar, 2012). This research was specifically concerned with the perception of firm performance on the part of investors, however, and not with actual measures of firm performance from within the companies themselves,
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