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Valuations Question 1- Valuation - Valuation Using Research Paper

Valuations Question 1- Valuation - Valuation Using Comparable information- Valuation is a process of estimating worth of an asset. However, when valuing a company or organization there is no "one" correct way to accomplish the task. Each organization may have a different way of reporting historical information, and event financial statements prepared with GAAP show assets based on a more historical, rather than current, paradigm. Generally speaking, though, the valuation of financial assets is done using one of more of three models:

Absolute values -- These models focus on the present value of an asset's expected future cash flows -- using multiperiod models like discounted cash flow or single-period models like the Gordon model. Absolute values take into account objective issues and are quantitatively based, but are valuable as only a partial picture into the actual value of the asset and may not be transferable from one industry to the other.

Relative models -- are more subjective and use market and competitive valuation techniques to look at similarities and differences within the specific industry.

Option Pricing models -- Option models are typically used for certain types of financial assets or investments with embedded options, bonds and such). The intrinsic value of certain assets, for instance, may be subjective and personal, and there may be other factors involved (Fernandez 2002).

Valuation remains volatile sometimes,...

being ready to launch a new product or service) and other external factors. Even brainpower an innovation should be included in valuation, particularly with certain types of technological organizations (Edvisson, et al. 1997). Financial statement analysis usually involves ratio (liquidity, turnover, profitability, trends, and industry), but there are more approaches using income, asset and markets that take other factors into consideration when looking at a more holistic view of the organization in question (Prat, et al., 2000).
Question 2 -- Cash is King? The situation revolves around a company that is at least 24-months shy of launching a new product that will revolutionize its industry. The company has a very minimal positive cash flow, but needs an influx of cash in order to stay the course. Within 6 months this organization will be out of cash if something is not done. In essence, this is the type of scenario that many new businesses face. There are no sure-fire ways to find capital, but there are several guidelines and plans that can be put into place immediately, prior to running out of funds.

First, one can hope that the organization has a good relationship with the bank and can present a plan that will show the loan officer that a medium term loan is needed in order to complete the new project. In this case, it would be more desirous to…

Sources used in this document:
REFERENCES

A Basic Guide to Bank-Term Loans. (2012). Entrepreneur. Retrieved from: http://www.entrepreneur.com/article/52728

Chemmanur, T., et al. (2011). How Does Venture Capital Financing Improve Effeciency? Review of Financial Studies. 24 (12): 4037-90.

Edvisson, L., et al. (1997). Intellectual Capital: Realizing Your Company's True Value by Finding Its Hidden Brainpower. New York: Harper Collins.

Fernandez, P. (2002). Valuation Methods and Shareholder Value Creation. London, UK: Elsevier Publications.
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