BUSINESS VALUATION
Business Valuation
Liberty University
BUSI 530-D07
Dr. Jeffrey Woo
November 10, 2016
BUSINESS VALUATION
The management shareholders are answerable for execution because they form an
important bridge between the execution management and the end user shareholder and hence
there is a need to incorporate the value creation to both groups (McKinsey & Company Inc.,
2010). Because this group is focused therefore on execution, their role is to ensure that the final
user investor has what they need to produce the results. They are also worried about the strategy
of the company, setting the policy and finally executing the approach. Their other concern is
execution which will help the company to generate profit, revenue and reduce the costs.
The company executives create value for the stakeholders by presenting ideas to help
them overcome their challenges; they also create value by bringing ideas to them which are
forward-looking that is looking at the long-term objective to increase revenue and profits (Jeroen
Geelhoed, 2014). They also create value by having gained a working managing level knowledge
of how to make developments and what is necessary to produce better results. Lastly, they create
value by building an agreement around a solution and by supplying the management financiers
with the business case of the product service or solution.
Business valuation refers to the process and set of procedures used to determine the
economic value of an owner's interest in business. Also, it is used to estimate the selling price of
the firm, resolve disputes related to gift taxation, divorce litigation and allocation of the business
purchase price among the business assets and it is used to estimate the value of associates’
ownership interests in a buy-sell-interest (Damodaran, 2011).
The reason therefore for business valuation is for sales, planning, estate tax valuation,
business, divorce litigation, collateral documentation and documenting that a sale price is
BUSINESS VALUATION
equitable. Unlike the financial statement analysis which normally includes the common size
analysis, ratio analysis, comparative industry analysis and the trend analysis.
Therefore, the financial statement analysis allows the experts to compare particular
companies to the other businesses in the same category and discover the trends which are
affecting the company over time. This allows the valuation expert to view the growth or decline
in revenues and expenses or other financial trends. This will only help to determine the discount
and the selection of market multiples.
BUSINESS VALUATION
References:
1.Damodaran, A. (2011). The Little Book of Valuation. John Wiley & Sons.
2.Jeroen Geelhoed, S. S. (2014). Creating Lasting Value. Kogan Page.
3.McKinsey & Company Inc., T. K. (2010). Valuation: Computing and management of the
Value of Companies. John Wiley and Sons.
