Information Guides -- Business Valuation
The focus of this Information Guide is identifying the resources
that support gathering critical information for the business valuation
process.
This Guide can be used for Financial Statement Analysis (BUS 514),
Spring 2005.
What is a business valuation?
- Determines the estimated market value of a business entity
- Estimates the complex economic benfits that arise from combing a group of physical assets with a group of intangible assets of the business as a going concern
- Estimates the price that informed buyers and sellers would negotiate for a business or partial equity interest
Conducting a thorough business valuation requires gathering information that combines quantitative financial techniques with qualitative analysis of the business, the industry, and the economic conditions in general. **
Components of a Business Valuation
IRS Rev. Rul. 59-60 states that valuations should address the following issues:**
- Nature and history of the business
- General economic outlook and conditions of the specific industry
- Book value of the stock
- Financial condition of the company
- Earnings capacity of the company
- Divident paying capacity of the company
- Whether the company has goodwill or other intangible value
- Previous sales of stock
- Market price of publicly traded companies who are engaged in the same or similar lines of business
Click here to read more about the "why" of conducting a business valuation.
**Business Valuation, Michael Hoffman, The CEO Refresher
