For what and when should a company valuation be done?
Apart from the basic and generic causes, there are several specific reasons why an entrepreneur should value the Business Valuation on specific occasions. If you think about the possibility of selling a company either in its entirety or partially after the segregation of a branch of the business, obviously the amount that would be obtained by selling would respond to the negotiation that takes place between buyer and seller.But it is clear that in the same, the respective positions of the two parties should obey to the valuation given to the object for sale.
Why business valuation?
If you consider the need to obtain your own resources, to face new investments or a process of expansion of your company during the negotiation the entry price for the new shareholders implies that both the entrepreneur and investors must bear in mind the value that they respectively grant to the affected company.Undoubtedly, the agreement of the swap equation -correspondence between the shares delivered from each merged company and those received from those resulting from the merger- must respond to the valuations attributed to the companies participating in the merger.
In the case of a hereditary transfer, whereby an employer distributes the total assets among the heirs, in order to achieve economic equality between the different parts of the inheritance, the company must be valued. Similarly, if in inheritance or in donation a company is divided among several heirs or grantees, each party should be subject to assessment to measure what is perceived by each. As you see, the reasons that can cause the convenience or obligation according to the cases of knowing the value of your company is multiple and varied.
How to know the value of companies?
To determine the value of your company, various techniques called valuation methods have been developed. According to the Net Book Value, the company is valued for the difference between the sum of the book value of its real asset and the sum of the book value of its eligible liability. Its advantage lies in relying on objective data, directly from the Balance. It has as disadvantages both the disregard of the possible existence of latent capital gains / losses, and the avoidance of present and future returns.According to the Net Asset Value, the company is valued at the net amount that would result in the hypothesis of its liquidation which requires an estimation of the realization value of its assets and a quantification of its liabilities.
Conclusion: look for any drawbacks
Overcomes one of the disadvantages indicated in the previous method but still does not consider the present and future returns. Estimating the real value of assets incorporates difficulties and subjectivity.According to the Capitalization of the Benefit, a company is valued capitalizing its annual profit at an update rate. This method is already considering the current profitability. Its drawback is that it projects into the future without nuances. The chosen update rate significantly influences the resulting value.
Why business valuation?
If you consider the need to obtain your own resources, to face new investments or a process of expansion of your company during the negotiation the entry price for the new shareholders implies that both the entrepreneur and investors must bear in mind the value that they respectively grant to the affected company.Undoubtedly, the agreement of the swap equation -correspondence between the shares delivered from each merged company and those received from those resulting from the merger- must respond to the valuations attributed to the companies participating in the merger.
In the case of a hereditary transfer, whereby an employer distributes the total assets among the heirs, in order to achieve economic equality between the different parts of the inheritance, the company must be valued. Similarly, if in inheritance or in donation a company is divided among several heirs or grantees, each party should be subject to assessment to measure what is perceived by each. As you see, the reasons that can cause the convenience or obligation according to the cases of knowing the value of your company is multiple and varied.
How to know the value of companies?
To determine the value of your company, various techniques called valuation methods have been developed. According to the Net Book Value, the company is valued for the difference between the sum of the book value of its real asset and the sum of the book value of its eligible liability. Its advantage lies in relying on objective data, directly from the Balance. It has as disadvantages both the disregard of the possible existence of latent capital gains / losses, and the avoidance of present and future returns.According to the Net Asset Value, the company is valued at the net amount that would result in the hypothesis of its liquidation which requires an estimation of the realization value of its assets and a quantification of its liabilities.
Conclusion: look for any drawbacks
Overcomes one of the disadvantages indicated in the previous method but still does not consider the present and future returns. Estimating the real value of assets incorporates difficulties and subjectivity.According to the Capitalization of the Benefit, a company is valued capitalizing its annual profit at an update rate. This method is already considering the current profitability. Its drawback is that it projects into the future without nuances. The chosen update rate significantly influences the resulting value.