Choosing the Right Valuation Approach Summary

Choosing the Right Valuation Approach Summary

The

 purpose

 of

 this

 article

 is

 to

 introduce

 various

 business

 valuation

 methods,

 including

  concepts,

 processes,

 pros

 and

 cons,

 caveats,

 and

 suitable

 circumstance.

  First

 section

 states

 that

 the

 analyst

 should

 de:ine

 the

 valuation

 problem

 by

 considering

 claim

  and

 level

 of

 value,

 valuation

 date,

 and

 the

 purpose

 of

 value.

 The

 claims

 is

 the

 corresponding

 value

 of

  the

 assets

 in

 a

 :inance

 balance

 sheet

 which

 is

 market-­‐value

 based.

 In

 some

 case,

 the

 valuation

 object

 is

  part

 of

 business,

 not

 entire

 :irm.

 The

 level

 of

 value

 depends

 on

 the

 liquidity

 and

 controlling-­‐or-­‐ minority

 interest.

 The

 valuation

 date

 should

 be

 decided

 base

 on

 the

 purpose

 of

 valuation.

 Then,

 the

  market,

 industry

 and

 economic

 condition

 for

 assessing

 :irm

 is

 settled

 by

 the

 date.

 The

 de:inition

 of

  asset

 value

 depends

 on

 the

 purpose

 of

 valuation.

 Trading

 in

 open

 market

 needs

 a

 fair

 market

 value,

  while

 selling

 to

 a

 speci:ic

 buyer

 requires

 a

 investment

 value.

 The

 purpose

 of

 valuation

 determines

 the

  assumptions,

 information

 and

 methods

 of

 valuation.

  Second

 section

 states

 the

 introduction,

 application,

 and

 caveats

 of

 each

 eight

 approaches.

 There

  are

 three

 major

 categories,

 asset/cost

 approaches,

 market

 approaches,

 and

 income...