Valuation of business
Valuation of business (company) is organized task-oriented process of calculation of the market value of the object in monetary terms, taking into account all factors and circumstances influencing on it at a particular time in the conditions of specific market.
Valuation of business is carried out in order to:
- improve efficiency of the company management;
- purchase and sell the business (shares of the company, bonds in the stock market);
- choose reasonable and appropriate investment decision;
- restructuring of the enterprise;
- purchase and sell business (enterprise) in parts or in whole;
- determine the share of each of the joint owners in case of conclusion or termination of the contract;
- form the company development plan;
- determine the extent of the company’s creditworthiness and value of the subject to mortgage in crediting;
- carry out insurance, during which the necessity to estimate the market value of the assets often appears;
- take reasonable management decisions relating to business;
- implementation of the business development investment project.
Depending on the cost factors, business valuation methods are divided into the methods of profit, comparative and cost approach. Each approach allows taking into account certain cost factors. In general, all three approaches to the business valuation connected between each other. Each approach proposes to use different kinds of information obtained on the open market.