The Art and Science of Business Valuation

Front Cover
Greenwood Publishing Group, 1999 - Business & Economics - 134 pages

The number of business valuations has exploded over the past decade, as has the number of would-be valuators. Link and Boger provide a sorely needed introductory overview of business valuation methods that points clearly to the limitations of the application of valuation and the strength and weaknesses of valuation tools.

While Link and Boger cover the mechanical science of business valuation, they also concentrate on the intuitive art of valuation, emphasizing the distinction between the two. Based on more than three decades of valuation experience and teaching of the associated methodologies, they give the novice valuator an understanding of the elements of art and science in the practice of business valuation and an appreciation that both elements are important. A valuable tool for students and professionals dealing with business valuation issues.

 

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Contents

SYSTEMATIC APPROACHES TO APPROXIMATING RISK
57
BUILDUP METHOD FOR DETERMINING DISCOUNT RATES AND CAPITALIZATION RATES
61
COMPARABILITY
65
ASPECTS OF COMPARABILITY
66
COMPARABILITY OF THE THREE BUSINESS EXAMPLES
70
ALTERNATIVE VALUATION METHODS
72
INCOMEBASED VERSUS ASSETBASED METHODS
72
INCOMEBASED METHODS
74

ECONOMIC ENVIRONMENT OF A BUSINESS
11
INCOME STATEMENTS AND BALANCE SHEETS
12
THE VALUE OF A BUSINESS
15
BASIC TOOLS FOR VALUATION
19
WEIGHTED AVERAGES
25
PRESENT VALUE
27
CAPITALIZATION
29
THREE BUSINESSES IN NEED OF VALUATION
31
GATE CITY WIDGET COMPANY
32
GATE CITY VIDEO RENTAL
35
GATE CITY ORTHOPEDIC CLINIC
38
TRENDS IN FINANCIAL DATA
41
FORECASTING
43
WEIGHTED AVERAGES
50
DISCOUNT RATES AND CAPITALIZATION RATES
53
ASSETBASED METHODS
81
INCOMEBASED AND ASSETBASED METHODS
82
VALUATION ADJUSTMENTS
85
VALUATION OF GATE CITY WIDGET COMPANY
89
PRESENT VALUE OF ADJUSTED FUTURE EARNINGS VALUATION
91
PRICETOEARNINGS RATIO VALUATION
97
VALUATION OF GATE CITY VIDEO RENTAL COMPANY
99
ADJUSTED NET ASSET VALUATION
102
VALUATION OF GATE CITY ORTHOPEDIC CLINIC
105
CAPITALIZATION OF EXCESS EARNINGS VALUATION METHOD
108
CONCLUSION
113
GLOSSARY
115
REFERENCES
127
INDEX
129
Copyright

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About the author (1999)

ALBERT N. LINK is Professor of Economics at the University of North Carolina at Greensboro. He is the author of numerous academic and professional books, including Evaluating Economic Damages (Quorum, 1992) and Evaluating Public Sector Research and Development (Praeger, 1996).

MICHAEL B. BOGER is a partner in the accounting firm of Breslow Starling Frost Warner & Boger, PLLC. In 1995 he became a Certified Valuation Analyst.

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