StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...

How Would You Value a Firm That You Were Trying To Purchase - Research Paper Example

Cite this document
Summary
Running head: How would you value a firm that you were trying to purchase? What are the strengths and weaknesses of each of the valuation methods? Name: Institution: Date: Introduction Finding out the value of a particular firm is not an easy endeavor. However, this kind of undertaking can prove to be an essential component for purposes of effective management or in instances where an individual may was to purchase that firm…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER97.9% of users find it useful
How Would You Value a Firm That You Were Trying To Purchase
Read Text Preview

Extract of sample "How Would You Value a Firm That You Were Trying To Purchase"

Download file to see previous pages

Holton and Bates 2009, elucidates that there are a number of methods through which a potential purchaser of a particular firm may apply in an effort to realize the value of that firm. The methods may include: Free Cash Flow Methods, Asset-Based Methods, Option-Based Valuation method, and the method of using Comparables, These tools or methods of valuations would in return assist the potential purchaser of the firm to analyze and make an informed purchasing choice. Discussion To begin with, the asset-based method can be efficiently used be an intending purchaser to value a give firm.

This method reveals the book value of a firm’s equity. In simpler terms, the asset based method shows the asset value of a firm or a company, less the debts of the firm. According to Strauss, 2011, a potential purchaser of a firm may find this method of valuation helpful since a company’s equity is all that a firm can be left with in an instance where it suddenly halt its selling its products or making money. This equity may be current assets, shareholders equity, and cash as tangible things, as well as brand name and management as intangible qualities.

The shortcomings of this method however is that there are some hidden assets that cannot be revealed. This may happen in instances where a piece of a firm land was purchased years ago and the value of that land has been kept as it was despite the appreciation that has dramatically taken place. Another method may be used to value a firm is by using comparables. This method is one of the most common means through which a company valuation is done by simply using the earnings that a company gets.

The earnings of a firm sometimes referred to as the net profit or net income can be said to be the amount of money that a firm is left with after it has paid all its bills or debts. In most cases, earning of a firm is measured according to the earnings per share. Earnings per share can be calculated by dividing the amount of earning a firm reports by the outstanding number of shares the firm has. Even though this method may be helpful to an individual intending to purchase a given firm, it falls short of other aspects of valuing a firm such as the firm assets which are an importance aspect of valuation in any business (Mayo 2010) Further, free cash flow method may be used in an attempt to value the worth of a given firm.

Even though most of the individual investors are not conversant with cash flow, this method is commonly used for valuation of both private and public firms especially by the bankers. Cash flow can be described as the company’s earnings before taxes, interest amortization and depreciation. This method may however be ineffective in valuing a firm worth and the actual business earnings since the taxes and other costs are not subtracted from the general earning. Taxes payable by a given firm may vary depending on the laws governing taxation in a particular financial year and even though the earnings of a given firm may be hefty the amount of taxes may be large thus the secondary costs or company’s profits may be uncertain.

Finally, a person may opt to use the option based method to value the worth of a firm before purchasing that firm. There are several other techniques of firm valuation as aforementioned

...Download file to see next pages Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“How Would You Value a Firm That You Were Trying To Purchase Research Paper”, n.d.)
How Would You Value a Firm That You Were Trying To Purchase Research Paper. Retrieved from https://studentshare.org/finance-accounting/1441226-how-would-you-value-a-firm-that-you-were-trying-to
(How Would You Value a Firm That You Were Trying To Purchase Research Paper)
How Would You Value a Firm That You Were Trying To Purchase Research Paper. https://studentshare.org/finance-accounting/1441226-how-would-you-value-a-firm-that-you-were-trying-to.
“How Would You Value a Firm That You Were Trying To Purchase Research Paper”, n.d. https://studentshare.org/finance-accounting/1441226-how-would-you-value-a-firm-that-you-were-trying-to.
  • Cited: 0 times

CHECK THESE SAMPLES OF How Would You Value a Firm That You Were Trying To Purchase

Jewellery Buying Decision Making Process

Jewellery purchase is primarily by women and most of them are self-purchased and this makes the women a prime target segment required to be convinced to make the purchase.... ewellery purchase is a very personal decision by an individual consumer.... The Impulsive Buyer who purchases products quickly, often the purchase is not premeditated and there is little or no analysis involved.... This is probably attuned to the less-than-J500 impulsive shopper for whom it is an on-the-spot decision to make a purchase and does not involve too much analysis....
5 Pages (1250 words) Essay

How to Use Marketing Strategy to Improve Sunform Supermarket's Performance

only then it will be able to deliver the most value point to its customers.... To achieve this objective, it should understand its customer psychology to gain knowledge of what they want and how they want it.... This paper about Marketing Strategy which is defined as the broad marketing thinking which enables an organization to develop its products and marketing mixes in the right direction....
16 Pages (4000 words) Dissertation

Behavioral Finance Nowadays

In the sentence, the communicator is quoted as saying how he has never been in need to work for any organization at the corporate level.... Apparently, the many times the speaker has been forced to boards of directors, he/she has always noticed that managerial production is very much anchored on how best organizations...
8 Pages (2000 words) Essay

Business-to-Business Marketing vs Business-to-Consumer Marketing

Adjei and Clark (2010) highlighted that B2C organizations utilize additional marketing exercises such as coupons, showcases, storefronts (both physical and online), and presents to allure the target business sector to purchase products.... Case in point, the objective of using an email address battle to advertise a B2C organization is to acquire shoppers to purchase the item promptly.... The starting venture in building advertising methods for both B2B you need to distinguish first whom your target client is, then evaluate why this specific client needs to heed your point....
12 Pages (3000 words) Essay

Consumer Buying Behaviour Model

hellip; Consumers were hiring milkshakes for two very different jobs.... But when marketers had originally asked individual consumers who hired a milkshake for either or both jobs which of its attributes they should improve-and when these responses were averaged with those of other consumers in the targeted demographic segment-it led to a one-size-fits-none product.... In addition, it will be appreciated how segmentation analysis can be used proactively to influence consumers movements to segments that are mutually beneficial to the seller and buyer....
12 Pages (3000 words) Coursework

The Strategies for Minimizing the Effects of the Crisis on the Investment Portfolio

Common risk management that makes losses is a situation that propels an investor to buy multiple types of stocks that will earn money after the preliminary purchase has been made.... The money that was lost is not accounted for the stocks that were bought but in not purchasing all the stocks in a single acquisition at one time, which in the event that the stock price has increased could have earned a considerably larger sum of money.... nbsp;… There are plenty of ways on how to tackle risk management....
12 Pages (3000 words) Assignment

You Are What You Buy

According to Kanner, “It's the meta-message that you can solve all of life's problems by purchasing the right products” (Kersting, 2004).... nbsp;  Essentially, the term consumerism is used to refer to a general belief that the purchase of products will lead inevitably to a sense of happiness and fulfillment in life.... "you Are What you Buy" paper examines the ways in which personal consumer choices function to define the self....
6 Pages (1500 words) Coursework

Necessary Information about Clients for Business Marketer

Marketers may get insight into products and promotion options that are not readily apparent, by means of research techniques to recognize how customers view them.... The author of this assignment "Necessary Information about Clients for Business Marketer" states that information is necessary for marketers as having an understanding of buyer's performance will help to clarify what is crucial to a purchaser and will also suggest the influences on a buyer's decision....
40 Pages (10000 words) Assignment
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us