Six values highlighted by a business valuation software

A business valuation of a company reveals the worth of the company in terms of.

• Market Position • Asset Price • Projected EarningsThe business valuation report is also an important document for a purchaser who is apprehensive regarding buying any business. All these reasons only underline the significance of a business valuation. This is the reason why most small and medium businesses go for business valuation processes notwithstanding the cost and time associated with it.

The business valuation resources required for a standard business valuation process are.

• The Profit • Loss Accounts Of The Business• The Annual Balance Sheet• The Future Projections Of Revenue

There are six values determined by different perspectives presented in a business valuation report. These values are as follows.

• 1. Asset-based value• The asset approach is defined as “a general way of

determining a value indication of a business, business ownership interest, or security using one or more methods based on the value of the assets net of liabilities.”

• Steps in employing the asset approach are:• 1) Start with the balance sheet – ideally this will be “as of”

the same date as the valuation date• 2) Restate assets and liabilities to fair market value where

necessary – this can be the most judgmental step in the asset approach• 3) Identify unrecorded assets and liabilities and what their

impact will be on the valuation – these may be off-balance sheet commitments or assets that are not on the balance sheet

There are six values determined by different perspectives presented in a business valuation report. These values are as follows.

• The simplest way of thinking about the asset approach is:

Assets – Liabilities = Asset Approach Value

• Considerations that need to be made when using the asset approach are:

– Premise of Value– Control– Marketability– Asset or Income based business– Going concern

• 2. Book value• The value of an asset as it appears on a balance sheet,

equal to cost minus accumulated depreciation. This value too is not used much for decision making as both the worth of assets and liabilities changes with time.

3. Adjusted Book Value• A measure of a company's valuation after liabilities,

including off-balance sheet liabilities, and assets are adjusted to reflect true fair market value.

• 4. Liquidation Value• . A business valuation software highlights this value in its

report by default. This value refers to the yield of the business in monetary terms if its assets are liquidated. This value is usually of great interest to the purchasers while making crucial purchase decisions.

•5. Replacement value•This value refers to the cost to be incurred if the same business

is to be started from scratch. This is a value based on hypothetical situations and can be considered as a way to determine the viability of a bargain.

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