Valuations

VALUATIONS:

Valuation is the process of estimating the current or future value of any assets which consists its value in money term.There are many techniques to determine the vaue of assets like some are in subjectives and other  in objectives.

Needs of Valuations:

1.Selling or Buying a Business:Many big corporations doing valuation while selling its subsidairy or buying and other firm,in order to determine the fair value of the fir which is going to sold or buy.

2.Buy or Sell Agreements:If there is preperation of any agreement for buying or selling then there is the valuation of the property or assets going to buy or sold.

3.Gift,Estate,Inheritance Taxes:During the filing of income tax there is the need of  correct valuation of items related to gifts,estate,inheritance ect.

4.Charitable Contributions:There is also a needs of correct valuation during the contribution to any charity.

5.Divorce:If any couple get divorce than there is the valuation of assets of couple for any compensation made to any partner.

6.Bankruptcy:During the filing of bankruptcy by any firm than there is the need of  correct valuation of assets of that firm.

7.In Life Insurance:During the time of taking life insurance policy than there is the need of valuation of determing need of taking life insurance policy.

Types of Valuations:

1.Fair Market Value:It means valuing the  market value of the  asset on the basis of demand and supply of asset.

2.Fair Value:It is a rational estimation of potential market price of goods or services,assets ect.it consists of acquisition,production,distribution,replacement cost ect.

3.Investment Value:It is a value of property or assets owned by the investors.It is a price at which investors buy fro the market.

4.Intrinsic Value:It is a value refer to the company's stock,assets,products ect. determine through fundamental analysis without refrence to it's market value.

5.Going Concern Value:It is the value of the business that is going to continue operating into future.

6.Liquidation Value:It is the the price of an assets,allowed insuficient time to sell in the open market.Assets have less buyers.This value have less than fair market value.

7.Book Value:It the value of the business from the comany's financial statement.It is calculated from the balance sheet,it is different between the company's total assets and liabilities.

8.Brand Value:It the value of the well known product of the company generating enough money which make its brand value in the market.

9.Human resource Value:It is a value of the personals working in the company.More efficient the employees of the company more he or she having human resource value.

10.Human Competence Value:It is a value of the human beign having specific skills,competency,knowledge ect.

Methods of Business Valuations:

1.Income Approach Methods:It is a basic valuation principle in which value of ownership interest in a company is equal to the present worth of future benifts of the ownership.

2.Discounted Future returns Methods:It means a discount rate which represents a total expected rate of returns that a buyer or investors would demand on the purchase price of ownership interest in an assets,given an risk inherent in that ownership interest.

3.Capitalized returned Methods:It is usually derived by subtracting company's expected average compound growth rate from its discount rate.It is approriate when it appear that company's current operations are indicative of it's future operations.

4.Market Approach Methods:Under this methds,the valuation of assets id done on the bases od similar or comparable assets beign sold in cash recently.This method is mostly use in large and public company counterparts.It is a most common price earning multiples.

5.Assets Based Approach:Under this method company's assets amd liabilities are adjusted to their appraised values and net result is an indication of the value of the company's equity.But this method is used in limited circumstances.

Intangible assets:Types

1.Technology related (eg Engineering drawings)

2.Customer related(eg customer lists)

3.Contract related(eg favourable supplier contract)

4. Human resources related(eg trained workforces)

5.Marketing related(eg Trade marke and Trade name)

6.Goodwill related(eg Going concern value)

Methods of Valuations:

1.Cost approach methods:

2.Income approache methods: