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  • Subject Name : Business valuation

Introduction to Business Valuation

Determining the true worth of the business is referred to as the business valuation. To get a good business valuation, it is the responsibility of the business owners to contract with some of the professional appraisers so that the opinion can be easily provided and the business valuation can be used for the different planning purposes (Aswath, 2018). In this context, the evaluation and the critical analysis will be made on the company “We Work” which aims in providing shared workplaces for the technological start-ups and the services for the other enterprises. The author’s response to We Work business evaluation is that a lot of money is required to develop a lot more of the office space. For example, allowing the owner is selling the business at a higher sales price or to pay lesser taxes after making the sale of the business or after the owner’s death. In the context of the market value, the goal to value the business needs to be clear and supportable to develop fair market decisions for the business (Teo, 2018).

The thesis statement of the assignment is to review the critical analysis of the two different parts of the book which will help in understanding the exact issue of the business evaluation.

Issues in Valuation

  • At the time of determining the company value, certain equivalence principles needed to be decided. The issues in this regard might be that through the risks the cash flow’s expected values and the cost of capital can get affected at the same time. In one part of the book, it has been critically analyzed by the authors that there arises complexity in every business and the person or the individual who is conducting the businesses had no choice but to assume that all the information has been correctly provided.
  • It has been critically highlighted that there are certain issues which have been highlighted through the book that is the use of the intangible assets in the business. This makes the business values very tricky. Moreover, intangible assets within the business organizations are notoriously difficult in proper valuation (Teo, 2018).
  • Again, the business having one product or the service is found to be at greater risk than the business having multiple products. The other part of the book highlighted that there are constantly occurring higher supply disruptions like the use of them so that the low-cost competitive advances can be achieved soon.
  • The critical analysis reflects that reliability on short contracts is also one of the issues in business valuation. Again, working with the business broker is also another issue in addressing the potential business problems before pacing the business for sale (ecovisdca, 2015).
  • The other valuation issues that had been reflected on the other part of the book is the mixture of both public as well as private equity which is disconnecting the link between the market value and the operational data. This had ultimately created a short and volatile market history (Teo, 2018). Again, the margins, as well as growth returns within the firm, is changing significantly and that is the reason, the businesses have found certain things difficult in analyzing and making the forecasts (Jordan & Messner, 2019).
  • Again, the smaller economies were exposed more towards the economic downturns since their products are often regarded as niche products which are discretionary by nature. The capacity of the firm in borrowing the money will increase gradually and this is the reason, the debt ratio will also get changed. This is the reason, the business growth in the later years will be getting affected and this way the business debt capacity will gradually decrease with the time passes by.
  • After a critical analysis, it has been found that more aggressive competitions need to be channelized well through which there need to be the proper valuation of the capital through which the firm’s growth can be identified easily (Teo, 2018).
  • The other difficulties found in the valuation of the business is to maintain the originality of the products as well as the diversity of the products and this is the reason, the wide range of the clients cannot be reached, hampering the business decisions and the evaluations.

Conclusion on Business Valuation

It has been found through the critical analysis that many business owners have a fake idea regarding the worth of the companies and most of them are just mere guesses. Mostly, the market values not got known properly and hence the franchisees or the business heirs pays more than the fair share of the estate taxes. This is the reason, the quality companies with the better rating always tend to get undervalued and accordingly above-average risk-adjusted returns often gets generated out of the fact.

Opinion on Business Valuation

It has been found that, in practice, there exist many problems in the business evaluation purposes due to the existence of the unjustified assumptions of the perfect capital markets. The valuation-related risks have been derived through the risk analysis and the risk aggregation based on which the inconsistent planning has been carried out and there also existed vulnerable stock returns. From the entire analysis, it can be stated that there exist certain unforeseen circumstances which are both positive as well as negative through which the business operations get affected and these things also cannot be predicted well. The reason behind this improper business valuation is the ineffective maintenance and the capabilities through which the current, as well as the projected assets and liabilities, cannot be well organised and accessed. In the context of the business valuations, it has been critically analyzed that expectations are also one of the important aspects to be discussed. This is because they can also be used as a form of the blueprint so that the business maintenance and the planning can be done effectively. Gaining the use of the outdated data entry and as well as the short contracts often gets disturbed like that of the third party or franchise approvals, which is necessary for selling the company.

References for Business Valuation

Aswath, D. (2018). How to Value Growth Companies. Retrieved from How to Value Growth Companies. Retrieved from https://www.informit.com/articles/article.aspx?p=2928207&seqNum=3

Deal, S. (2018). The Difficult Issues Often Attached to Valuing a Business. Retrieved from The Difficult Issues Often Attached to Valuing a Business: https://deal-studio.com/difficult-issues-often-attached-valuing-business/

ecovisdca. (2015). Difficulties in valuing a business . retrieved from difficulties in valuing a business. Retrieved from https://www.ecovisdca.ie/2015/07/28/difficulties-valuing-business/

Jordan, S., & Messner, M. (2019). The use of forecast accuracy indicators to improve planning quality: Insights from a case study. European Accounting Review, 337-359.

Teo, E. e. (2018). Business Valuation. 1st Edition Cengage.

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