Valuing Your Business

What approach to use: A valuation approach is the method used to determine the fair market value of a business.

The most common approaches are:

Market approach

The market approach is based on finding prices for comparable businesses or transactions in the public or private markets and using them to infer the value of the business or transaction. Two methods to determine the market value of a business are:

  • Current market value: applicable if stock is actively traded in the stock market.
  • Comparable: identify a publicly traded business with comparable characteristics and calculate multiples based on the performance

Income approach

The income approach is based on determining future earnings and calculating the present value. Two common approaches are:

  • Discounted cashflow method: Involves projecting future cashflows, income and expenditure. Calculating a terminal value and discounting them to present value.
  • Capitalised cashflow method: A shortened version of discounted cashflow where both the growth and discount rate as assumed to remain constant into perpetuity

Asset approach

This is based on the value of business being equal to the sum of all the parts of the business. Adjusting book value of each asset or liability to fair market value.

So, which do you use: it depends on the specific circumstances of the business being valued.

Do you have any questions?

We are happy to help. Please post your comment below or call Lisa Byrne, Audit Manager at Cooney Carey, on 01 677 9000. Alternatively, send her an email: lbyrne@cooneycarey.ie 

If this article helped you, please share it with others.

Posted on March 14, 2018 by Lisa Byrne

Single European Vat Area

The EU are reviewing the operation of Vat within the European Union. The following proposals have been made:

The Cornerstones of a definitive vat regime

  1. The principle of taxation at destination for intra-EU cross border supplies of goods. Under this principle the Vat rate of a member state of destination, where the buyer is located, is charged.
  1. The confirmation that the vendor is liable in the case of an intra-EU supply of goods as a general rule, which means that the seller is responsible for charging and collecting the Vat. However, if the buyer is a ‘certified taxable person’ it is the buyer who is liable for payment of Vat due directly to the treasury of the member state of destination.

Read more

Posted on January 9, 2018 by Cooney Carey

Why do Fraudsters do it?

As a fraud examiner, we consider the Fraud Triangle:-

  • Pressure
  • Opportunity
  • Rationalisation

In 2008 a Harvard Business School professor, Eugene Soltes examined this question and in 2016 published a book on the subject.

He found that middle management and employees further down the corporate ladder might commit fraud because they found a ready source of cash to ease their economic problems.

What puzzled Soltes is why well-paid business people committed fraud and he interviewed Read more

Posted on November 16, 2017 by Paul Leonard

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