CONCEPT OF VALUATION CMA PRANAB KR.CHAKRABARTY

Transcript:CONCEPT OF VALUATION CMA PRANAB KR.CHAKRABARTY:
CONCEPT OF VALUATION CMA PRANAB KR.CHAKRABARTY VALUATION MEANING As per dictionary meaning- an estimation of the worth of something , especially one carried out by a professional valuer. International Valuation Standard Council has defined Valuation as : “ the process of determining the ‘Economic Worth’ of an Asset or Company under certain assumptions and limiting conditions and subject to the data available on the valuation date. Valuation Introduction “Some men know the price of everything and the value of nothing “ - Oscar Wilde “ Appraisers have a value in mind before they start the process and try to back into it” - Aswath Damaodaran, Jan 14,2009 “ There is a vast difference between understanding something well enough to buy it as opposed to understanding it well enough to sell it.” - Zig Ziglar, Secrets of Closing the Sale, 1984 It determine 3 factors : Cost : Expenditure incurred to produce a commodity having a value - Historical fact. Price : Additional reward to the producer for the labour and capital involved – Value Consideration Value : Opinion and varies from purpose to purpose- enjoyment benefit. Why Valuation ? To understand the worth of the Business . For expanding the Business . To see a baseline value for the business and develop a strategy to improve the profitability of the business and increase the value of the business for an exit strategy. To evaluate an offer and negotiate a strategic sale of a business . To determine the annual per share value of an Employee Stock Ownership Plan (ESOP) Why Valuation ? To identify the weakness of the business to refocus the operational efforts to improve the profitability and the bottom line . For Buying and selling and funding for the New Project. To evaluate the Equity Value . Financial Reporting Purposes. Determine the intrinsic value . Determine the value for Insolvency and Liquidation. Determine the value for winding up, Merger & Acquisition. Areas for Valuation Merger and Acquisition. Fund raising . Sale or Reconstruction of the Business. Issue of Shares , ESOP, Sweat Equity , Buy Back . Impairment of Assets. FDI and Foreign Exchange related transaction. Insolvency and Liquidation Process. Legal and Statutory obligation. Insurance Valuation. Types of Value Book Value- Value in the Balance Sheet Market Value – Price at which Buyer & Seller trades. Fair Market Value – Municipal Valuation, Insurance Industry. Intrinsic Value – True