Semis CHAP 8 business And Equity Valuation Flashcards
Also known as a company valuation
Business valuation
Is the process of determining the ECONOMIC VALUE of a business
Business Valuation
is the simplest method of business
valuation. It is calculated by multiplying the company’s share
price by its total number of shares outstanding.
Market capitalization
a stream
of revenues generated over a certain period of time is applied
to a multiplier which depends on the industry and economic
environment
Times revenue method
may be used to get a more accurate picture of the real value of
a company, since a company’s profits are a more reliable
indicator of its financial success than sales revenue is.
Earnings multiplier
This method is based on projections of future cash
flows, which are adjusted to get the current market value of the company
Discounted Cash flow method
This is the value of shareholders’ equity of a business as
shown on the balance sheet statement.
Book value method
derived by subtracting the total liabilities of a company
from its total assets.
Book value method
Is a professional designation awarded to accountants such as CPAs
who specialize in calculating the value of businesses.
ACCREDITATION IN
BUSINESS VALUATION
commonly referred to as the market value of equity or market capitalization,
Equity value
, can be defined as the
total value of the company that is attributable to equity
investors.
Equity Value
It is calculated by multiplying a company’s
share price by its number of shares outstanding.
Equity Value
True or False
The equity value of a company is the same as its book value
False. Not the same
True or false
The calculation of basic shares outstanding does not
include the effect of dilution that may occur due to dilutive
securities such as stock options, restricted and performance
stock units, preferred stock, warrants, and convertible debt.
True
True or false.
Both equity value and enterprise value are used to value
companies, with the exception of a few industries such as banking
and insurance, where only “enterprise” value is used.
False. Equity.
