The different methods of company evaluation

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 Critically review the different methods of company evaluation Valuation tools including Share Value Analysis (SVA) and the value drivers of SVA and how they are seen to drive the value of a company. In order to critically review the different types of methods of company evaluation, one must understand the meaning of company evaluation and to understand what valuation tools are available to use for example Share Value Analysis (SVA), the drivers of Share Value Analysis and how they are seen to drive the company. In order to investigate information which is needed for evaluating companies there are certain factors which need to be considered, factors which affect the value of the company and the sources of information which are needed. There are specific analysis which must be performed before a company evaluation can be determined, these are business strategy analysis, accounting analysis, financial analysis and a prospective analysis. A business strategy analysis is the ability to evaluate the company’s present financial position and the likely performance in the future. There is the need to identify the company’s position in relation to its competitors, investigate the key successes and any potential risks that will affect the company’s business performance and to be able to identify how well the company’s successes and risks are being managed. An accounting analysis is the company’s accounting methods which can ultimately expose or obscure the company’s business strategy and economics. In order for the company to do this is must judge how effectively the company’s financial statements can reflect the business, and the ability to learn how to adjust any financial statements as needed. A financial analysis is the ability to evaluate the effectiveness of the company’s strategy, and to be able to make sound financial forecasts by examining all the cash flow measures and ratios of the company’s operating, financing and investment performance. The prospective analysis is the knowledge of how the company is performing and how it will perform in future markets which is the key to business decisions. A company evaluation is the process and procedures used to approximation the economic value of the company. A valuation of the company is used to determine the price by which they are willing to either pay or to receive to complete the sale of a business. Documents which are usually required to determine the company evaluation are the accounting documents – income statements, balance sheets, cash flows and annual reports etc. Depending on what kind of requirements are needed, there are several methods which can be used, discounted cash flow, net assets, peer comparison and the estimated liquidation value. The company valuation process starts with a thorough definition of the company in questions activity, i.e. where sales have been achieved, the different criteria a competitor/ potential buyer will take into consideration during the valuation process. There are, of course, several factors which come to the forefront when looking at the accuracy of these figures and of the company’s past activity. These questions include are the figures are realisable to give the company a true evaluation.

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