Microsoft Word peachtree case study
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| 2.3.1 The Market Approach One of the foundations for the validity of using the various market‐based approaches to the appraisal of a business or a specific interest in a business is based in part on the Principle of Substitution in other words, the economic value of a business tends to be determined by the cost of acquiring an equally desirable substitute. Prudent individuals will not pay more for something than they would pay for an equally desirable substitute.” 4 The market is considered by some to be fundamental to valuation, as fair market value should be determined by the market. Generally in valuing smaller, thinly traded or privately‐held companies, the value of stock or securities of corporations engaged in the same or similar lines of business and listed on a major exchange that allows a comparison to be made between the pricing 4 Trugman, Gary R, Understanding business valuation ‐ a practical guide to valuing small to medium‐sized businesses, 2nd edition. (New York, NY American Institute of Certified Public Accountants, 2002) pp. 55‐56. Page 19 of 141 multiples exhibited by the guideline public company and the subject company could betaken into consideration along with other factors (Guideline Public Company Method. In the case of very small companies or where there are no similar enough guideline companies, a search could be done to locate entire companies that have been bought and sold, whether one of the parties is publicly traded or closely‐ held, that enables pricing multiples to be developed and then applied to the subject business. A variety of methods can betaken when not considering the Guideline Public Company Method. They are commonly referred to as Direct Market Data Private Company Transaction Public Company Transaction or Merger and Acquisition Method. Download 0.84 Mb. Share with your friends:
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