Microsoft Word peachtree case study
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| 4.9 Financial Forecast Internal Revenue Ruling 59‐60 states in part that valuation … is, in essence, a prophecy as to the future and must be based on facts available at the required date of appraisal In effect, the value of a particular interest in a business is the generic present value (i.e., the price a purchase will pay today) for all of the expected future benefits the purchaser expects to receive in the future. This is true for whatever standard of value is used to determine such a value calculations and which methods are used may change however, the price paid today always represents the present value of the future benefits expected to be received. Page 82 of 141 A valuator’s role in the development and/or evaluation of the subject company’s forecast can vary. Many small businesses do not have a forecast or budget, which leaves the full job to the valuator to develop such a forecast based on the analysis of the subject and discussions with management of the entity. Other businesses have well‐developed, detailed forecasts that only require the valuator to analyze the forecast and determine its reasonability with respect to the valuator’s investigation of the company, the industry, and the economy, among other factors. In the case of a company‐prepared forecast, the valuator may adjust the results to be more inline with the valuator’s expectations of the future performance of the company. There area number of other circumstances valuators may find themselves in with respect to the company’s perspective as to its future prospects. The valuator is generally in the best position to subjectively evaluate all of the available information in order to develop, confirm, or modify an appraisal subject’s financial forecast. It is very important to remember that forecasts of future performance whether completed by the valuator, another third party, or company management are by definition speculative in nature and include some degree of risk and uncertainty. The valuator recognizes that a simple historical average is many times not indicative of future performance nor is the same long term growth rate expected to be realized year in and year out. Careful consideration also needs to be given to the short‐term variability in performance expected and whether that variability would be considered outside expected parameters based on the valuator’s analysis of the Company, the industry, and the economy. Through informed judgment based on the foregoing analysis of the subject, the following paragraphs discuss the future earnings capacity of the Company. Download 0.84 Mb. Share with your friends:
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