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Strategic Value Analysis: Business Valuation

In: Strategic Management Accounting

Author

Listed:
  • Wing Sun Li

    (Beijing Normal University–Hong Kong Baptist University)

Abstract

s This chapter is a second part of the prior chapter which provides step-by-step guidelines to assess business valuation of a firm by using discount cash flow technique through four main stages. The first process is to convert strategic plans into a financial forecast plan through establishment of strategic bases and key assumptions. The second stage articulates the steps to prepare free cash flows – the essential document for business valuation. As discount rate is a key consideration for business valuation, the third part discusses the criteria for selection of discount rate and the implication of discount rate to business valuation. The final stage introduces the concept of terminal value (perpetual value) of a business which is the business value beyond the forecast period. As a “going concern” basis of the business valuation, it is an integral part of the entire business valuation but is often underestimated in the valuation process. The chapter proposes an approach to tap this perceptual value into the business value computation. A case is presented throughout the chapter to illustrate step by step how business valuation is formulated. This chapter showcases to readers how business valuation is conducted in a systematic approach.

Suggested Citation

  • Wing Sun Li, 2018. "Strategic Value Analysis: Business Valuation," Management for Professionals, in: Strategic Management Accounting, chapter 10, pages 171-192, Springer.
    • Handle: RePEc:spr:mgmchp:978-981-10-5729-8_10
    DOI: 10.1007/978-981-10-5729-8_10
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