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Financial Valuation Workbook: Step-by-Step Exercises and Tests to Help You Master Financial Valuation, 3rd Edition by Michael J. Mard, James R. Hitchner

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Chapter 4

ValTips

INTRODUCTION

In the companion book, Financial Valuations: Applications and Models (FVAM), there are numerous ValTips throughout the chapters of the text that are used to highlight important concepts, application issues, and pitfalls to avoid. We have re-created these ValTips in this chapter with certain modifications to make them presentable on a stand-alone basis. These ValTips are organized and identified by the chapter/section in FVAM.

CHAPTER 1: INTRODUCTION TO FINANCIAL VALUATION

1. Relying on the wrong standard of value can result in a very different value, and in a dispute setting, the possible dismissal of the value altogether.

2. Although many states use the term “fair market value” in their marital dissolution cases, the definition of fair market value may vary from state to state and will not necessarily be the same definition as in the tax area.

3. Some companies are worth more dead than alive. It is important for the analyst, particularly when valuing an entire company, to determine if the going-concern value exceeds the liquidation value. For a minority interest, there are situations where the going-concern value is less than liquidation value. However, the minority shareholder cannot force a liquidation if the controlling shareholder desires to continue the business as a going concern.

4. Price and cost can equal value but don’t necessarily have to equal value. Furthermore, value is future-looking. Although historical information can be used to ...

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