Corporate Finance Guideline

From the Corporate Finance Faculty of the ICAEW

Business Valuations

GUIDELINE
Issue 4 December1997 ISBN 1 85355 788 9

Corporate Finance

Business Valuations
CONTENTS
Page 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Introduction Ownership of a business Bases of valuation The valuation requirement Required return on investment Valuation methods Market based methods Asset based methodologies The DCF technique Trading companies: the choices Asset based approaches The use of DCF Financing considerations More complex methods Industry ‘rules of thumb’ Shareholder value analysis techniques Information about the business Required market information Applying market information Overseas valuations Bibliography 2 2 3 4 4 5 5 6 6 8 9 9 10 10 11 12 13 14 15 15 17

PREFACE
Research indicates that Faculty members expect regular information, ideas and guidance. The concept Corporate Finance Guidelines has therefore been adopted. As chartered accountants often have less time available for reading than they would wish, these documents are succinct and the writers will direct the reader to other, and often fuller, expositions on the subject. The guidelines will give a general overview and an analysis of the critical features of the subject, aiming to be practical. Some will summarise suggested good practice and others will be discussions on current conditions. Authors are chosen on a ‘most appropriate for the subject’ basis. The guidelines represent the personal views of the authors and not necessarily those of their firms or of the Faculty. Some guidelines will have a limited life and will be updated in due course. The nature of some subjects will preclude the guidelines from being definitive or mandatory. Being general in nature, the points made in the guidelines may or may not be relevant to specific circumstances. The Faculty committee intends that the guidelines will act as an aide-mémoire for members, provide new ideas, and