Business and stock are appraised by certified senior valuers. The value of the stock or the appraised value of the business all shares similar meanings. The enterprises under the business operations of an organization or company will have a different business value which depends on past performance or differences in assets held by that organization that are not the same regardless of whether they are tangible and intangible assets. For your information, in some organizations, the intangible assets may even have a much higher value than the real estate which the business value will be difficult to compare. However, businesses that operate in the same industry may have comparable standards in some areas.
In this case, the 2 most common valuation methods when it comes to business valuation are:
First, the adjustment of accounting costs which will be based on the assets held by that organization such as both tangible and intangible assets. The tangible assets can be real estate, land, buildings, machinery, equipment/tools, inventory, etc. including adjustment of cash status. On the other hand, the intangible assets can be brand/trademark, license software, patent, concession, various rights of claims, goodwill, etc. When receiving the complete set of assets according to the list, the business valuation will be conducted by referring to the current conditions.
The next step is to appraise using the ‘Income Approach’ by referring to the past performances of the business which will be analyzed together with competitors in the same industry. Modify some of the important factors to suit the operations and market share status as well as analyze the strengths and weaknesses of the business operation. By doing these, it will allow you to project the cash flow that will be the future performance and ability to know the current business value using the income approach to be able to compare the result with the one calculated by the ‘Cost Approach’. For your information, some of this information will be received from interviewing the business owner together with some additional reference documents to be requested.
Reviewing the appraised value of a business may also use performance indicators of competitors in the same market and industry or by comparing with companies in the stock exchange that are in the same industry in P/E P/B, etc.