Category Archives: Valuations

How to Manipulate a Business Value by Calculating Accumulated Depreciation

Manipulating a value of a company is relatively easy.  Unfortunately it is difficult to determine if the manipulation is intentional or an error in judgment.  An intentional error is performed to provide the client with a desired result while an error in judgment is not intentional or the valuation analyst is not experienced enough to…  Continue Reading »

Business Valuation: Depreciation Expense in Excess of Capital Expenditures

Hello, my name is Richard Claywell and this is Litigation Speaks. This week, I am discussing making a projection/forecast and having the depreciation expense exceed the capital expenditures.  However, before I get started I want to reiterate again that the example I am showing is from an actual case and this is what business valuation…  Continue Reading »

Business Valuation: Coefficient of Determination (r2), Damages and Lost Profits

This week, I am discussing the using of regression analysis to make projections or forecasts of revenues and determining fixed and variable or saved costs in a damages model.  However, before I get started I want to reiterate again that the example I am showing is from actual cases and this is what business valuation…  Continue Reading »

Business Valuation: Adding verses Subtracting Long-Term Sustainable Growth

This week, I am discussing (a business valuation report where the expert erroneously added the long-term sustainable growth instead of subtracting it and its impact on the value of a company.  The theory is incorrect and will always undervalue a company. However, before I get started I want to reiterate that the example I am…  Continue Reading »

Business Valuation: Conclusion of Value, Incorrect Weighting of Methods

This week, I am discussing (a business valuation report that has used a weighted average of the market, income and asset approaches).  In my opinion the analysis was inaccurate and indicates bias by determining an artificially low value.   Initial Business Valuation Conclusion The expert has performed the Asset, Market and Income Approach to determine…  Continue Reading »

Business Valuation: Incorrect Cost of Goods Sold and Gross Profit

Cost of Goods Sold Based on Historical Trends It is common to see a Discounted Cash Flow in a business valuation report.  There are a lot of companies that sell or manufacture a product.  These types of companies are supposed to account for the inventory needed to sell their product.  Exhibit 1 below is an…  Continue Reading »

Business Valuation: Misapplication of Forecasted/Projected Revenues and Operating Income

Forecast Based on Historical Trends It is common to see a Discounted Cash Flow in a business valuation report.  With COVID-19 in the recent past, the business valuation community is aware of using prior data that is no longer reliable.  If a company has experienced a downturn and has not fully recovered to the pre-COVIDS-19…  Continue Reading »

Business Valuation: Introduction to Symmetrical Data

This week, I am discussing the use and misuse of symmetrical data using market multiples from sales transaction databases.  Symmetric data is observed when the values of variables appear at regular frequencies or intervals around the mean (average). Asymmetric data, on the other hand, may have skewness or noise such that the data appears at…  Continue Reading »

Business Valuation: Selecting Market Multiples

This week, I am discussing the selection of market multiples from various databases and the process of eliminating transactions that are not comparable.  I will not be discussing all of the reasons to eliminate transactions for not being comparable but will give you an idea of what the process is like. Types of Databases There…  Continue Reading »

Business Valuation: Inappropriate Benchmarking

I have been valuing closely held companies since 1985. I have earned two of the highest and most challenging designations in the business valuation field including the CBA and ASA. I am a Certified Public Accountant, have a Master’s in Business Valuation and holds the ASA, CBA, ABV, ICVS, CVA, MAFF, CFD, CVGA, ICVS-A credentials.…  Continue Reading »

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