Category Archives: Valuations

Business Valuations: Using Rules of Thumb

I want to address the use of Rules of Thumb when performing a business valuation. First, business valuations follow Revenue Ruling 59-60 (you should look this upon the internet), Professional Standards and a number of treatises have developed and should be followed by business valuation experts. The Rule of Thumb is a pricing multiple, not…  Continue Reading »

Business Valuations: Introduction to Revenue Ruling 59-60

The thrust of this series is to educate the attorney on what is expected to be performed in doing a business valuation for both non-litigation and litigation cases.  We will discuss the issues addressed in Revenue Ruling 59-60 and the treatises that have evolved from it. Revenue Ruling 59-60, Fair Market Value What is Revenue…  Continue Reading »

Business Valuation: Introduction to Pricing Multiples

Hello, my name is Richard Claywell and this is litigation speaks.  When a business valuation is performed, I have seen cases where the opposing expert will use Earnings Before Interest Taxes Depreciation Amortization (“EBITDA”).  I want to talk today about what the pricing multiples mean. Pricing Multiples The most popular method of determining a value…  Continue Reading »

Business Valuation: Not Converting Net Income to Cash Flows

Hello, my name is Richard Claywell and this is litigation speaks.  When reviewing business valuation reports I have seen cases where the opposing expert will capitalize pre-tax earnings and then apply an after-tax cash flow discount/capitalization rate to the earnings. Depending on the experience level of the expert, they may not notice this potential error…  Continue Reading »

Business Valuation and Lost Profits: How Reliable Are The Experts Forecast?

The business valuation, lost profits expert will need to forecast or project the revenues and related expenses to determine the value of a company or the lost profits or damages in a case.   There are multiple techniques for making the forecasts or projections.  One of the techniques used in business valuations and lost profits cases…  Continue Reading »

Business Valuation: Excluding Cash For Changes in Net Working Capital

There are many reasons for a client to need to determine the value of a company. Revenue Ruling 59-60 is the impetus for all business valuations (appraisals). There are three approaches that are utilized to value a business. The three approaches are the Asset-Based Approach, Income Approach and the Market Approach. Underneath each approach there…  Continue Reading »

Business Valuation: Incorrect Mid-Year Convention Net Present Value Factor in Terminal Year

There are many reasons for a client to need to determine the value of a company. Revenue Ruling 59-60 is the impetus for all business valuations (appraisals).  There are three approaches that are utilized to value a business. The three approaches are the Asset-Based Approach, Income Approach and the Market Approach. Underneath each approach there…  Continue Reading »

Business Valuation: Depreciation and Capital Expenses Not The Same in Terminal Year

There are many reasons for a client to need to determine the value of a company.  Revenue Ruling 59-60 is the impetus for all business valuations (appraisals).  When preparing a forecast, the future capital expenditures (typically equipment needed for growth) and future depreciation needs to be estimated. Depreciation Based on Generally Accepted Accounting Principles Economic…  Continue Reading »

Business Valuation: Not Normalizing Operating Expenses

There are many reasons for a client to need to determine the value of a company.  Revenue Ruling 59-60 is the impetus for all business valuations (appraisals).  There are three approaches that are utilized to value a business.  The three approaches are the Asset-Based Approach, Income Approach and the Market Approach.  Underneath each approach there…  Continue Reading »

The Truth Behind Weighted Average Cost of Capital Minority Interests

There are many reasons for a client to need to determine the value of a company. Revenue Ruling 59-60 is the impetus for all business valuations (appraisals). There are three primary approaches used to develop a discount or capitalization rate that are utilized to value a business. The three primary approaches are the Build Up…  Continue Reading »

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