We perform business valuations using the following methods:
- the income approach – discounted cash flows – based on the business’s economic and financial performance to date as well as forecasts prepared by its management, analysed and verified by the valuation professional.
The Discounted Cash Flows method (DCF) results from the assumption that a business is worth as much as the income it will generate over an adopted period after the anticipated return on capital is paid. This valuation method takes into account, to some extent, the so-called intangible assets (not disclosed in the books of the enterprise), such: its market standing, trademarks, licences and patents held, business contacts and customer network, uniquely qualified team of employees, proprietary internal organisation and management system, etc. Cash flows reflect cash balances representing the relationships of the enterprise with its environment (suppliers, customers, employees, institutions).
According to the DCF method, the value of the enterprise equals total cash flows generated by the enterprise adjusted to account for the relevant discount rate which, once put together and added up, represent the combined cash flow remaining at the owners’ disposal.
- the asset-based method – adjusted net assets – prepared with the adjusted balance-sheet data of the enterprise taking into account estimations of the market value of real estate prepared by expert property appraisers (appraisal reports).
The book value is the combined net amount of fixed and current assets financed out of equity, based on current entries in the accounting records, taking into account the current levels of debt and liabilities. For the purposes of the valuation, the value of asset items is updated in line with the principle of prudence and according to the current fair value.