Did you know that value is a worthless term by itself because it can mean so many different things? A value found for one purpose can be entirely different from the value for another. Understanding exactly what type of value you are looking for can make the information you obtain from a valuation much more useful. Here's a look at some of the many kinds of value:
Value:
A useless word by itself.
Book Value:
Not a standard of value at all. Book value is an accounting term for the total net assets minus total liabilities on the balance sheet. Intangible assets are usually excluded from book value.
Fair Value:
Statutory standard of value usually used in court cases involving dissenting shareholders' litigation. Court precedent in most states has not equated fair value with fair market value, but the courts have reached little other consensus on its meaning. In real estate appraisals, on the other hand, fair value is often used synonymously with fair market value.
Liquidation Value:
Liquidation value is the value derived from the piecemeal sale of assets. The sale can be orderly or forced, which can affect the value. Liquidation value is typically at the low end of the value spectrum.
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Intrinsic value:
Subjective value of an entity to an owner/buyer. Intrinsic value may exclude current market influences. It also may include consideration of such things as the company's assets, and its likely future earnings, dividends and growth rate.
Investment Value:
Value to a particular buyer or investor considering his or her specific personal circumstances, knowledge of the transaction and potential synergies. This value can be higher or lower than the company's fair market value.
Enterprise Value:
Value of 100% of the shareholders' equity on a control basis.
Invested Capital Value:
Fair market value of 100% of the equity plus the market value of long-term debt.
Minority Value:
Value reflecting an ownership position of less than 50%.
Control Value:
Additional value inherent in a legally controlling interest, reflecting the power of control over the business.
Marketable Value:
Value of an equity assuming a pre-established market in which that equity can be exchanged.
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Private Company Value:
Opposite of marketable value. Private company value represents a decreased value due to the limitations in the equity's marketability.
Choosing the Wrong Value May be Costly
It's important to know what base type of value (i.e., minority, marketable) you're starting with before any discounts or premiums are applied. Relying on the wrong type of value may be quite an expensive mistake. Understanding the differences between standards of value can help you interpret their relative worth in your situation.
How A Valuation Advisor Can Help Your Case
You probably realize that a valuator can be invaluable in providing expert testimony to support cases involving marital dissolution, shareholder disputes and estate-related matters. But did you realize that we can also provide litigation services in the following ways?
Before even filing an action, we can help you determine whether the proceeding is worth pursuing. By estimating potential damages, we give you an idea of the costs -- and rewards -- involved.
Asking us to review financial documents early in the case can help you sort the
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wheat from the chaff and formulate a clear, concise financial analysis from the massive amounts of technical information you will probably have to wade through.
To make sure your questioning is pertinent and effective as you prepare depositions, we can assist you in developing knowledgeable questions critical to the issue being resolved. With in-depth knowledge of financial matters, you could miss an essential point that would drive home your case.
Kessler International can help you evaluate the opposing expert's results and find weaknesses in the opposing expert's analysis. While a summary of the opposing expert's strengths and weaknesses can be key to your case preparation, you may want to discuss with us whether this summary should be in writing.
You may also want to have Kessler International review depositions having to do with financial or valuation matters. With our expertise and specialized software we may discern patterns or note a point that you would not notice.
By helping you develop cross-examination questions that probe the weaknesses of the opposing party, Kessler International can assist you in obtaining the best possible result.
Please call us for assistance with these or other valuation matters.
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