The purpose of each valuation is to determine economic value. In the valuation process, specific elements often play a decisive role. Acting as critical sparring partners, Wingman’s business valuators work closely with the client in assessing forecasts, risks and synergetic advantages, taking the complete picture approach in order to arrive at balanced and fair opinions. Wingman’s approach combines in-depth analysis and pragmatic advice.
The result: sound and insightful valuations.
A company’s annual accounts are a snapshot of its financial health at the end of the previous financial year. It generally does not tell us much about the economic value of a company. Business valuation is the process of determining what a business is worth and focuses on the impact of future earning capacity expressed in terms of expected cash flows. Past performance is used to determine whether these expectations are realistic.
Valuations incorporate expectations about the future. However, future cash flows are uncertain. The more uncertain, the less the cash flow is worth. And also, the further in the future the cash flow is expected, the lower its value.
In principle, economic value is determined by:
- the projected cash flows;
- the time when the cash flows occur;
- the risk associated with the cash flows.
There are a large number of valuation methods suitable (or less suitable) for use in a wide variety of contexts. The Discounted Cash Flow (DCF) method and related Adjusted Present Value (APV) method are based on the elements of time, cash flows and risk. Both methods have proven to be effective in the practice of business valuation.