Using Excel for Accounting: Business Valuation

Name: Using Excel for Accounting: Business Valuation
Author: Bob Akbar

Identify which market valuation method is best for your business

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Course: On-Demand

In this lesson, we will talk about valuation based on assets. In this approach, we are using liabilities, as well, we are assuming that these companies have liabilities, as well as assets. So we have listed their liabilities and their assets together to find the net worth. You will notice they all have stocks, they have buildings, they have equipment. There's a brand of value that's associated with these companies, and they have goodwill. And the sum of those gives us the total assets. Under the liabilities, there's credit that they are using and there's accounts payable where they owe money to other people, their vendors, their employees, whatever the case may be. And then when we add those up, we get the liabilities. The difference of the two, the assets and the liabilities, gives us the net worth. So the way that we do this is we find the sum and we put all the assets together, and we do the same thing with their liabilities. Then we come down here and we find the difference between their assets and their liabilities. As you can tell, these companies are losing propositions so far. Now, you may be purchasing them because you can turn them around. You want to sell their assets, settle with their creditors, whatever your plans are, but these are the numbers that are coming out. And we are going to simply auto fill these values in, same thing with the liabilities, and same thing with their net worth. And here we are. Now, it is assumed what you're doing the assets approach, that these numbers have been verified in their accounting, what the buildings are worth, there's an appraisal, equipment, same thing. One of the simple tests is if you say, "What if I don't wanna buy your equipment? "Can we get that discounted off the purchase price?" The brand is a little bit harder to actually be able to determine, but there are formulas for that, as well. The creditors should also be listed on their statements so that you can verify those. As we can see, we have three losing propositions here, and based on the assets approach, A, B, and D, there are solid values for them. Thanks for watching. Stay tuned for income approach.

Intermediate Provider : Bob Akbar 3 Lessons · 20m in Arabic, German, English, Spanish, French, Portuguese, Chinese

Course Description

Business valuation is a critical part of accounting. A business needs to be properly valuated for tax liabilities, credits, and sales prices to be established. In these lessons we will explore Market, Asset, and Income Approaches to business valuation. The Market Approach considers assets such as inventory, as well the earnings or cash flow of a company. This is most used along with historical data to predict the current and future prices of a business within its own category. The Assets Approach considers assets and liabilities. It looks at what the business owns and what it owes. This approach is most effective for those businesses where cashflow is not a consideration. The Income Approach is most often used for income producing properties and stocks. This approach uses a price to earnings ratio to calculate appropriate values.

In this course, we will explore which market valuation method is best for your business. There are multiple methods to valuate a business, depending on what the function of the business is. These include Market, Asset, and Income Approaches, each of which is valid for specific types of business valuation. This course will show you that understanding the proper methods for business categorization and valuation is vital to success.

What You'll Learn

Describe the Market, Asset, and Income Approaches to business valuation
Differentiate the Market, Asset, and Income Approaches to business valuation
Explain which valuation approach is best for different types of business, and why
Apply the Market Approach using inventory, earnings, cash flow, and historical data to predict business prices
Use the Income Approach with a price-to-earnings ratio to value income-producing properties and stocks
Determine business valuation using the Asset Approach based on what a business owns and owes

Key Takeaways

Business valuation is a critical part of accounting, needed to establish tax liabilities, credits, and sales prices.
The Market Approach considers assets such as inventory and a company's earnings or cash flow, and is most used with historical data to predict current and future prices within a business category.
The Asset Approach considers what a business owns and what it owes, and is most effective for businesses where cash flow is not a consideration.
The Income Approach is most often used for income-producing properties and stocks, using a price-to-earnings ratio to calculate values.
There are multiple valuation methods depending on the function of the business, and choosing the proper method for business categorization and valuation is vital to success.

Frequently Asked Questions

What will this course teach me about business valuation?

The course explores the Market, Asset, and Income Approaches to business valuation, helping you describe and differentiate them and explain which approach is best for different types of business and why.

Which business valuation approaches are covered?

The course covers three approaches across its lessons: the Market Approach, the Assets Approach, and the Income Approach.

How does the course help me choose the right valuation method?

It explains that there are multiple methods depending on the function of the business, and shows you which market valuation method is best for your business and why each approach is valid for specific types of business valuation.

When is the Income Approach the right method to use?

According to the course, the Income Approach is most often used for income-producing properties and stocks and uses a price-to-earnings ratio to calculate appropriate values.

What skills does this course help build?

The course builds skills in Accounting Methods, Business Analysis, Business Valuation, Stock Valuation, Valuation Using Multiples, and Valuation Models.