All of us run into bottlenecks in our work. A bottleneck is an obstacle to getting the job done. There are two sources of bottlenecks: others and you!
Bottlenecks due to others arise when you are waiting for their approval of your engagement, data, review of your draft, or maybe for meeting, deposition, or [...]
In the last and some previous posts, I referred to “buy-a-job” businesses. By that, I meant businesses that generate at least fair market compensation for their owner-managers and adequately service all debt, but do not (necessarily) generate cash flows to equity that yield much of a return on investment.
Buy-a-job businesses are not just small [...]
This post reviews the Justification of Purchase (JOP) Test, on which I receive many questions from readers and students.
The JOP tests whether a concluded value is reasonable. Note first that the “concluded value” is the value of 100% of the common stock of a business. As described here, it cannot be used to [...]
When I generate summary historical and projected financial statements, I always prepare cash flow statements as well as income statements and balance sheets. The cash flow statement starts with net income and ends with the change in the annual cash balance, which reconciles the opening and closing cash balances. Toward the end of [...]
Proxy data are substitutes for ideal information that is not available to us. If you think about it, almost all of the data we use in valuations are proxies!
Assume we are valuing a non-marketable minority interest in a local car dealership for tax purposes.
In our economic and industry analyses, we do not know what [...]
As you read this post, mentally play “America the Beautiful” as background music. The United States of America is a free country, with liberty, justice, and property rights for all!
Company boards of directors may authorize the issuance of employee stock options at ANY exercise price they deem appropriate. They may decide to issue [...]
How many times have you encountered situations like this? A business has multiple owners. One or more is to be bought out. The problem is that either there is no buy-sell agreement whatsoever, or the agreement does not stipulate a buyout price / formula, terms of payment, or level of value (whether [...]
I do very little damages valuation work, and as a result, I am always extremely careful to make sure I understand and confirm the standard of value that applies to those matters.
In a recent case, plaintiffs were squeezed out of minority interests in a public company (domiciled in Delaware) that was acquired. The attorney [...]
Most “Old Economy” industrial businesses I have valued recently were hurt by the 2008 recession, while most “New Economy” technology businesses were early-stage ventures that were evolving rapidly. In neither case were historical financial results of much use in forecasting results. Nevertheless, I dutifully gathered, analyzed, and reported them.
I started wondering [...]
I write different reports for different readers. Before I start writing, I ask myself “Who is the most important reader of this report?”
In a price allocation for financial reporting, the most important reader is the client’s auditor, who will almost certainly be knowledgeable about valuation. In a selling price analysis for a small [...]
