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data-event-name="pinnable-header.vector-toc.pin">move to sidebar</button> <button class="vector-pinnable-header-toggle-button vector-pinnable-header-unpin-button" data-event-name="pinnable-header.vector-toc.unpin">hide</button> </div> <ul class="vector-toc-contents" id="mw-panel-toc-list"> <li id="toc-mw-content-text" class="vector-toc-list-item vector-toc-level-1"> <a href="#" class="vector-toc-link"> <div class="vector-toc-text">(Top)</div> </a> </li> <li id="toc-Valuation_overview" class="vector-toc-list-item vector-toc-level-1 vector-toc-list-item-expanded"> <a class="vector-toc-link" href="#Valuation_overview"> <div class="vector-toc-text"> <span class="vector-toc-numb">1</span> <span>Valuation overview</span> </div> </a> <ul id="toc-Valuation_overview-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Usage" class="vector-toc-list-item vector-toc-level-1 vector-toc-list-item-expanded"> <a class="vector-toc-link" href="#Usage"> <div class="vector-toc-text"> <span class="vector-toc-numb">2</span> <span>Usage</span> </div> </a> <ul id="toc-Usage-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Business_valuation" class="vector-toc-list-item vector-toc-level-1 vector-toc-list-item-expanded"> <a class="vector-toc-link" href="#Business_valuation"> <div class="vector-toc-text"> <span class="vector-toc-numb">3</span> <span>Business valuation</span> </div> </a> <button aria-controls="toc-Business_valuation-sublist" class="cdx-button cdx-button--weight-quiet cdx-button--icon-only vector-toc-toggle"> <span class="vector-icon mw-ui-icon-wikimedia-expand"></span> <span>Toggle Business valuation subsection</span> </button> <ul id="toc-Business_valuation-sublist" class="vector-toc-list"> <li id="toc-Discounted_cash_flow_method" class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Discounted_cash_flow_method"> <div class="vector-toc-text"> <span class="vector-toc-numb">3.1</span> <span>Discounted cash flow method</span> </div> </a> <ul id="toc-Discounted_cash_flow_method-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Guideline_companies_method" class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Guideline_companies_method"> <div class="vector-toc-text"> <span class="vector-toc-numb">3.2</span> <span>Guideline companies method</span> </div> </a> <ul id="toc-Guideline_companies_method-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Net_asset_value_method" class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Net_asset_value_method"> <div class="vector-toc-text"> <span class="vector-toc-numb">3.3</span> <span>Net asset value method</span> </div> </a> <ul id="toc-Net_asset_value_method-sublist" class="vector-toc-list"> </ul> </li> </ul> </li> <li id="toc-Specialised_cases" class="vector-toc-list-item vector-toc-level-1 vector-toc-list-item-expanded"> <a class="vector-toc-link" href="#Specialised_cases"> <div class="vector-toc-text"> <span class="vector-toc-numb">4</span> <span>Specialised cases</span> </div> </a> <button aria-controls="toc-Specialised_cases-sublist" class="cdx-button cdx-button--weight-quiet cdx-button--icon-only vector-toc-toggle"> <span class="vector-icon mw-ui-icon-wikimedia-expand"></span> <span>Toggle Specialised cases subsection</span> </button> <ul id="toc-Specialised_cases-sublist" class="vector-toc-list"> <li id="toc-Valuation_of_a_suffering_company" class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Valuation_of_a_suffering_company"> <div class="vector-toc-text"> <span class="vector-toc-numb">4.1</span> <span>Valuation of a suffering company</span> </div> </a> <ul id="toc-Valuation_of_a_suffering_company-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Valuation_of_a_startup_company" class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Valuation_of_a_startup_company"> <div class="vector-toc-text"> <span class="vector-toc-numb">4.2</span> <span>Valuation of a startup company</span> </div> </a> <ul id="toc-Valuation_of_a_startup_company-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Valuation_of_intangible_assets" class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Valuation_of_intangible_assets"> <div class="vector-toc-text"> <span class="vector-toc-numb">4.3</span> <span>Valuation of intangible assets</span> </div> </a> <ul id="toc-Valuation_of_intangible_assets-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Valuation_of_mining_projects" class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Valuation_of_mining_projects"> <div class="vector-toc-text"> <span class="vector-toc-numb">4.4</span> <span>Valuation of mining projects</span> </div> </a> <ul id="toc-Valuation_of_mining_projects-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Valuing_financial_services_firms" class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Valuing_financial_services_firms"> <div class="vector-toc-text"> <span class="vector-toc-numb">4.5</span> <span>Valuing financial services firms</span> </div> </a> <ul id="toc-Valuing_financial_services_firms-sublist" class="vector-toc-list"> </ul> </li> </ul> </li> <li id="toc-Mismarking" class="vector-toc-list-item vector-toc-level-1 vector-toc-list-item-expanded"> <a class="vector-toc-link" href="#Mismarking"> <div class="vector-toc-text"> <span class="vector-toc-numb">5</span> <span>Mismarking</span> </div> </a> <ul id="toc-Mismarking-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-See_also" class="vector-toc-list-item vector-toc-level-1 vector-toc-list-item-expanded"> <a class="vector-toc-link" href="#See_also"> <div class="vector-toc-text"> <span class="vector-toc-numb">6</span> <span>See also</span> </div> </a> <ul id="toc-See_also-sublist" class="vector-toc-list"> </ul> </li> <li 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Available in 16 languages" > <label id="p-lang-btn-label" for="p-lang-btn-checkbox" class="vector-dropdown-label cdx-button cdx-button--fake-button cdx-button--fake-button--enabled cdx-button--weight-quiet cdx-button--action-progressive mw-portlet-lang-heading-16" aria-hidden="true" ><span class="vector-icon mw-ui-icon-language-progressive mw-ui-icon-wikimedia-language-progressive"></span> <span class="vector-dropdown-label-text">16 languages</span> </label> <div class="vector-dropdown-content"> <div class="vector-menu-content"> <ul class="vector-menu-content-list"> <li class="interlanguage-link interwiki-ar mw-list-item"><a href="https://ar.wikipedia.org/wiki/%D9%85%D9%82%D9%8A%D8%A7%D8%B3_%D8%A7%D9%84%D9%82%D9%8A%D9%85%D8%A9" title="مقياس القيمة – Arabic" lang="ar" hreflang="ar" data-title="مقياس القيمة" data-language-autonym="العربية" data-language-local-name="Arabic" class="interlanguage-link-target"><span>العربية</span></a></li><li class="interlanguage-link interwiki-ca mw-list-item"><a href="https://ca.wikipedia.org/wiki/Valoraci%C3%B3_(finances)" title="Valoració (finances) – Catalan" lang="ca" hreflang="ca" data-title="Valoració (finances)" data-language-autonym="Català" data-language-local-name="Catalan" class="interlanguage-link-target"><span>Català</span></a></li><li class="interlanguage-link interwiki-es mw-list-item"><a href="https://es.wikipedia.org/wiki/Valuaci%C3%B3n" title="Valuación – Spanish" lang="es" hreflang="es" data-title="Valuación" data-language-autonym="Español" data-language-local-name="Spanish" class="interlanguage-link-target"><span>Español</span></a></li><li class="interlanguage-link interwiki-eu mw-list-item"><a href="https://eu.wikipedia.org/wiki/Balioespen_(finantza)" title="Balioespen (finantza) – Basque" lang="eu" hreflang="eu" data-title="Balioespen (finantza)" data-language-autonym="Euskara" data-language-local-name="Basque" class="interlanguage-link-target"><span>Euskara</span></a></li><li class="interlanguage-link interwiki-fa mw-list-item"><a href="https://fa.wikipedia.org/wiki/%D8%A7%D8%B1%D8%B2%D8%B4%E2%80%8C%DA%AF%D8%B0%D8%A7%D8%B1%DB%8C" title="ارزش‌گذاری – Persian" lang="fa" hreflang="fa" data-title="ارزش‌گذاری" data-language-autonym="فارسی" data-language-local-name="Persian" class="interlanguage-link-target"><span>فارسی</span></a></li><li class="interlanguage-link interwiki-fr mw-list-item"><a href="https://fr.wikipedia.org/wiki/Valorisation_(finance)" title="Valorisation (finance) – French" lang="fr" hreflang="fr" data-title="Valorisation (finance)" data-language-autonym="Français" data-language-local-name="French" class="interlanguage-link-target"><span>Français</span></a></li><li class="interlanguage-link interwiki-it mw-list-item"><a href="https://it.wikipedia.org/wiki/Valutazione_(finanza)" title="Valutazione (finanza) – Italian" lang="it" hreflang="it" data-title="Valutazione (finanza)" data-language-autonym="Italiano" data-language-local-name="Italian" class="interlanguage-link-target"><span>Italiano</span></a></li><li class="interlanguage-link interwiki-he mw-list-item"><a href="https://he.wikipedia.org/wiki/%D7%94%D7%A2%D7%A8%D7%9B%D7%AA_%D7%A9%D7%95%D7%95%D7%99" title="הערכת שווי – Hebrew" lang="he" hreflang="he" data-title="הערכת שווי" data-language-autonym="עברית" data-language-local-name="Hebrew" class="interlanguage-link-target"><span>עברית</span></a></li><li class="interlanguage-link interwiki-kk mw-list-item"><a href="https://kk.wikipedia.org/wiki/%D0%91%D0%B0%D2%93%D0%B0%D0%BB%D0%B0%D1%83_(%D1%8D%D0%BA%D0%BE%D0%BD%D0%BE%D0%BC%D0%B8%D0%BA%D0%B0)" title="Бағалау (экономика) – Kazakh" lang="kk" hreflang="kk" data-title="Бағалау (экономика)" data-language-autonym="Қазақша" data-language-local-name="Kazakh" class="interlanguage-link-target"><span>Қазақша</span></a></li><li class="interlanguage-link interwiki-ne mw-list-item"><a href="https://ne.wikipedia.org/wiki/%E0%A4%AE%E0%A5%82%E0%A4%B2%E0%A5%8D%E0%A4%AF%E0%A4%BE%E0%A4%82%E0%A4%95%E0%A4%A8" title="मूल्यांकन – Nepali" lang="ne" hreflang="ne" data-title="मूल्यांकन" data-language-autonym="नेपाली" data-language-local-name="Nepali" class="interlanguage-link-target"><span>नेपाली</span></a></li><li class="interlanguage-link interwiki-pt mw-list-item"><a href="https://pt.wikipedia.org/wiki/Valuation" title="Valuation – Portuguese" lang="pt" hreflang="pt" data-title="Valuation" data-language-autonym="Português" data-language-local-name="Portuguese" class="interlanguage-link-target"><span>Português</span></a></li><li class="interlanguage-link interwiki-ru mw-list-item"><a href="https://ru.wikipedia.org/wiki/%D0%9E%D1%86%D0%B5%D0%BD%D0%BE%D1%87%D0%BD%D0%B0%D1%8F_%D0%B4%D0%B5%D1%8F%D1%82%D0%B5%D0%BB%D1%8C%D0%BD%D0%BE%D1%81%D1%82%D1%8C" title="Оценочная деятельность – Russian" lang="ru" hreflang="ru" data-title="Оценочная деятельность" data-language-autonym="Русский" data-language-local-name="Russian" class="interlanguage-link-target"><span>Русский</span></a></li><li class="interlanguage-link interwiki-fi mw-list-item"><a href="https://fi.wikipedia.org/wiki/Arvonm%C3%A4%C3%A4ritys" title="Arvonmääritys – Finnish" lang="fi" hreflang="fi" data-title="Arvonmääritys" data-language-autonym="Suomi" data-language-local-name="Finnish" class="interlanguage-link-target"><span>Suomi</span></a></li><li class="interlanguage-link interwiki-uk mw-list-item"><a href="https://uk.wikipedia.org/wiki/%D0%9E%D1%86%D1%96%D0%BD%D0%BE%D1%87%D0%BD%D0%B0_%D0%B4%D1%96%D1%8F%D0%BB%D1%8C%D0%BD%D1%96%D1%81%D1%82%D1%8C" title="Оціночна діяльність – Ukrainian" lang="uk" hreflang="uk" data-title="Оціночна діяльність" data-language-autonym="Українська" data-language-local-name="Ukrainian" class="interlanguage-link-target"><span>Українська</span></a></li><li class="interlanguage-link interwiki-vi mw-list-item"><a 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For the valuation of derivatives and interest rate / fixed income instruments, see <a href="/wiki/Mathematical_finance" title="Mathematical finance">Mathematical finance</a>. 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href="mw-data:TemplateStyles:r1129693374"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><table class="sidebar sidebar-collapse nomobile nowraplinks accounting"><tbody><tr><td class="sidebar-pretitle">Part of <a href="/wiki/Category:Accounting" title="Category:Accounting">a series</a> on</td></tr><tr><th class="sidebar-title-with-pretitle"><a href="/wiki/Accounting" title="Accounting">Accounting</a></th></tr><tr><td class="sidebar-image"><span class="notpageimage" typeof="mw:File"><a href="/wiki/File:Ledger.png" class="mw-file-description" title="Early 19th-century German ledger"><img alt="Early 19th-century German ledger" src="//upload.wikimedia.org/wikipedia/commons/thumb/e/e6/Ledger.png/200px-Ledger.png" decoding="async" width="200" height="105" class="mw-file-element" srcset="//upload.wikimedia.org/wikipedia/commons/thumb/e/e6/Ledger.png/300px-Ledger.png 1.5x, //upload.wikimedia.org/wikipedia/commons/thumb/e/e6/Ledger.png/400px-Ledger.png 2x" data-file-width="1706" data-file-height="896" /></a></span></td></tr><tr><td class="sidebar-above"> <div class="hlist"><ul><li><a href="/wiki/Constant_purchasing_power_accounting" title="Constant purchasing power accounting">Constant purchasing power</a></li><li><a href="/wiki/Historical_cost" title="Historical cost">Historical cost</a></li><li><a href="/wiki/Management_accounting" title="Management accounting">Management</a></li><li><a href="/wiki/Tax_accounting_in_the_United_States" title="Tax accounting in the United States">Tax</a></li></ul></div></td></tr><tr><td class="sidebar-content"> <div class="sidebar-list mw-collapsible mw-collapsed noborder"><div class="sidebar-list-title" style="color: var(--color-base)">Major types</div><div class="sidebar-list-content mw-collapsible-content"><div class="hlist"><ul><li><a href="/wiki/Audit" title="Audit">Audit</a></li><li><a href="/wiki/Budget" title="Budget">Budget</a></li><li><a href="/wiki/Cost_accounting" title="Cost accounting">Cost</a></li><li><a href="/wiki/Forensic_accounting" title="Forensic accounting">Forensic</a></li><li><a href="/wiki/Financial_accounting" title="Financial accounting">Financial</a></li><li><a href="/wiki/Fund_accounting" title="Fund accounting">Fund</a></li><li><a href="/wiki/Governmental_accounting" title="Governmental accounting">Governmental</a></li><li><a href="/wiki/Management_accounting" title="Management accounting">Management</a></li><li><a href="/wiki/Social_accounting" title="Social accounting">Social</a></li><li><a href="/wiki/Tax_accounting" class="mw-redirect" title="Tax accounting">Tax</a></li></ul></div></div></div></td> </tr><tr><td class="sidebar-content"> <div class="sidebar-list mw-collapsible mw-collapsed"><div class="sidebar-list-title" style="color: var(--color-base)">Key concepts</div><div class="sidebar-list-content mw-collapsible-content"><div class="hlist"><ul><li><a href="/wiki/Accounting_period" title="Accounting period">Accounting period</a></li><li><a href="/wiki/Accrual" title="Accrual">Accrual</a></li><li><a href="/wiki/Constant_purchasing_power_accounting" title="Constant purchasing power accounting">Constant purchasing power</a></li><li><a href="/wiki/Economic_entity" title="Economic entity">Economic entity</a></li><li><a href="/wiki/Fair_value" title="Fair value">Fair value</a></li><li><a href="/wiki/Going_concern" title="Going concern">Going concern</a></li><li><a href="/wiki/Historical_cost" title="Historical cost">Historical cost</a></li><li><a href="/wiki/Matching_principle" title="Matching principle">Matching principle</a></li><li><a href="/wiki/Materiality_(auditing)" title="Materiality (auditing)">Materiality</a></li><li><a href="/wiki/Revenue_recognition" title="Revenue recognition">Revenue recognition</a></li><li><a href="/wiki/Unit_of_account" title="Unit of account">Unit of account</a></li></ul></div></div></div></td> </tr><tr><td class="sidebar-content"> <div class="sidebar-list mw-collapsible mw-collapsed"><div class="sidebar-list-title" style="color: var(--color-base)">Selected accounts</div><div class="sidebar-list-content mw-collapsible-content"><div class="hlist"><ul><li><a href="/wiki/Asset" title="Asset">Assets</a></li><li><a href="/wiki/Cash" title="Cash">Cash</a></li><li><a href="/wiki/Cost_of_goods_sold" title="Cost of goods sold">Cost of goods sold</a></li><li><a href="/wiki/Depreciation" title="Depreciation">Depreciation</a> / <a href="/wiki/Amortization_(business)" class="mw-redirect" title="Amortization (business)">Amortization (business)</a></li><li><a href="/wiki/Equity_(finance)" title="Equity (finance)">Equity</a></li><li><a href="/wiki/Expense" title="Expense">Expenses</a></li><li><a href="/wiki/Goodwill_(accounting)" title="Goodwill (accounting)">Goodwill</a></li><li><a href="/wiki/Liability_(financial_accounting)" title="Liability (financial accounting)">Liabilities</a></li><li><a href="/wiki/Profit_(accounting)" title="Profit (accounting)">Profit</a></li><li><a href="/wiki/Revenue" title="Revenue">Revenue</a></li></ul></div></div></div></td> </tr><tr><td class="sidebar-content"> <div class="sidebar-list mw-collapsible mw-collapsed"><div class="sidebar-list-title" style="color: var(--color-base)"><a href="/wiki/Accounting_standard" title="Accounting standard">Accounting standards</a></div><div class="sidebar-list-content mw-collapsible-content"><div class="hlist"><ul><li><a href="/wiki/Generally_accepted_accounting_principles" class="mw-redirect" title="Generally accepted accounting principles">Generally-accepted principles</a></li><li><a href="/wiki/Generally_accepted_auditing_standards" class="mw-redirect" title="Generally accepted auditing standards">Generally-accepted auditing standards</a></li><li><a href="/wiki/Convergence_of_accounting_standards" title="Convergence of accounting standards">Convergence</a></li><li><a href="/wiki/International_Financial_Reporting_Standards" title="International Financial Reporting Standards">International Financial Reporting Standards</a></li><li><a href="/wiki/International_Standards_on_Auditing" title="International Standards on Auditing">International Standards on Auditing</a></li><li><a href="/wiki/Management_Accounting_Principles" class="mw-redirect" title="Management Accounting Principles">Management Accounting Principles</a></li></ul></div></div></div></td> </tr><tr><td class="sidebar-content"> <div class="sidebar-list mw-collapsible mw-collapsed"><div class="sidebar-list-title" style="color: var(--color-base)"><a href="/wiki/Financial_statement" title="Financial statement">Financial statements</a></div><div class="sidebar-list-content mw-collapsible-content"><div class="hlist"><ul><li><a href="/wiki/Annual_report" title="Annual report">Annual report</a></li><li><a href="/wiki/Balance_sheet" title="Balance sheet">Balance sheet</a></li><li><a href="/wiki/Cash_flow_statement" title="Cash flow statement">Cash-flow</a></li><li><a href="/wiki/Statement_of_changes_in_equity" title="Statement of changes in equity">Equity</a></li><li><a href="/wiki/Income_statement" title="Income statement">Income</a></li><li><a href="/wiki/Management_discussion_and_analysis" class="mw-redirect" title="Management discussion and analysis">Management discussion</a></li><li><a href="/wiki/Notes_to_the_financial_statements" class="mw-redirect" title="Notes to the financial statements">Notes to the financial statements</a></li></ul></div></div></div></td> </tr><tr><td class="sidebar-content"> <div class="sidebar-list mw-collapsible mw-collapsed"><div class="sidebar-list-title" style="color: var(--color-base)"><a href="/wiki/Bookkeeping" title="Bookkeeping">Bookkeeping</a></div><div class="sidebar-list-content mw-collapsible-content"><div class="hlist"><ul><li><a href="/wiki/Bank_reconciliation" title="Bank reconciliation">Bank reconciliation</a></li><li><a href="/wiki/Debits_and_credits" title="Debits and credits">Debits and credits</a></li><li><a href="/wiki/Double-entry_bookkeeping_system" class="mw-redirect" title="Double-entry bookkeeping system">Double-entry system</a></li><li><a href="/wiki/FIFO_and_LIFO_accounting" title="FIFO and LIFO accounting">FIFO and LIFO</a></li><li><a href="/wiki/General_journal" title="General journal">Journal</a></li><li><a href="/wiki/Ledger" title="Ledger">Ledger</a> / <a href="/wiki/General_ledger" title="General ledger">General ledger</a></li><li><a href="/wiki/Trial_balance" title="Trial balance">Trial balance</a></li></ul></div></div></div></td> </tr><tr><td class="sidebar-content"> <div class="sidebar-list mw-collapsible mw-collapsed"><div class="sidebar-list-title" style="color: var(--color-base)"><a href="/wiki/Audit" title="Audit">Auditing</a></div><div class="sidebar-list-content mw-collapsible-content"><div class="hlist"><ul><li><a href="/wiki/Financial_audit" title="Financial audit">Financial</a></li><li><a href="/wiki/Internal_audit" title="Internal audit">Internal</a></li><li><a href="/wiki/Accounting_networks_and_associations" class="mw-redirect" title="Accounting networks and associations">Firms</a></li><li><a href="/wiki/Auditor%27s_report" title="Auditor's report">Report</a></li><li><a href="/wiki/Sarbanes%E2%80%93Oxley_Act" title="Sarbanes–Oxley Act">Sarbanes–Oxley Act</a></li></ul></div></div></div></td> </tr><tr><td class="sidebar-content"> <div class="sidebar-list mw-collapsible mw-collapsed"><div class="sidebar-list-title" style="color: var(--color-base)">People and organizations</div><div class="sidebar-list-content mw-collapsible-content"><div class="hlist"><ul><li><a href="/wiki/Accountant" title="Accountant">Accountants</a></li><li><a href="/wiki/Category:Accounting_organizations" title="Category:Accounting organizations">Accounting organizations</a></li><li><a href="/wiki/Luca_Pacioli" title="Luca Pacioli">Luca Pacioli</a></li></ul></div></div></div></td> </tr><tr><td class="sidebar-content"> <div class="sidebar-list mw-collapsible mw-collapsed"><div class="sidebar-list-title" style="color: var(--color-base)">Development</div><div class="sidebar-list-content mw-collapsible-content"><div class="hlist"><ul><li><a href="/wiki/History_of_accounting" title="History of accounting">History</a></li><li><a href="/wiki/Accounting_research" title="Accounting research">Research</a></li><li><a href="/wiki/Positive_accounting" title="Positive accounting">Positive accounting</a></li><li><a href="/wiki/Sarbanes%E2%80%93Oxley_Act" title="Sarbanes–Oxley Act">Sarbanes–Oxley Act</a></li></ul></div></div></div></td> </tr><tr><td class="sidebar-content"> <div class="sidebar-list mw-collapsible mw-collapsed"><div class="sidebar-list-title" style="color: var(--color-base)">Misconduct</div><div class="sidebar-list-content mw-collapsible-content"><div class="hlist"><ul><li><a href="/wiki/Creative_accounting" title="Creative accounting">Creative</a></li><li><a href="/wiki/Earnings_management" title="Earnings management">Earnings management</a></li><li><a href="/wiki/Error_account" title="Error account">Error account</a></li><li><a href="/wiki/Hollywood_accounting" title="Hollywood accounting">Hollywood</a></li><li><a href="/wiki/Off-balance-sheet" title="Off-balance-sheet">Off-balance-sheet</a></li><li><a href="/wiki/Two_sets_of_books" title="Two sets of books">Two sets of books</a></li></ul></div></div></div></td> </tr><tr><td class="sidebar-navbar"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><style data-mw-deduplicate="TemplateStyles:r1239400231">.mw-parser-output .navbar{display:inline;font-size:88%;font-weight:normal}.mw-parser-output .navbar-collapse{float:left;text-align:left}.mw-parser-output .navbar-boxtext{word-spacing:0}.mw-parser-output .navbar ul{display:inline-block;white-space:nowrap;line-height:inherit}.mw-parser-output .navbar-brackets::before{margin-right:-0.125em;content:"[ "}.mw-parser-output .navbar-brackets::after{margin-left:-0.125em;content:" ]"}.mw-parser-output .navbar li{word-spacing:-0.125em}.mw-parser-output .navbar a>span,.mw-parser-output .navbar a>abbr{text-decoration:inherit}.mw-parser-output .navbar-mini abbr{font-variant:small-caps;border-bottom:none;text-decoration:none;cursor:inherit}.mw-parser-output .navbar-ct-full{font-size:114%;margin:0 7em}.mw-parser-output .navbar-ct-mini{font-size:114%;margin:0 4em}html.skin-theme-clientpref-night .mw-parser-output .navbar li a abbr{color:var(--color-base)!important}@media(prefers-color-scheme:dark){html.skin-theme-clientpref-os .mw-parser-output .navbar li a abbr{color:var(--color-base)!important}}@media print{.mw-parser-output .navbar{display:none!important}}</style><div class="navbar plainlinks hlist navbar-mini"><ul><li class="nv-view"><a href="/wiki/Template:Accounting" title="Template:Accounting"><abbr title="View this template">v</abbr></a></li><li class="nv-talk"><a href="/wiki/Template_talk:Accounting" title="Template talk:Accounting"><abbr title="Discuss this template">t</abbr></a></li><li class="nv-edit"><a href="/wiki/Special:EditPage/Template:Accounting" title="Special:EditPage/Template:Accounting"><abbr title="Edit this template">e</abbr></a></li></ul></div></td></tr></tbody></table> <p>In <a href="/wiki/Finance" title="Finance">finance</a>, <b>valuation</b> is the process of determining the <a href="/wiki/Value_(economics)" title="Value (economics)">value</a> of a (potential) investment, asset, or security. Generally, there are three approaches taken, namely discounted cashflow valuation, relative valuation, and contingent claim valuation.<sup id="cite_ref-1" class="reference"><a href="#cite_note-1"><span class="cite-bracket">[</span>1<span class="cite-bracket">]</span></a></sup> </p><p>Valuations can be done for <a href="/wiki/Asset" title="Asset">assets</a> (for example, investments in marketable securities such as companies' <a href="/wiki/Share_capital" title="Share capital">shares</a> and related rights, <a href="/wiki/Business" title="Business">business</a> enterprises, or <a href="/wiki/Intangible_asset" title="Intangible asset">intangible assets</a> such as <a href="/wiki/Patent" title="Patent">patents</a>, <a href="/wiki/Data_valuation" title="Data valuation">data</a> and <a href="/wiki/Trademark" title="Trademark">trademarks</a>) or for <a href="/wiki/Liability_(accounting)" class="mw-redirect" title="Liability (accounting)">liabilities</a> (e.g., <a href="/wiki/Bond_(finance)" title="Bond (finance)">bonds</a> issued by a company). Valuation is a subjective exercise, and in fact, the process of valuation itself can also affect the value of the asset in question. </p><p>Valuations may be needed for various reasons such as <a href="/wiki/Investment_analysis" class="mw-redirect" title="Investment analysis">investment analysis</a>, <a href="/wiki/Capital_budgeting" title="Capital budgeting">capital budgeting</a>, <a href="/wiki/Merger" class="mw-redirect" title="Merger">merger</a> and <a href="/wiki/Takeover" title="Takeover">acquisition</a> transactions, <a href="/wiki/Financial_reporting" class="mw-redirect" title="Financial reporting">financial reporting</a>, taxable events to determine the proper <a href="/wiki/Tax" title="Tax">tax</a> liability. In a <a href="/wiki/Business_valuation" title="Business valuation">business valuation</a> context, various techniques are used to determine the (hypothetical) price that a third party would pay for a given company; while in a <a href="/wiki/Investment_management" title="Investment management">portfolio management context</a>, <a href="/wiki/Stock_valuation" title="Stock valuation">stock valuation</a> is used by <a href="/wiki/Financial_analyst" title="Financial analyst">analysts</a> to determine the <i>price</i> at which the stock is fairly valued relative to its projected and historical earnings, and to thus profit from related price movement. </p> <meta property="mw:PageProp/toc" /> <div class="mw-heading mw-heading2"><h2 id="Valuation_overview">Valuation overview</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Valuation_(finance)&action=edit&section=1" title="Edit section: Valuation overview"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1236090951"><div role="note" class="hatnote navigation-not-searchable">See also: <a href="/wiki/Outline_of_finance#Valuation" title="Outline of finance">Outline of finance § Valuation</a></div> <p>Common terms for the value of an asset or liability are <a href="/wiki/Market_value" title="Market value">market value</a>, <a href="/wiki/Fair_value" title="Fair value">fair value</a>, and <a href="/wiki/Intrinsic_value_(finance)" title="Intrinsic value (finance)">intrinsic value</a>. The meanings of these terms differ. For instance, when an analyst believes a stock's intrinsic value is greater (or less) than its market price, an analyst makes a "buy" (or "sell") recommendation. Moreover, an asset's intrinsic value may be subject to personal opinion and vary among analysts. The <a href="/wiki/International_Valuation_Standards_Council" title="International Valuation Standards Council">International Valuation Standards</a> include definitions for common bases of value and generally accepted practice procedures for valuing assets of all types. Regardless, the valuation itself is done generally using one or more of the following approaches:<sup id="cite_ref-2" class="reference"><a href="#cite_note-2"><span class="cite-bracket">[</span>2<span class="cite-bracket">]</span></a></sup> </p> <ol><li>Absolute value models ("<a href="/wiki/Intrinsic_value_(finance)#Equity" title="Intrinsic value (finance)">Intrinsic valuation</a>") that determine the present value of an asset's expected future cash flows. These models take two general forms: multi-period models such as <a href="/wiki/Discounted_cash_flow" title="Discounted cash flow">discounted cash flow</a> models, or single-period models such as the <a href="/wiki/Gordon_model" class="mw-redirect" title="Gordon model">Gordon model</a> (which, in fact, often <a href="/wiki/Limit_of_a_sequence" title="Limit of a sequence">"telescope"</a> the former). These models rely on mathematics rather than price observation. See <a href="/wiki/Outline_of_finance#Discounted_cash_flow_valuation" title="Outline of finance">Outline of finance § Discounted cash flow valuation</a>.</li> <li><a href="/wiki/Relative_value_(economics)" title="Relative value (economics)">Relative value</a> models determine value based on the observation of market prices of 'comparable' assets, relative to a common variable like earnings, cashflows, book value or sales. This result will often be used to complement / revisit the intrinsic valuation. See <a href="/wiki/Outline_of_finance#Relative_valuation" title="Outline of finance">Outline of finance § Relative valuation</a>.</li> <li><a href="/wiki/Valuation_of_options" title="Valuation of options">Option pricing models</a>, in this context, are used to value specific balance-sheet items, or the asset itself, when these have option-like characteristics. Examples of the first type are <a href="/wiki/Warrant_(finance)" title="Warrant (finance)">warrants</a>, <a href="/wiki/Employee_stock_option" title="Employee stock option">employee stock options</a>, and <a href="/wiki/Investment" title="Investment">investments</a> with <a href="/wiki/Embedded_option" title="Embedded option">embedded options</a> such as <a href="/wiki/Callable_bond" title="Callable bond">callable bonds</a>; the second type are usually <a href="/wiki/Real_options" class="mw-redirect" title="Real options">real options</a>. The most common option pricing models employed here are the <a href="/wiki/Black%E2%80%93Scholes" class="mw-redirect" title="Black–Scholes">Black–Scholes</a>-<a href="/wiki/Robert_C._Merton" title="Robert C. Merton">Merton</a> models, <a href="/wiki/Lattice_model_(finance)" title="Lattice model (finance)">lattice models</a> and <a href="/wiki/Monte_Carlo_simulations" class="mw-redirect" title="Monte Carlo simulations">Monte Carlo simulations</a>. This approach is sometimes referred to as <a href="/wiki/Contingent_claim_valuation" class="mw-redirect" title="Contingent claim valuation">contingent claim valuation</a>, in that the value will be contingent on some other asset. See <a href="/wiki/Outline_of_finance#Contingent_claim_valuation" title="Outline of finance">Outline of finance § Contingent claim valuation</a>.</li></ol> <div class="mw-heading mw-heading2"><h2 id="Usage">Usage</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Valuation_(finance)&action=edit&section=2" title="Edit section: Usage"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>In finance, valuation analysis is required for many reasons including tax assessment, <a href="/wiki/Will_(law)" class="mw-redirect" title="Will (law)">wills</a> and <a href="/wiki/Estate_(law)" title="Estate (law)">estates</a>, <a href="/wiki/Divorce" title="Divorce">divorce</a> <a href="/wiki/Settlement_(litigation)" title="Settlement (litigation)">settlements</a>, business analysis, and basic <a href="/wiki/Bookkeeping" title="Bookkeeping">bookkeeping</a> and <a href="/wiki/Accounting" title="Accounting">accounting</a>. Since the value of things fluctuates over time, valuations are as of a specific date like the end of the accounting quarter or year. They may alternatively be <a href="/wiki/Mark-to-market_accounting" title="Mark-to-market accounting">mark-to-market</a> estimates of the current value of assets or liabilities as of this minute or this day for the purposes of managing portfolios and associated financial risk (for example, within large financial firms including <a href="/wiki/Investment_bank" class="mw-redirect" title="Investment bank">investment banks</a> and stockbrokers). </p><p>Some balance sheet items are much easier to value than others. Publicly traded stocks and bonds have prices that are quoted frequently and readily available. Other assets are harder to value. For instance, private firms that have no frequently quoted price. Additionally, financial instruments that have prices that are partly dependent on theoretical models of one kind or another are difficult to value and this generates <a href="/wiki/Valuation_risk" title="Valuation risk">valuation risk</a>. For example, options are generally valued using the <a href="/wiki/Black%E2%80%93Scholes" class="mw-redirect" title="Black–Scholes">Black–Scholes</a> model while the liabilities of <a href="/wiki/Life_assurance" class="mw-redirect" title="Life assurance">life assurance</a> firms are valued using the theory of <a href="/wiki/Present_value" title="Present value">present value</a>. Intangible business assets, like <a href="/wiki/Goodwill_(accounting)" title="Goodwill (accounting)">goodwill</a> and <a href="/wiki/Intellectual_property" title="Intellectual property">intellectual property</a>, are open to a wide range of value interpretations. Another intangible asset, <a href="/wiki/Data_valuation" title="Data valuation">data</a>, is increasingly being recognized as a valuable asset in the information economy.<sup id="cite_ref-3" class="reference"><a href="#cite_note-3"><span class="cite-bracket">[</span>3<span class="cite-bracket">]</span></a></sup> </p><p>It is possible and conventional for financial professionals to make their own estimates of the valuations of assets or liabilities that they are interested in. Their calculations are of various kinds including analyses of companies that focus on price-to-book, price-to-earnings, price-to-cash-flow and <a href="/wiki/Present_value" title="Present value">present value</a> calculations, and analyses of bonds that focus on credit ratings, assessments of <a href="/wiki/Default_risk" class="mw-redirect" title="Default risk">default risk</a>, <a href="/wiki/Risk_premium" title="Risk premium">risk premia</a>, and levels of <a href="/wiki/Real_interest_rate" title="Real interest rate">real interest rates</a>. All of these approaches may be thought of as creating estimates of value that compete for credibility with the prevailing share or bond prices, where applicable, and may or may not result in buying or selling by market participants. Where the valuation is for the purpose of a <a href="/wiki/Mergers_and_acquisitions" title="Mergers and acquisitions">merger or acquisition</a> the respective businesses make available further detailed financial information, usually on the completion of a <a href="/wiki/Non-disclosure_agreement" title="Non-disclosure agreement">non-disclosure agreement</a>. </p><p>Valuation requires judgment and assumptions: </p> <ul><li>There are different circumstances and purposes to value an asset (e.g., distressed firm, tax purposes, mergers and acquisitions, financial reporting). Such differences can lead to different valuation methods or different interpretations of the method results</li> <li>All valuation models and methods have limitations (e.g., degree of complexity, relevance of observations, mathematical form)</li> <li>Model inputs can vary significantly because of necessary judgment and differing assumptions</li></ul> <p>Users of valuations benefit when key information, assumptions, and limitations are disclosed to them. Then they can weigh the degree of reliability of the result and make their decision. </p> <div class="mw-heading mw-heading2"><h2 id="Business_valuation">Business valuation</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Valuation_(finance)&action=edit&section=3" title="Edit section: Business valuation"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1236090951"><div role="note" class="hatnote navigation-not-searchable">Main article: <a href="/wiki/Business_valuation" title="Business valuation">Business valuation</a></div> <p><a href="/wiki/Business" title="Business">Businesses</a> or fractional interests in businesses may be valued for various purposes such as <a href="/wiki/Mergers_and_acquisitions" title="Mergers and acquisitions">mergers and acquisitions</a>, sale of <a href="/wiki/Securities" class="mw-redirect" title="Securities">securities</a>, and taxable events. When correct, a valuation should reflect the capacity of the business to match a certain market demand, as it is the only true predictor of future cash flows. An accurate valuation of <a href="/wiki/Privately_held_company" title="Privately held company">privately owned companies</a> largely depends on the reliability of the firm's historic financial information. <a href="/wiki/Public_company" title="Public company">Public company</a> <a href="/wiki/Financial_statement" title="Financial statement">financial statements</a> are audited by <a href="/wiki/Certified_Public_Accountant" title="Certified Public Accountant">Certified Public Accountants</a> (USA), <a href="/wiki/Chartered_Certified_Accountant" class="mw-redirect" title="Chartered Certified Accountant">Chartered Certified Accountants</a> (<a href="/wiki/Association_of_Chartered_Certified_Accountants" title="Association of Chartered Certified Accountants">ACCA</a>) or <a href="/wiki/Chartered_Accountant" class="mw-redirect" title="Chartered Accountant">Chartered Accountants</a> (UK), and <a href="/wiki/Chartered_Professional_Accountant" title="Chartered Professional Accountant">Chartered Professional Accountants</a> (Canada) and overseen by a government regulator. Alternatively, private firms do not have government oversight—unless operating in a regulated industry—and are usually not required to have their financial statements audited. Moreover, managers of private firms often prepare their financial statements to minimize profits and, therefore, <a href="/wiki/Taxes" class="mw-redirect" title="Taxes">taxes</a>. Alternatively, managers of public firms tend to want higher profits to increase their stock price. Therefore, a firm's historic financial information may not be accurate and can lead to over- and undervaluation. In an acquisition, a buyer often performs <a href="/wiki/Due_diligence" title="Due diligence">due diligence</a> to verify the seller's information. </p><p>Financial statements prepared in accordance with <a href="/wiki/Generally_accepted_accounting_principles" class="mw-redirect" title="Generally accepted accounting principles">generally accepted accounting principles</a> (GAAP) show many assets based on their historic costs rather than at their current market values. For instance, a firm's <a href="/wiki/Balance_sheet" title="Balance sheet">balance sheet</a> will usually show the value of land it owns at what the firm paid for it rather than at its current market value. But under GAAP requirements, a firm must show the fair values (which usually approximates market value) of some types of assets such as financial instruments that are held for sale rather than at their original cost. When a firm is required to show some of its assets at fair value, some call this process "<a href="/wiki/Mark-to-market" class="mw-redirect" title="Mark-to-market">mark-to-market</a>". But reporting asset values on financial statements at fair values gives managers ample opportunity to slant asset values upward to artificially increase profits and their stock prices. Managers may be motivated to alter earnings upward so they can earn bonuses. Despite the risk of manager bias, equity investors and creditors prefer to know the market values of a firm's assets—rather than their historical costs—because current values give them better information to make decisions. </p><p>There are commonly three pillars to valuing business entities: comparable company analyses, discounted cash flow analysis, and precedent transaction analysis. Business valuation credentials include the Chartered Business Valuator (CBV) offered by the <a href="/wiki/CBV_Institute" title="CBV Institute">CBV Institute</a>, ASA and CEIV from the <a href="/wiki/American_Society_of_Appraisers" title="American Society of Appraisers">American Society of Appraisers</a>, and the CVA by the National Association of Certified Valuators and Analysts. </p> <div class="mw-heading mw-heading3"><h3 id="Discounted_cash_flow_method">Discounted cash flow method</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Valuation_(finance)&action=edit&section=4" title="Edit section: Discounted cash flow method"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1236090951"><div role="note" class="hatnote navigation-not-searchable">Main article: <a href="/wiki/Valuation_using_discounted_cash_flows" title="Valuation using discounted cash flows">Valuation using discounted cash flows</a></div> <p>This method estimates the value of an asset based on its expected future cash flows, which are discounted to the present (i.e., the present value). This concept of discounting future money is commonly known as the <a href="/wiki/Time_value_of_money" title="Time value of money">time value of money</a>. For instance, an asset that matures and pays $1 in one year is worth less than $1 today. The size of the discount is based on an <a href="/wiki/Opportunity_cost_of_capital" class="mw-redirect" title="Opportunity cost of capital">opportunity cost of capital</a> and it is expressed as a percentage or <a href="/wiki/Discount_window" title="Discount window">discount rate</a>. </p><p>In finance theory, the amount of the <a href="/wiki/Opportunity_cost" title="Opportunity cost">opportunity cost</a> is based on a relation between the risk and return of some sort of investment. <a href="/wiki/Classical_economics" title="Classical economics">Classic economic theory</a> maintains that people are rational and averse to risk. They, therefore, need an incentive to accept risk. The incentive in finance comes in the form of higher expected returns after buying a risky asset. In other words, the more risky the investment, the more return investors want from that investment. Using the same example as above, assume the first investment opportunity is a government bond that will pay interest of 5% per year and the principal and interest payments are guaranteed by the government. Alternatively, the second investment opportunity is a bond issued by small company and that bond also pays annual interest of 5%. If given a choice between the two bonds, virtually all investors would buy the government bond rather than the small-firm bond because the first is less risky while paying the same interest rate as the riskier second bond. In this case, an investor has no incentive to buy the riskier second bond. Furthermore, in order to attract capital from investors, the small firm issuing the second bond must pay an interest rate higher than 5% that the government bond pays. Otherwise, no investor is likely to buy that bond and, therefore, the firm will be unable to raise capital. But by offering to pay an interest rate more than 5% the firm gives investors an incentive to buy a riskier bond. </p><p>For a <a href="/wiki/Valuation_using_discounted_cash_flows" title="Valuation using discounted cash flows">valuation</a> using the <a href="/wiki/Discounted_cash_flow" title="Discounted cash flow">discounted cash flow</a> method, one first estimates the future cash flows from the investment and then estimates a reasonable discount rate after considering the riskiness of those cash flows and interest rates in the <a href="/wiki/Capital_markets" class="mw-redirect" title="Capital markets">capital markets</a>. Next, one makes a calculation to compute the present value of the future cash flows. </p> <div class="mw-heading mw-heading3"><h3 id="Guideline_companies_method">Guideline companies method</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Valuation_(finance)&action=edit&section=5" title="Edit section: Guideline companies method"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1236090951"><div role="note" class="hatnote navigation-not-searchable">Main article: <a href="/wiki/Comparable_company_analysis" class="mw-redirect" title="Comparable company analysis">Comparable company analysis</a></div> <p>This method determines the value of a firm by observing the prices of similar companies (called "guideline companies") that sold in the market. Those sales could be shares of stock or sales of entire firms. The observed prices serve as valuation benchmarks. From the prices, one calculates <a href="/wiki/Valuation_using_multiples" title="Valuation using multiples">price multiples</a> such as the <a href="/wiki/Price-to-earnings_ratio" class="mw-redirect" title="Price-to-earnings ratio">price-to-earnings</a> or <a href="/wiki/Price-to-book_ratio" class="mw-redirect" title="Price-to-book ratio">price-to-book</a> ratios—one or more of which used to value the firm. For example, the average price-to-earnings multiple of the guideline companies is applied to the subject firm's earnings to estimate its value. </p><p>Many price multiples can be calculated. Most are based on a financial statement element such as a firm's earnings (price-to-earnings) or book value (price-to-book value) but multiples can be based on other factors such as price-per-subscriber. </p> <div class="mw-heading mw-heading3"><h3 id="Net_asset_value_method">Net asset value method</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Valuation_(finance)&action=edit&section=6" title="Edit section: Net asset value method"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>The third-most common method of estimating the value of a company looks to the <a href="/wiki/Asset" title="Asset">assets</a> and <a href="/wiki/Liability_(financial_accounting)" title="Liability (financial accounting)">liabilities</a> of the business. At a minimum, a <a href="/wiki/Solvency" title="Solvency">solvent</a> company could shut down operations, sell off the assets, and pay the <a href="/wiki/Creditor" title="Creditor">creditors</a>. Any cash that would remain establishes a floor value for the company. This method is known as the <a href="/wiki/Net_asset_value" title="Net asset value">net asset value</a> or cost method. In general the <a href="/wiki/Discounted_cash_flow" title="Discounted cash flow">discounted cash flows</a> of a well-performing company exceed this floor value. Some companies, however, are worth more "dead than alive", like weakly performing companies that own many tangible assets. This method can also be used to value heterogeneous portfolios of investments, as well as <a href="/wiki/Nonprofit" class="mw-redirect" title="Nonprofit">nonprofits</a>, for which discounted cash flow analysis is not relevant. The valuation premise normally used is that of an orderly <a href="/wiki/Liquidation" title="Liquidation">liquidation</a> of the assets, although some valuation scenarios (e.g., <a href="/wiki/Purchase_price_allocation" title="Purchase price allocation">purchase price allocation</a>) imply an "<a href="/wiki/Value-in-use" title="Value-in-use">in-use</a>" valuation such as <a href="/wiki/Depreciated" class="mw-redirect" title="Depreciated">depreciated</a> replacement cost new. <a rel="nofollow" class="external text" href="https://blog.johannessonholding.se/2021/07/08/substance-valuation-method/">This method is most appropriate in situations where there are no significant intangible assets, or when a company is voluntarily liquidating its assets as a result of ceased operations.</a> </p><p>An alternative approach to the net asset value method is the excess earnings method. (This method was first described in the U.S. <a href="/wiki/Internal_Revenue_Service" title="Internal Revenue Service">Internal Revenue Service</a>'s <i>Appeals and Review Memorandum</i> 34,<sup class="noprint Inline-Template" style="white-space:nowrap;">[<i><a href="/wiki/Wikipedia:Please_clarify" title="Wikipedia:Please clarify"><span title="The text near this tag needs further explanation. (October 2015)">further explanation needed</span></a></i>]</sup> and later refined by <a rel="nofollow" class="external text" href="https://users.wfu.edu/palmitar/Law&Valuation/chapter%205/Documents/RevRul68-609.html">Revenue Ruling 68-609</a>.) The excess earnings method has the appraiser identify the value of tangible assets, estimate an appropriate return on those tangible assets, and subtract that return from the total return for the business, leaving the "excess" return, which is presumed to come from the intangible assets. An appropriate capitalization rate is applied to the excess return, resulting in the value of those intangible assets. That value is added to the value of the tangible assets and any non-operating assets, and the total is the value estimate for the business as a whole. See <a href="/wiki/Clean_surplus_accounting" title="Clean surplus accounting">Clean surplus accounting</a>, <a href="/wiki/Residual_income_valuation" title="Residual income valuation">Residual income valuation</a>. </p> <div class="mw-heading mw-heading2"><h2 id="Specialised_cases">Specialised cases</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Valuation_(finance)&action=edit&section=7" title="Edit section: Specialised cases"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>The approaches to valuation outlined above, are generic and will be modified for the unique positioning and characteristics <sup id="cite_ref-4" class="reference"><a href="#cite_note-4"><span class="cite-bracket">[</span>4<span class="cite-bracket">]</span></a></sup> of the business in question. <sup id="cite_ref-5" class="reference"><a href="#cite_note-5"><span class="cite-bracket">[</span>5<span class="cite-bracket">]</span></a></sup> In the below cases, however, more specific valuation-practices <a href="/wiki/Best_practice#Other_domains" title="Best practice">have developed</a> <sup id="cite_ref-6" class="reference"><a href="#cite_note-6"><span class="cite-bracket">[</span>6<span class="cite-bracket">]</span></a></sup> within the <a href="/wiki/Investment_management" title="Investment management">investment industry</a>. To these, more than elsewhere, <a href="/wiki/Real_options_valuation" title="Real options valuation">real options valuation</a> may be applied; <sup id="cite_ref-7" class="reference"><a href="#cite_note-7"><span class="cite-bracket">[</span>7<span class="cite-bracket">]</span></a></sup> see <a href="/wiki/Business_valuation#Option_pricing_approaches" title="Business valuation">Business valuation § Option pricing approaches</a>. </p> <div class="mw-heading mw-heading3"><h3 id="Valuation_of_a_suffering_company">Valuation of a suffering company</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Valuation_(finance)&action=edit&section=8" title="Edit section: Valuation of a suffering company"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>Investors in a <a href="/wiki/Financial_distress" title="Financial distress">suffering company</a>, or in other "<a href="/wiki/Distressed_securities" title="Distressed securities">distressed securities</a>", may intend (i) to <a href="/wiki/Restructuring" title="Restructuring">restructure the business</a>, with the valuation <a href="/wiki/Financial_distress#Options_for_relieving_financial_distress" title="Financial distress">reflecting its potential thereafter</a>, or (ii) to purchase the company - or its debt - at a discount, <a href="/wiki/Distressed_securities#Investment_strategy" title="Distressed securities">as part of an Investment Strategy</a> aimed at <a href="/wiki/Private_equity#Distressed_securities" title="Private equity">realizing a profit on recovery</a>. </p><p>Preliminary to the valuation, the <a href="/wiki/Financial_statements" class="mw-redirect" title="Financial statements">financial statements</a> are <a href="/wiki/Business_valuation#Normalization_of_financial_statements" title="Business valuation">initially recast</a>, to "better reflect the firm's indebtedness, financing costs and recurring earnings".<sup id="cite_ref-8" class="reference"><a href="#cite_note-8"><span class="cite-bracket">[</span>8<span class="cite-bracket">]</span></a></sup> Here adjustments are made to <a href="/wiki/Working_capital" title="Working capital">working capital</a>, deferred <a href="/wiki/Capital_expenditure" title="Capital expenditure">capital expenditures</a>, <a href="/wiki/Cost_of_goods_sold" title="Cost of goods sold">cost of goods sold</a>, non-recurring professional fees and costs, above- or below-market leases, excess salaries in the case of <a href="/wiki/Private_company" class="mw-redirect" title="Private company">private companies</a>, and certain non-operating income/expense items.<sup id="cite_ref-9" class="reference"><a href="#cite_note-9"><span class="cite-bracket">[</span>9<span class="cite-bracket">]</span></a></sup> </p><p>The valuation is built on this base, with any of the standard market-, income-, or asset-based approaches employed. Often these are used in combination, providing a "triangulation" or (weighted) average. Particularly in the second case above, the company may be valued using <a href="/wiki/Real_options_analysis" class="mw-redirect" title="Real options analysis">real options analysis</a>, serving to complement (or sometimes replace) this standard value; see <a href="/wiki/Business_valuation#Option_pricing_approaches" title="Business valuation">Business valuation § Option pricing approaches</a> and <a href="/wiki/Merton_model" title="Merton model">Merton model</a>. </p><p>As required, various adjustments are then made to this result, so as to reflect characteristics of the firm external to its profitability and cash flow. These adjustments consider any <a href="/wiki/Marketability" class="mw-redirect" title="Marketability">lack of marketability</a> resulting in a discount, and re the stake in question, any <a href="/wiki/Control_premium" title="Control premium">control premium</a> or <a href="/wiki/Business_valuation#Discount_for_lack_of_control" title="Business valuation">lack of control discount</a>. Balance sheet items external to the valuation, but due to the new owners, are similarly recognized; these include excess (or restricted) cash, and other non-operating assets and liabilities. </p> <div class="mw-heading mw-heading3"><h3 id="Valuation_of_a_startup_company">Valuation of a startup company</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Valuation_(finance)&action=edit&section=9" title="Edit section: Valuation of a startup company"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p><a href="/wiki/Startup_company" title="Startup company">Startup companies</a> such as <a href="/wiki/Uber" title="Uber">Uber</a>, which was valued at $50 billion in early 2015, are assigned <a href="/wiki/Post-money_valuation" title="Post-money valuation">post-money valuations</a> based on the price at which their most recent investor put money into the company. The price reflects what investors, for the most part <a href="/wiki/Venture_capital" title="Venture capital">venture capital</a> firms, are willing to pay for a share of the firm. They are not listed on any stock market, nor is the valuation based on their assets or profits, but on their potential for success, growth, and eventually, possible profits.<sup id="cite_ref-10" class="reference"><a href="#cite_note-10"><span class="cite-bracket">[</span>10<span class="cite-bracket">]</span></a></sup> Many startup companies use internal growth factors to show their potential growth which may attribute to their valuation. The professional investors who fund startups are experts, but hardly infallible, see <a href="/wiki/Dot-com_bubble" title="Dot-com bubble">Dot-com bubble</a>.<sup id="cite_ref-NYT51115_11-0" class="reference"><a href="#cite_note-NYT51115-11"><span class="cite-bracket">[</span>11<span class="cite-bracket">]</span></a></sup> <a href="/wiki/Valuation_using_discounted_cash_flows" title="Valuation using discounted cash flows">Valuation using discounted cash flows</a> discusses various considerations here. </p><p>The valuation of early-stage startups <sup id="cite_ref-12" class="reference"><a href="#cite_note-12"><span class="cite-bracket">[</span>12<span class="cite-bracket">]</span></a></sup> can be more nuanced due to their lack of established track records. One common approach is using comparative valuations, although this method can be less accurate given the uniqueness of each startup.<sup id="cite_ref-13" class="reference"><a href="#cite_note-13"><span class="cite-bracket">[</span>13<span class="cite-bracket">]</span></a></sup> Some methods adjust the average <a href="/wiki/Pre-money_valuation" title="Pre-money valuation">pre-money valuation</a> of pre-revenue startups based on various attributes within the same market.<sup id="cite_ref-14" class="reference"><a href="#cite_note-14"><span class="cite-bracket">[</span>14<span class="cite-bracket">]</span></a></sup> Average pre-money valuations in a particular region or sector, obtained from recent market deals, can also serve as reference points.<sup id="cite_ref-15" class="reference"><a href="#cite_note-15"><span class="cite-bracket">[</span>15<span class="cite-bracket">]</span></a></sup> During <a href="/wiki/Series_A_round" title="Series A round">Series A funding rounds</a>, the typical valuation for startups is reported to be between $10 million to $15 million.<sup id="cite_ref-16" class="reference"><a href="#cite_note-16"><span class="cite-bracket">[</span>16<span class="cite-bracket">]</span></a></sup> </p> <div class="mw-heading mw-heading3"><h3 id="Valuation_of_intangible_assets">Valuation of intangible assets</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Valuation_(finance)&action=edit&section=10" title="Edit section: Valuation of intangible assets"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>Valuation models can be used to value <a href="/wiki/Intangible_asset" title="Intangible asset">intangible assets</a> such as for <a href="/wiki/Patent_valuation" title="Patent valuation">patent valuation</a>, but also in <a href="/wiki/Copyright" title="Copyright">copyrights</a>, <a href="/wiki/Software" title="Software">software</a>, <a href="/wiki/Trade_secret" title="Trade secret">trade secrets</a>, and customer relationships.<sup id="cite_ref-Damodaran_Intangibles_17-0" class="reference"><a href="#cite_note-Damodaran_Intangibles-17"><span class="cite-bracket">[</span>17<span class="cite-bracket">]</span></a></sup> As economies are becoming increasingly informational, it is recognized that there is a need for new methods to <a href="/wiki/Data_valuation" title="Data valuation">value data</a>, another intangible asset. </p><p>Valuations here are often necessary both for <a href="/wiki/Financial_reporting" class="mw-redirect" title="Financial reporting">financial reporting</a> and <a href="/wiki/Intellectual_property" title="Intellectual property">intellectual property</a> transactions. They are also inherent in <a href="/wiki/Securities_research" title="Securities research">securities analysis</a> - listed and <a href="/wiki/Private_equity" title="Private equity">private</a> - in cases where <a href="/wiki/Financial_analysts" class="mw-redirect" title="Financial analysts">analysts</a> must estimate the <a href="/wiki/Valuation_using_discounted_cash_flows#Determine_cash_flow_for_each_forecast_period" title="Valuation using discounted cash flows">incremental contribution</a> of patents (etc) to equity value; see next paragraph. Since few sales of benchmark intangible assets can ever be observed, one often values these sorts of assets using either a present value model, or by <a href="/wiki/Intrinsic_value_(finance)#Equity" title="Intrinsic value (finance)">estimating the cost of recreating the asset in question</a>. In some cases, <sup id="cite_ref-18" class="reference"><a href="#cite_note-18"><span class="cite-bracket">[</span>18<span class="cite-bracket">]</span></a></sup> <sup id="cite_ref-Kellogg_&_Charnes_19-0" class="reference"><a href="#cite_note-Kellogg_&_Charnes-19"><span class="cite-bracket">[</span>19<span class="cite-bracket">]</span></a></sup> <a href="/wiki/Patent_valuation#Option-based_method" title="Patent valuation">option-based techniques</a> or <a href="/wiki/Decision_tree" title="Decision tree">decision trees</a> may be applied. Regardless of the method, the process is often time-consuming and costly. If required, stock markets can give an indirect estimate of a corporation's intangible asset value: this can be reckoned as the difference between its <a href="/wiki/Market_capitalisation" class="mw-redirect" title="Market capitalisation">market capitalisation</a> and its <a href="/wiki/Book_value" title="Book value">book value</a> (including <a href="/wiki/Tangible_common_equity" title="Tangible common equity">only hard assets</a>), i.e. effectively its <a href="/wiki/Goodwill_(accounting)" title="Goodwill (accounting)">goodwill</a>; see also <a href="/wiki/PVGO" class="mw-redirect" title="PVGO">PVGO</a>. </p><p>As regards listed equity, the above techniques are most often applied in the <a href="/wiki/Category:Biotechnology_companies" title="Category:Biotechnology companies">biotech-</a>, <a href="/wiki/Category:Life_sciences_industry" title="Category:Life sciences industry">life sciences-</a> and <a href="/wiki/Category:Pharmaceutical_companies" title="Category:Pharmaceutical companies">pharmaceutical sectors</a> <sup id="cite_ref-Segal_20-0" class="reference"><a href="#cite_note-Segal-20"><span class="cite-bracket">[</span>20<span class="cite-bracket">]</span></a></sup> <sup id="cite_ref-21" class="reference"><a href="#cite_note-21"><span class="cite-bracket">[</span>21<span class="cite-bracket">]</span></a></sup> <sup id="cite_ref-22" class="reference"><a href="#cite_note-22"><span class="cite-bracket">[</span>22<span class="cite-bracket">]</span></a></sup> <sup id="cite_ref-Kellogg_&_Charnes_19-1" class="reference"><a href="#cite_note-Kellogg_&_Charnes-19"><span class="cite-bracket">[</span>19<span class="cite-bracket">]</span></a></sup> (see <a href="/wiki/List_of_largest_biotechnology_and_pharmaceutical_companies" class="mw-redirect" title="List of largest biotechnology and pharmaceutical companies">List of largest biotechnology and pharmaceutical companies</a>). These businesses are involved in <a href="/wiki/Research_and_development" title="Research and development">research and development</a> (R&D), and testing, that typically takes years to complete, and where the new product may ultimately <a href="/wiki/Approved_drug#Approval" title="Approved drug">not be approved</a><sup id="cite_ref-Kellogg_&_Charnes_19-2" class="reference"><a href="#cite_note-Kellogg_&_Charnes-19"><span class="cite-bracket">[</span>19<span class="cite-bracket">]</span></a></sup> (see <a href="/wiki/Contingent_value_rights" title="Contingent value rights">Contingent value rights</a>). <a href="/wiki/Securities_research#Analyst_specialization" title="Securities research">Industry specialists</a> thus apply the above techniques - and here especially <a href="/wiki/RNPV" class="mw-redirect" title="RNPV">rNPV</a> - to the <a href="/wiki/Pharmaceutical_industry#Research_and_development" title="Pharmaceutical industry">pipeline of products</a> under development, and, at the same time,<sup id="cite_ref-Damodaran_Intangibles_17-1" class="reference"><a href="#cite_note-Damodaran_Intangibles-17"><span class="cite-bracket">[</span>17<span class="cite-bracket">]</span></a></sup> also estimate the impact on existing revenue streams due to <a href="/wiki/Pharmaceutical_industry#Patents_and_generics" title="Pharmaceutical industry">expiring patents</a>. For relative valuation,<sup id="cite_ref-Segal_20-1" class="reference"><a href="#cite_note-Segal-20"><span class="cite-bracket">[</span>20<span class="cite-bracket">]</span></a></sup> a specialized ratio is R&D spend as a percentage of sales. Similar analysis may be applied to <a href="/wiki/Option_(filmmaking)" title="Option (filmmaking)">options on films</a> re the valuation of <a href="/wiki/Film_studios" class="mw-redirect" title="Film studios">film studios</a>. </p> <div class="mw-heading mw-heading3"><h3 id="Valuation_of_mining_projects">Valuation of mining projects</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Valuation_(finance)&action=edit&section=11" title="Edit section: Valuation of mining projects"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1236090951"><div role="note" class="hatnote navigation-not-searchable">Further information: <a href="/wiki/Mineral_economics" title="Mineral economics">Mineral economics</a>, <a href="/wiki/Mineral_resource_estimation" title="Mineral resource estimation">Mineral resource estimation</a>, and <a href="/wiki/Mineral_resource_classification" title="Mineral resource classification">Mineral resource classification</a></div> <p>In <a href="/wiki/Mining" title="Mining">mining</a>, valuation is the process of determining the value or worth of a <a href="/wiki/Mineral_rights#Mineral_estate" title="Mineral rights">mining property</a> - i.e. as distinct from a listed mining corporate. Mining valuations are sometimes required for <a href="/wiki/IPO" class="mw-redirect" title="IPO">IPOs</a>, <a href="/wiki/Fairness_opinion" title="Fairness opinion">fairness opinions</a>, litigation, mergers and acquisitions, and shareholder-related matters. In valuing a mining project or mining property, <a href="/wiki/Fair_market_value" title="Fair market value">fair market value</a> is the standard of value to be used. In general,<sup id="cite_ref-Queen's_1_23-0" class="reference"><a href="#cite_note-Queen's_1-23"><span class="cite-bracket">[</span>23<span class="cite-bracket">]</span></a></sup> this result will be a function of the property's <a href="/wiki/Mineral_resource_classification#Mineral_reserves_and_ore_reserves" title="Mineral resource classification">"reserve"</a> - the estimated size and grade of the <a href="/wiki/Ore#Ore_deposits" title="Ore">deposit</a> in question - and <a href="/wiki/Mining#Techniques" title="Mining">the complexity</a> and costs of extracting this.<sup id="cite_ref-Beattie_24-0" class="reference"><a href="#cite_note-Beattie-24"><span class="cite-bracket">[</span>24<span class="cite-bracket">]</span></a></sup> <sup id="cite_ref-25" class="reference"><a href="#cite_note-25"><span class="cite-bracket">[</span>25<span class="cite-bracket">]</span></a></sup> </p><p><i><a rel="nofollow" class="external text" href="http://web.cim.org/standards/documents/Block487_Doc69.pdf">CIMVal</a></i> generally applied by the <a href="/wiki/Toronto_Stock_Exchange" title="Toronto Stock Exchange">Toronto Stock Exchange</a>, is widely recognized as a "standard" for the valuation of mining projects. (CIMVal: <a href="/wiki/Canadian_Institute_of_Mining,_Metallurgy_and_Petroleum" title="Canadian Institute of Mining, Metallurgy and Petroleum">Canadian Institute of Mining, Metallurgy and Petroleum</a> on Valuation of Mineral Properties <sup id="cite_ref-26" class="reference"><a href="#cite_note-26"><span class="cite-bracket">[</span>26<span class="cite-bracket">]</span></a></sup>) The <a href="/wiki/Australasian_Institute_of_Mining_and_Metallurgy" title="Australasian Institute of Mining and Metallurgy">Australasian</a> equivalent is <a rel="nofollow" class="external text" href="https://www.valmin.org"><i>VALMIN</i></a>; the <a href="/wiki/Southern_African_Institute_of_Mining_and_Metallurgy" title="Southern African Institute of Mining and Metallurgy">Southern African</a> is <a href="/wiki/South_African_Mineral_Reporting_Codes#SAMVAL" title="South African Mineral Reporting Codes"><i>SAMVAL</i></a>. These standards stress the use of the <a href="/wiki/Business_valuation#Asset-based_approaches" title="Business valuation">cost approach</a>, <a href="/wiki/Business_valuation#Market_approaches" title="Business valuation">market approach</a>, and the <a href="/wiki/Income_approach" title="Income approach">income approach</a>, depending on the stage of development of the mining property or project; see <sup id="cite_ref-Lilford_and_R.C.A._Minnitt_27-0" class="reference"><a href="#cite_note-Lilford_and_R.C.A._Minnitt-27"><span class="cite-bracket">[</span>27<span class="cite-bracket">]</span></a></sup> for further discussion and context. Real Options analysis <sup id="cite_ref-Shafiee_Abbate_28-0" class="reference"><a href="#cite_note-Shafiee_Abbate-28"><span class="cite-bracket">[</span>28<span class="cite-bracket">]</span></a></sup> <sup id="cite_ref-29" class="reference"><a href="#cite_note-29"><span class="cite-bracket">[</span>29<span class="cite-bracket">]</span></a></sup> is sometimes <sup id="cite_ref-Queen's_1_23-1" class="reference"><a href="#cite_note-Queen's_1-23"><span class="cite-bracket">[</span>23<span class="cite-bracket">]</span></a></sup> <sup id="cite_ref-Lilford_and_R.C.A._Minnitt_27-1" class="reference"><a href="#cite_note-Lilford_and_R.C.A._Minnitt-27"><span class="cite-bracket">[</span>27<span class="cite-bracket">]</span></a></sup> <sup id="cite_ref-Shafiee_Abbate_28-1" class="reference"><a href="#cite_note-Shafiee_Abbate-28"><span class="cite-bracket">[</span>28<span class="cite-bracket">]</span></a></sup> used when there is a need to evaluate the project under different scenarios from inception. </p><p>Analyzing listed <a href="/wiki/Category:Mining_companies" title="Category:Mining companies">mining corporates</a> (and other <a href="/wiki/Category:Non-renewable_resource_companies" title="Category:Non-renewable resource companies">resource companies</a>) is also specialized,<sup id="cite_ref-Beattie_24-1" class="reference"><a href="#cite_note-Beattie-24"><span class="cite-bracket">[</span>24<span class="cite-bracket">]</span></a></sup> as the valuation requires a <a href="/wiki/Mineral_resource_estimation" title="Mineral resource estimation">good understanding of the company's overall assets</a>, its operational business model <a href="/wiki/Category:Commodities_used_as_an_investment" title="Category:Commodities used as an investment">as well as key market drivers</a>,<sup id="cite_ref-30" class="reference"><a href="#cite_note-30"><span class="cite-bracket">[</span>30<span class="cite-bracket">]</span></a></sup> and an understanding of that <a href="/wiki/Category:Stock_market_indices_by_industry" title="Category:Stock market indices by industry">sector of the stock market</a>.<sup id="cite_ref-Beattie_24-2" class="reference"><a href="#cite_note-Beattie-24"><span class="cite-bracket">[</span>24<span class="cite-bracket">]</span></a></sup> Re the latter, a distinction is usually made based on size and financial capabilities; see <a href="/wiki/Mining#Corporate_classifications" title="Mining">Mining § Corporate classifications</a>. </p> <ul><li>The price of a "Junior" mining stock, typically having one asset, will at its early stages be linked to the result of its <a href="/wiki/Mining_feasibility_study" title="Mining feasibility study">feasibility study</a>; later, the price will be a function of that mine's viability and value, largely applying the above techniques.</li> <li>A "Major", on the other hand, has numerous <a href="/wiki/Mineral_rights" title="Mineral rights">properties</a>, and the contents of any single deposit will impact stock value in a limited fashion; this due to diversification, access to funding, and, also, since the share price inheres goodwill. Typically, then, the exposure is more to the <a href="/wiki/Commodity_market" title="Commodity market">market value of each mineral</a> in the portfolio, than to the individual properties.</li></ul> <div class="mw-heading mw-heading3"><h3 id="Valuing_financial_services_firms">Valuing financial services firms</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Valuation_(finance)&action=edit&section=12" title="Edit section: Valuing financial services firms"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>There are two main difficulties with valuing <a href="/wiki/Financial_services" title="Financial services">financial services</a> firms. <sup id="cite_ref-Damodaran_31-0" class="reference"><a href="#cite_note-Damodaran-31"><span class="cite-bracket">[</span>31<span class="cite-bracket">]</span></a></sup> <sup id="cite_ref-Nissim_32-0" class="reference"><a href="#cite_note-Nissim-32"><span class="cite-bracket">[</span>32<span class="cite-bracket">]</span></a></sup> <sup id="cite_ref-33" class="reference"><a href="#cite_note-33"><span class="cite-bracket">[</span>33<span class="cite-bracket">]</span></a></sup> <sup id="cite_ref-Le_Fur_34-0" class="reference"><a href="#cite_note-Le_Fur-34"><span class="cite-bracket">[</span>34<span class="cite-bracket">]</span></a></sup> The first is that the cash flows to a financial service firm cannot be easily estimated, since <a href="/wiki/Capital_expenditure" title="Capital expenditure">capital expenditures</a>, <a href="/wiki/Working_capital" title="Working capital">working capital</a> and debt are not clearly defined: "debt for a financial service firm is more akin to raw material than to a source of capital; the notion of <a href="/wiki/Cost_of_capital" title="Cost of capital">cost of capital</a> and <a href="/wiki/Enterprise_value" title="Enterprise value">enterprise value</a> may be meaningless as a consequence."<sup id="cite_ref-Damodaran_31-1" class="reference"><a href="#cite_note-Damodaran-31"><span class="cite-bracket">[</span>31<span class="cite-bracket">]</span></a></sup> (See <a href="/wiki/Financial_risk_management#Application" title="Financial risk management">related discussion</a> re. the <a href="/wiki/Risk_management" title="Risk management">risk management</a> of financial- vs non-financial firms.) The second is that these firms operate under a <a href="/wiki/Financial_regulation" title="Financial regulation">highly regulated environment</a>, and valuation assumptions (<a href="/wiki/Valuation_using_discounted_cash_flows#Determine_cash_flow_for_each_forecast_period" title="Valuation using discounted cash flows">and model outputs</a>) must incorporate regulatory limits, at least as "bounds".<sup id="cite_ref-Le_Fur_34-1" class="reference"><a href="#cite_note-Le_Fur-34"><span class="cite-bracket">[</span>34<span class="cite-bracket">]</span></a></sup> </p><p>The approach taken for a DCF valuation, is to then "remove" debt from the valuation, by discounting at the <a href="/wiki/Cost_of_equity" title="Cost of equity">cost of equity</a> either <a href="/wiki/Free_cash_flow_to_equity" title="Free cash flow to equity">free cash flow to equity</a> (<a href="/wiki/Net_income" title="Net income">net income</a> less any reinvestment in <a href="/wiki/Regulatory_capital" class="mw-redirect" title="Regulatory capital">regulatory capital</a>) or <a href="/wiki/Residual_income_valuation" title="Residual income valuation">excess return</a>;<sup id="cite_ref-35" class="reference"><a href="#cite_note-35"><span class="cite-bracket">[</span>35<span class="cite-bracket">]</span></a></sup> a <a href="/wiki/Dividend_discount_model" title="Dividend discount model">dividend based valuation</a> is often employed. This is in contrast to the more typical approach of <a href="/wiki/Valuation_using_discounted_cash_flows#Basic_formula_for_firm_valuation_using_DCF_model" title="Valuation using discounted cash flows">discounting free cash flow to the <i>Firm</i></a> where <a href="/wiki/EBITDA" class="mw-redirect" title="EBITDA">EBITDA</a> less capital expenditures and working capital is discounted at the <a href="/wiki/Weighted_average_cost_of_capital" title="Weighted average cost of capital">weighted average cost of capital</a>, which incorporates the <a href="/wiki/Cost_of_debt" class="mw-redirect" title="Cost of debt">cost of debt</a>. </p><p>For a multiple based valuation, similarly, <a href="/wiki/PE_ratio" class="mw-redirect" title="PE ratio">price to earnings</a> is preferred to <a href="/wiki/EV/EBITDA" class="mw-redirect" title="EV/EBITDA">EV/EBITDA</a>. Here, there are also industry-specific measures used to compare between investments and within sub-sectors; this, once normalized by market cap (or other appropriate result), and recognizing regulatory differences: </p> <ul><li><a href="/wiki/Insurance#Insurance_companies" title="Insurance">Insurance companies</a>: <a href="/wiki/Embedded_value" title="Embedded value">embedded value</a> and <a href="/wiki/Actuarial_reserves" title="Actuarial reserves">actuarial reserves</a></li> <li><a href="/wiki/Bank#Types_of_banks" title="Bank">Banking sector</a>: <a href="/wiki/Net_interest_margin" title="Net interest margin">net interest margin</a> and <a href="/wiki/Allowance_for_Loan_and_Lease_Losses" title="Allowance for Loan and Lease Losses">provision for credit losses</a></li> <li><a href="/wiki/Wealth_management" title="Wealth management">Wealth-</a> and <a href="/wiki/Investment_management" title="Investment management">investment management</a> firms: <a href="/wiki/Assets_under_management" title="Assets under management">assets under management</a></li> <li><a href="/wiki/Investment_bank" class="mw-redirect" title="Investment bank">Investment banks</a>: <a href="/wiki/P/B_ratio#Total_book_value_vs_tangible_book_value" title="P/B ratio">price to tangible book value</a> and <a href="/wiki/Return_on_tangible_equity" title="Return on tangible equity">return on tangible equity</a>.</li></ul> <div class="mw-heading mw-heading2"><h2 id="Mismarking">Mismarking</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Valuation_(finance)&action=edit&section=13" title="Edit section: Mismarking"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1236090951"><div role="note" class="hatnote navigation-not-searchable">Further information: <a href="/wiki/Valuation_control" class="mw-redirect" title="Valuation control">Valuation control</a> and <a href="/wiki/Mark-to-market_accounting" title="Mark-to-market accounting">Mark-to-market accounting</a></div> <p><a href="/wiki/Mismarking" title="Mismarking">Mismarking</a> in securities valuation takes place when the value that is assigned to securities does not reflect what the securities are actually worth, due to intentional <a href="/wiki/Fraudulent" class="mw-redirect" title="Fraudulent">fraudulent</a> mispricing.<sup id="cite_ref-36" class="reference"><a href="#cite_note-36"><span class="cite-bracket">[</span>36<span class="cite-bracket">]</span></a></sup><sup id="cite_ref-auto3_37-0" class="reference"><a href="#cite_note-auto3-37"><span class="cite-bracket">[</span>37<span class="cite-bracket">]</span></a></sup><sup id="cite_ref-auto4_38-0" class="reference"><a href="#cite_note-auto4-38"><span class="cite-bracket">[</span>38<span class="cite-bracket">]</span></a></sup> </p><p>Mismarking misleads investors and fund executives about how much the securities in a securities portfolio managed by a trader are worth (the securities' <a href="/wiki/Net_asset_value" title="Net asset value">net asset value</a>, or NAV), and thus misrepresents performance.<sup id="cite_ref-auto6_39-0" class="reference"><a href="#cite_note-auto6-39"><span class="cite-bracket">[</span>39<span class="cite-bracket">]</span></a></sup><sup id="cite_ref-auto7_40-0" class="reference"><a href="#cite_note-auto7-40"><span class="cite-bracket">[</span>40<span class="cite-bracket">]</span></a></sup><sup id="cite_ref-41" class="reference"><a href="#cite_note-41"><span class="cite-bracket">[</span>41<span class="cite-bracket">]</span></a></sup> </p><p>When a <a href="/wiki/Rogue_trader" title="Rogue trader">rogue trader</a> engages in mismarking, it allows him to obtain a higher <a href="/wiki/Bonus_payment" title="Bonus payment">bonus</a> from the financial firm for which he works, where his bonus is calculated by the performance of the securities portfolio that he is managing.<sup id="cite_ref-auto6_39-1" class="reference"><a href="#cite_note-auto6-39"><span class="cite-bracket">[</span>39<span class="cite-bracket">]</span></a></sup><sup id="cite_ref-auto7_40-1" class="reference"><a href="#cite_note-auto7-40"><span class="cite-bracket">[</span>40<span class="cite-bracket">]</span></a></sup> </p> <div class="mw-heading mw-heading2"><h2 id="See_also">See also</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Valuation_(finance)&action=edit&section=14" title="Edit section: See also"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <ul><li><a href="/wiki/Appraisal_(disambiguation)" class="mw-redirect mw-disambig" title="Appraisal (disambiguation)">Appraisal (disambiguation)</a></li> <li><a href="/wiki/Asset_price_inflation" title="Asset price inflation">Asset price inflation</a></li> <li><a href="/wiki/Business_valuation" title="Business valuation">Business valuation</a></li> <li><a href="/wiki/Business_valuation_standard" title="Business valuation standard">Business valuation standard</a></li> <li><a href="/wiki/Control_premium" title="Control premium">Control premium</a></li> <li><a href="/wiki/Depreciation" title="Depreciation">Depreciation</a></li> <li><a href="/wiki/Earnings_response_coefficient" title="Earnings response coefficient">Earnings response coefficient</a></li> <li><a href="/wiki/Efficient-market_hypothesis" title="Efficient-market hypothesis">Efficient-market hypothesis</a></li> <li><a href="/wiki/Enterprise_value" title="Enterprise value">Enterprise value</a></li> <li><a href="/wiki/Equity_value" title="Equity value">Equity value</a></li> <li><a href="/wiki/Film_finance" title="Film finance">Film finance</a></li> <li><a href="/wiki/Fundamental_analysis" title="Fundamental analysis">Fundamental analysis</a></li> <li><a href="/wiki/Intellectual_property_valuation" title="Intellectual property valuation">Intellectual property valuation</a></li> <li><a href="/wiki/Intermediated_research" title="Intermediated research">Intermediated research</a></li> <li><a href="/wiki/Investment_management" title="Investment management">Investment management</a></li> <li><a href="/wiki/Lipper_average" title="Lipper average">Lipper average</a></li> <li><a href="/wiki/Market-based_valuation" title="Market-based valuation">Market-based valuation</a></li> <li><a href="/wiki/Minority_discount" title="Minority discount">Minority discount</a></li> <li><a href="/wiki/Paper_valuation" title="Paper valuation">Paper valuation</a></li> <li><a href="/wiki/Patent_valuation" title="Patent valuation">Patent valuation</a></li> <li><a href="/wiki/PEG_ratio" title="PEG ratio">PEG ratio</a></li> <li><a href="/wiki/Present_value" title="Present value">Present value</a></li> <li><a href="/wiki/PVGO" class="mw-redirect" title="PVGO">Present value of growth opportunities</a></li> <li><a href="/wiki/Price_discovery" title="Price discovery">Price discovery</a></li> <li><a href="/wiki/Pricing" title="Pricing">Pricing</a></li> <li><a href="/wiki/Real_options_valuation" title="Real options valuation">Real options valuation</a></li> <li><a href="/wiki/Real_estate_appraisal" title="Real estate appraisal">Real estate appraisal</a></li> <li><a href="/wiki/Standard_cost_accounting" title="Standard cost accounting">Standard cost accounting</a></li> <li><a href="/wiki/Stock_valuation" title="Stock valuation">Stock valuation</a></li> <li><a href="/wiki/Sum-of-the-parts_analysis" title="Sum-of-the-parts analysis">Sum-of-the-parts analysis</a></li> <li><a href="/wiki/Terminal_value_(finance)" title="Terminal value (finance)">Terminal value</a></li> <li><a href="/wiki/Undervalued_stock" title="Undervalued stock">Undervalued stock</a></li> <li><a href="/wiki/Valuation_risk" title="Valuation risk">Valuation risk</a></li> <li>Specific pricing models <ul><li><a href="/wiki/Capital_asset_pricing_model" title="Capital asset pricing model">Capital asset pricing model</a></li> <li><a href="/wiki/Arbitrage_pricing_theory" title="Arbitrage pricing theory">Arbitrage pricing theory</a></li> <li><a href="/wiki/Black%E2%80%93Scholes" class="mw-redirect" title="Black–Scholes">Black–Scholes</a> (for <a href="/wiki/Option_(finance)" title="Option (finance)">options</a>)</li> <li><a href="/wiki/Fuzzy_pay-off_method_for_real_option_valuation" title="Fuzzy pay-off method for real option valuation">Fuzzy pay-off method for real option valuation</a></li> <li><a href="/wiki/Single-index_model" title="Single-index model">Single-index model</a></li> <li><a href="/wiki/Markov_switching_multifractal" title="Markov switching multifractal">Markov switching multifractal</a></li> <li><a href="/wiki/Multiple_factor_models" title="Multiple factor models">Multiple factor models</a></li></ul></li></ul> <div class="mw-heading mw-heading2"><h2 id="References">References</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Valuation_(finance)&action=edit&section=15" title="Edit section: References"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <style data-mw-deduplicate="TemplateStyles:r1239543626">.mw-parser-output .reflist{margin-bottom:0.5em;list-style-type:decimal}@media screen{.mw-parser-output .reflist{font-size:90%}}.mw-parser-output .reflist .references{font-size:100%;margin-bottom:0;list-style-type:inherit}.mw-parser-output .reflist-columns-2{column-width:30em}.mw-parser-output .reflist-columns-3{column-width:25em}.mw-parser-output .reflist-columns{margin-top:0.3em}.mw-parser-output .reflist-columns ol{margin-top:0}.mw-parser-output .reflist-columns li{page-break-inside:avoid;break-inside:avoid-column}.mw-parser-output .reflist-upper-alpha{list-style-type:upper-alpha}.mw-parser-output .reflist-upper-roman{list-style-type:upper-roman}.mw-parser-output .reflist-lower-alpha{list-style-type:lower-alpha}.mw-parser-output .reflist-lower-greek{list-style-type:lower-greek}.mw-parser-output .reflist-lower-roman{list-style-type:lower-roman}</style><div class="reflist"> <div class="mw-references-wrap mw-references-columns"><ol class="references"> <li id="cite_note-1"><span class="mw-cite-backlink"><b><a href="#cite_ref-1">^</a></b></span> <span class="reference-text"><style data-mw-deduplicate="TemplateStyles:r1238218222">.mw-parser-output cite.citation{font-style:inherit;word-wrap:break-word}.mw-parser-output .citation q{quotes:"\"""\"""'""'"}.mw-parser-output .citation:target{background-color:rgba(0,127,255,0.133)}.mw-parser-output .id-lock-free.id-lock-free a{background:url("//upload.wikimedia.org/wikipedia/commons/6/65/Lock-green.svg")right 0.1em center/9px no-repeat}.mw-parser-output .id-lock-limited.id-lock-limited a,.mw-parser-output .id-lock-registration.id-lock-registration a{background:url("//upload.wikimedia.org/wikipedia/commons/d/d6/Lock-gray-alt-2.svg")right 0.1em center/9px no-repeat}.mw-parser-output .id-lock-subscription.id-lock-subscription a{background:url("//upload.wikimedia.org/wikipedia/commons/a/aa/Lock-red-alt-2.svg")right 0.1em center/9px no-repeat}.mw-parser-output .cs1-ws-icon a{background:url("//upload.wikimedia.org/wikipedia/commons/4/4c/Wikisource-logo.svg")right 0.1em center/12px no-repeat}body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-free a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-limited a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-registration a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-subscription a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .cs1-ws-icon a{background-size:contain;padding:0 1em 0 0}.mw-parser-output .cs1-code{color:inherit;background:inherit;border:none;padding:inherit}.mw-parser-output .cs1-hidden-error{display:none;color:var(--color-error,#d33)}.mw-parser-output .cs1-visible-error{color:var(--color-error,#d33)}.mw-parser-output .cs1-maint{display:none;color:#085;margin-left:0.3em}.mw-parser-output .cs1-kern-left{padding-left:0.2em}.mw-parser-output .cs1-kern-right{padding-right:0.2em}.mw-parser-output .citation .mw-selflink{font-weight:inherit}@media screen{.mw-parser-output .cs1-format{font-size:95%}html.skin-theme-clientpref-night .mw-parser-output .cs1-maint{color:#18911f}}@media screen and (prefers-color-scheme:dark){html.skin-theme-clientpref-os .mw-parser-output .cs1-maint{color:#18911f}}</style><cite id="CITEREFDamodaran2002" class="citation book cs1">Damodaran, Aswath (31 January 2002). <a rel="nofollow" class="external text" href="https://books.google.com/books?id=sLQhYjndgwEC"><i>Investment Valuation: Tools and Techniques for Determining the Value of Any Asset</i></a> (Second ed.). John Wiley & Sons. pp. 9, 11. <a href="/wiki/ISBN_(identifier)" class="mw-redirect" title="ISBN (identifier)">ISBN</a> <a href="/wiki/Special:BookSources/978-0-471-41490-2" title="Special:BookSources/978-0-471-41490-2"><bdi>978-0-471-41490-2</bdi></a>. <a rel="nofollow" class="external text" href="https://web.archive.org/web/20230327060943/https://books.google.com/books?id=sLQhYjndgwEC">Archived</a> from the original on 27 March 2023<span class="reference-accessdate">. Retrieved <span class="nowrap">1 March</span> 2023</span>.</cite><span title="ctx_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Abook&rft.genre=book&rft.btitle=Investment+Valuation%3A+Tools+and+Techniques+for+Determining+the+Value+of+Any+Asset&rft.pages=9%2C+11&rft.edition=Second&rft.pub=John+Wiley+%26+Sons&rft.date=2002-01-31&rft.isbn=978-0-471-41490-2&rft.aulast=Damodaran&rft.aufirst=Aswath&rft_id=https%3A%2F%2Fbooks.google.com%2Fbooks%3Fid%3DsLQhYjndgwEC&rfr_id=info%3Asid%2Fen.wikipedia.org%3AValuation+%28finance%29" class="Z3988"></span></span> </li> <li id="cite_note-2"><span class="mw-cite-backlink"><b><a href="#cite_ref-2">^</a></b></span> <span class="reference-text"><a href="/wiki/Aswath_Damodaran" title="Aswath Damodaran">Aswath Damodaran</a> (2012). <a rel="nofollow" class="external text" href="http://people.stern.nyu.edu/adamodar/pdfiles/eqnotes/ValIntro.pdf"><i>An Introduction to Valuation</i></a> <a rel="nofollow" class="external text" href="https://web.archive.org/web/20210708031409/http://people.stern.nyu.edu/adamodar/pdfiles/eqnotes/ValIntro.pdf">Archived</a> 2021-07-08 at the <a href="/wiki/Wayback_Machine" title="Wayback Machine">Wayback Machine</a>. <a href="/wiki/NYU" class="mw-redirect" title="NYU">NYU</a> teaching note</span> </li> <li id="cite_note-3"><span class="mw-cite-backlink"><b><a href="#cite_ref-3">^</a></b></span> <span class="reference-text"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1238218222"><cite class="citation web cs1"><a rel="nofollow" class="external text" href="https://www.weforum.org/agenda/2017/09/the-value-of-data/">"The Value of Data"</a>. 22 September 2017. <a rel="nofollow" class="external text" href="https://web.archive.org/web/20201109034435/https://www.weforum.org/agenda/2017/09/the-value-of-data">Archived</a> from the original on 9 November 2020<span class="reference-accessdate">. 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(2012). <a rel="nofollow" class="external text" href="https://www.ausimm.com/publications/conference-proceedings/project-evaluation-2012-/now-this-is-the-time-for-mining-companies-to-choose---real-option-valuation-or-discount-cash-flow">Now, this is the Time for Mining Companies to Choose - Real Option Valuation or Discount Cash Flow</a>. <a href="/wiki/Australasian_Institute_of_Mining_and_Metallurgy" title="Australasian Institute of Mining and Metallurgy">Australasian Institute of Mining and Metallurgy</a></span> </li> <li id="cite_note-29"><span class="mw-cite-backlink"><b><a href="#cite_ref-29">^</a></b></span> <span class="reference-text">Rudolf Zdravlje (2011). <a rel="nofollow" class="external text" href="https://core.ac.uk/display/56378814">Real Options Analysis of Mining Projects</a></span> </li> <li id="cite_note-30"><span class="mw-cite-backlink"><b><a href="#cite_ref-30">^</a></b></span> <span class="reference-text"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1238218222"><cite class="citation web cs1"><a rel="nofollow" class="external text" href="https://www.investec.com/en_za/focus/beyond-wealth/inside-the-world-of-the-mining-analyst.html">"Inside the world of the mining analyst"</a>. <a rel="nofollow" class="external text" href="https://web.archive.org/web/20210228193722/https://www.investec.com/en_za/focus/beyond-wealth/inside-the-world-of-the-mining-analyst.html">Archived</a> from the original on 2021-02-28<span class="reference-accessdate">. Retrieved <span class="nowrap">2021-02-12</span></span>.</cite><span title="ctx_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Abook&rft.genre=unknown&rft.btitle=Inside+the+world+of+the+mining+analyst&rft_id=https%3A%2F%2Fwww.investec.com%2Fen_za%2Ffocus%2Fbeyond-wealth%2Finside-the-world-of-the-mining-analyst.html&rfr_id=info%3Asid%2Fen.wikipedia.org%3AValuation+%28finance%29" class="Z3988"></span></span> </li> <li id="cite_note-Damodaran-31"><span class="mw-cite-backlink">^ <a href="#cite_ref-Damodaran_31-0"><sup><i><b>a</b></i></sup></a> <a href="#cite_ref-Damodaran_31-1"><sup><i><b>b</b></i></sup></a></span> <span class="reference-text">Aswath Damodaran (2009). <a rel="nofollow" class="external text" href="http://people.stern.nyu.edu/adamodar/pdfiles/papers/finfirm09.pdf"><i>Valuing Financial Service Firms</i></a> <a rel="nofollow" class="external text" href="https://web.archive.org/web/20191020190955/http://people.stern.nyu.edu/adamodar/pdfiles/papers/finfirm09.pdf">Archived</a> 2019-10-20 at the <a href="/wiki/Wayback_Machine" title="Wayback Machine">Wayback Machine</a>, <a href="/wiki/New_York_University_Stern_School_of_Business" title="New York University Stern School of Business">Stern, NYU</a></span> </li> <li id="cite_note-Nissim-32"><span class="mw-cite-backlink"><b><a href="#cite_ref-Nissim_32-0">^</a></b></span> <span class="reference-text">Doron Nissim (2010).<a rel="nofollow" class="external text" href="http://www.columbia.edu/~dn75/Analysis%20and%20Valuation%20of%20Insurance%20Companies%20-%20Final.pdf"><i>Analysis and Valuation of Insurance Companies</i></a> <a rel="nofollow" class="external text" href="https://web.archive.org/web/20191020201443/http://www.columbia.edu/~dn75/Analysis%20and%20Valuation%20of%20Insurance%20Companies%20-%20Final.pdf">Archived</a> 2019-10-20 at the <a href="/wiki/Wayback_Machine" title="Wayback Machine">Wayback Machine</a>, <a href="/wiki/Columbia_Business_School" title="Columbia Business School">Columbia Business School</a></span> </li> <li id="cite_note-33"><span class="mw-cite-backlink"><b><a href="#cite_ref-33">^</a></b></span> <span class="reference-text">Oleg Deev (2011). <a rel="nofollow" class="external text" href="https://journals.muni.cz/fai/article/view/7820">"Methods of Bank Valuation: A Critical Overview"</a> <a rel="nofollow" class="external text" href="https://web.archive.org/web/20230614094138/https://journals.muni.cz/fai/article/view/7820">Archived</a> 2023-06-14 at the <a href="/wiki/Wayback_Machine" title="Wayback Machine">Wayback Machine</a>. <i>Financial Assets and Investing</i>. Vol.2, No.3</span> </li> <li id="cite_note-Le_Fur-34"><span class="mw-cite-backlink">^ <a href="#cite_ref-Le_Fur_34-0"><sup><i><b>a</b></i></sup></a> <a href="#cite_ref-Le_Fur_34-1"><sup><i><b>b</b></i></sup></a></span> <span class="reference-text">Yann Le Fur, <i>et. al.</i> (2022). <a rel="nofollow" class="external text" href="https://www.vernimmen.com/Read/Articles_on_financials/Putting_a_value_on_banks.html?iframe">"Putting a value on banks"</a></span> </li> <li id="cite_note-35"><span class="mw-cite-backlink"><b><a href="#cite_ref-35">^</a></b></span> <span class="reference-text">See e.g. <a rel="nofollow" class="external text" href="https://pages.stern.nyu.edu/~adamodar/pc/eqexret.xls">eqexret.xls</a> by Prof. Aswath Damodaran</span> </li> <li id="cite_note-36"><span class="mw-cite-backlink"><b><a href="#cite_ref-36">^</a></b></span> <span class="reference-text"><a rel="nofollow" class="external text" href="https://www.bis.org/bcbs/qisoprisknote.pdf">"1QIS 2 - Operational Risk Loss Data – 4 May 2001,"</a> <a rel="nofollow" class="external text" href="https://web.archive.org/web/20210301172701/https://www.bis.org/bcbs/qisoprisknote.pdf">Archived</a> 1 March 2021 at the <a href="/wiki/Wayback_Machine" title="Wayback Machine">Wayback Machine</a> <a href="/wiki/Bank_of_International_Settlements" class="mw-redirect" title="Bank of International Settlements">Bank of International Settlements</a>.</span> </li> <li id="cite_note-auto3-37"><span class="mw-cite-backlink"><b><a href="#cite_ref-auto3_37-0">^</a></b></span> <span class="reference-text"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1238218222"><cite id="CITEREFDaniel_Strauss2019" class="citation web cs1">Daniel Strauss (November 29, 2019). <a rel="nofollow" class="external text" href="https://markets.businessinsider.com/news/stocks/morgan-stanley-fires-places-on-leave-four-traders-mismarking-securities-2019-11-1028727080">"Morgan Stanley reportedly fires or places on leave at least 4 traders while investigating millions in hidden losses | Markets Insider"</a>. <i>Business Insider</i>. <a rel="nofollow" class="external text" href="https://web.archive.org/web/20210415185903/https://markets.businessinsider.com/news/stocks/morgan-stanley-fires-places-on-leave-four-traders-mismarking-securities-2019-11-1028727080">Archived</a> from the original on 2021-04-15<span class="reference-accessdate">. Retrieved <span class="nowrap">2020-11-15</span></span>.</cite><span title="ctx_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Ajournal&rft.genre=unknown&rft.jtitle=Business+Insider&rft.atitle=Morgan+Stanley+reportedly+fires+or+places+on+leave+at+least+4+traders+while+investigating+millions+in+hidden+losses+%26%23124%3B+Markets+Insider&rft.date=2019-11-29&rft.au=Daniel+Strauss&rft_id=https%3A%2F%2Fmarkets.businessinsider.com%2Fnews%2Fstocks%2Fmorgan-stanley-fires-places-on-leave-four-traders-mismarking-securities-2019-11-1028727080&rfr_id=info%3Asid%2Fen.wikipedia.org%3AValuation+%28finance%29" class="Z3988"></span></span> </li> <li id="cite_note-auto4-38"><span class="mw-cite-backlink"><b><a href="#cite_ref-auto4_38-0">^</a></b></span> <span class="reference-text"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1238218222"><cite id="CITEREFEugene_IngogliaTodd_FishmanMark_Daniels2020" class="citation web cs1">Eugene Ingoglia; Todd Fishman; Mark Daniels (April 22, 2020). <a rel="nofollow" class="external text" href="https://www.aoinvestigationsinsight.com/amid-falling-markets-valuation-challenges-and-mis-marking-fraud-risks-rise/">"Amid falling markets, valuation challenges and mis-marking fraud risks rise"</a>. <i>Investigations Insight</i>. <a rel="nofollow" class="external text" href="https://web.archive.org/web/20200928000720/http://www.aoinvestigationsinsight.com/amid-falling-markets-valuation-challenges-and-mis-marking-fraud-risks-rise/">Archived</a> from the original on September 28, 2020<span class="reference-accessdate">. Retrieved <span class="nowrap">November 15,</span> 2020</span>.</cite><span title="ctx_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Ajournal&rft.genre=unknown&rft.jtitle=Investigations+Insight&rft.atitle=Amid+falling+markets%2C+valuation+challenges+and+mis-marking+fraud+risks+rise&rft.date=2020-04-22&rft.au=Eugene+Ingoglia&rft.au=Todd+Fishman&rft.au=Mark+Daniels&rft_id=https%3A%2F%2Fwww.aoinvestigationsinsight.com%2Famid-falling-markets-valuation-challenges-and-mis-marking-fraud-risks-rise%2F&rfr_id=info%3Asid%2Fen.wikipedia.org%3AValuation+%28finance%29" class="Z3988"></span></span> </li> <li id="cite_note-auto6-39"><span class="mw-cite-backlink">^ <a href="#cite_ref-auto6_39-0"><sup><i><b>a</b></i></sup></a> <a href="#cite_ref-auto6_39-1"><sup><i><b>b</b></i></sup></a></span> <span class="reference-text"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1238218222"><cite id="CITEREFAziz_Abdel-Qader2020" class="citation web cs1">Aziz Abdel-Qader (January 31, 2020). <a rel="nofollow" class="external text" href="https://www.financemagnates.com/executives/moves/morgan-stanley-names-two-new-heads-for-fx-options-desk/">"Morgan Stanley Names Two New Heads for FX Options Desk; Silverman and Jeurissen are replacing Thiago Melzer, who was fired in November amid allegations of mismarking securities"</a>. <i>Finance Magnates</i>. <a rel="nofollow" class="external text" href="https://web.archive.org/web/20210226024902/https://www.financemagnates.com/executives/moves/morgan-stanley-names-two-new-heads-for-fx-options-desk/">Archived</a> from the original on February 26, 2021<span class="reference-accessdate">. Retrieved <span class="nowrap">November 15,</span> 2020</span>.</cite><span title="ctx_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Ajournal&rft.genre=unknown&rft.jtitle=Finance+Magnates&rft.atitle=Morgan+Stanley+Names+Two+New+Heads+for+FX+Options+Desk%3B+Silverman+and+Jeurissen+are+replacing+Thiago+Melzer%2C+who+was+fired+in+November+amid+allegations+of+mismarking+securities.&rft.date=2020-01-31&rft.au=Aziz+Abdel-Qader&rft_id=https%3A%2F%2Fwww.financemagnates.com%2Fexecutives%2Fmoves%2Fmorgan-stanley-names-two-new-heads-for-fx-options-desk%2F&rfr_id=info%3Asid%2Fen.wikipedia.org%3AValuation+%28finance%29" class="Z3988"></span></span> </li> <li id="cite_note-auto7-40"><span class="mw-cite-backlink">^ <a href="#cite_ref-auto7_40-0"><sup><i><b>a</b></i></sup></a> <a href="#cite_ref-auto7_40-1"><sup><i><b>b</b></i></sup></a></span> <span class="reference-text"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1238218222"><cite id="CITEREFGeorge_J._Benston2006" class="citation journal cs1">George J. Benston (July–August 2006). "Fair-value accounting: A cautionary tale from Enron". <i>Journal of Accounting and Public Policy</i>. <b>25</b> (4): <span class="nowrap">465–</span>484. <a href="/wiki/Doi_(identifier)" class="mw-redirect" title="Doi (identifier)">doi</a>:<a rel="nofollow" class="external text" href="https://doi.org/10.1016%2Fj.jaccpubpol.2006.05.003">10.1016/j.jaccpubpol.2006.05.003</a>.</cite><span title="ctx_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Ajournal&rft.genre=article&rft.jtitle=Journal+of+Accounting+and+Public+Policy&rft.atitle=Fair-value+accounting%3A+A+cautionary+tale+from+Enron&rft.volume=25&rft.issue=4&rft.pages=%3Cspan+class%3D%22nowrap%22%3E465-%3C%2Fspan%3E484&rft.date=2006-07%2F2006-08&rft_id=info%3Adoi%2F10.1016%2Fj.jaccpubpol.2006.05.003&rft.au=George+J.+Benston&rfr_id=info%3Asid%2Fen.wikipedia.org%3AValuation+%28finance%29" class="Z3988"></span></span> </li> <li id="cite_note-41"><span class="mw-cite-backlink"><b><a href="#cite_ref-41">^</a></b></span> <span class="reference-text">Kent Oz (2009). <a rel="nofollow" class="external text" href="https://ir.lawnet.fordham.edu/cgi/viewcontent.cgi?article=1344&context=jcfl">"Independent Fund Administrators As A Solution for Hedge Fund Fraud,"</a> <a rel="nofollow" class="external text" href="https://web.archive.org/web/20210303001324/https://ir.lawnet.fordham.edu/cgi/viewcontent.cgi?article=1344&context=jcfl">Archived</a> 2021-03-03 at the <a href="/wiki/Wayback_Machine" title="Wayback Machine">Wayback Machine</a> <i>Fordham Journal of Corporate & Financial Law</i>.</span> </li> </ol></div></div> <div class="navbox-styles"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><style data-mw-deduplicate="TemplateStyles:r1236075235">.mw-parser-output .navbox{box-sizing:border-box;border:1px solid #a2a9b1;width:100%;clear:both;font-size:88%;text-align:center;padding:1px;margin:1em auto 0}.mw-parser-output .navbox .navbox{margin-top:0}.mw-parser-output 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aria-labelledby="Corporate_finance_and_investment_banking430" style="padding:3px"><table class="nowraplinks hlist mw-collapsible autocollapse navbox-inner" style="border-spacing:0;background:transparent;color:inherit"><tbody><tr><th scope="col" class="navbox-title" colspan="2"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1239400231"><div class="navbar plainlinks hlist navbar-mini"><ul><li class="nv-view"><a href="/wiki/Template:Corporate_finance_and_investment_banking" title="Template:Corporate finance and investment banking"><abbr title="View this template">v</abbr></a></li><li class="nv-talk"><a href="/wiki/Template_talk:Corporate_finance_and_investment_banking" title="Template talk:Corporate finance and investment banking"><abbr title="Discuss this template">t</abbr></a></li><li class="nv-edit"><a href="/wiki/Special:EditPage/Template:Corporate_finance_and_investment_banking" 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style="width:100%;padding:0"><div style="padding:0 0.25em"></div><table class="nowraplinks navbox-subgroup" style="border-spacing:0"><tbody><tr><th scope="row" class="navbox-group" style="width:1%;line-height:1.3em;"><a href="/wiki/Public_offering" title="Public offering">Equity offerings</a></th><td class="navbox-list-with-group navbox-list navbox-even" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/At-the-market_offering" title="At-the-market offering">At-the-market offering</a></li> <li><a href="/wiki/Book_building" title="Book building">Book building</a></li> <li><a href="/wiki/Bookrunner" title="Bookrunner">Bookrunner</a></li> <li><a href="/wiki/Bought_deal" title="Bought deal">Bought deal</a></li> <li><a href="/wiki/Bought_out_deal" title="Bought out deal">Bought out deal</a></li> <li><a href="/wiki/Corporate_spin-off" title="Corporate spin-off">Corporate spin-off</a></li> <li><a href="/wiki/Direct_public_offering" title="Direct public offering">Direct public offering</a></li> <li><a href="/wiki/Equity_carve-out" title="Equity carve-out">Equity carve-out</a></li> <li><a href="/wiki/Follow-on_offering" title="Follow-on offering">Follow-on offering</a></li> <li><a href="/wiki/Greenshoe" title="Greenshoe">Greenshoe</a> <ul><li><a href="/wiki/Reverse_greenshoe" class="mw-redirect" title="Reverse greenshoe">Reverse</a></li></ul></li> <li><a href="/wiki/Initial_public_offering" title="Initial public offering">Initial public offering</a></li> <li><a href="/wiki/Pre-IPO" title="Pre-IPO">Pre-IPO</a></li> <li><a href="/wiki/Private_placement" title="Private placement">Private placement</a></li> <li><a href="/wiki/Public_offering" title="Public offering">Public offering</a></li> <li><a href="/wiki/Rights_issue" title="Rights issue">Rights issue</a></li> <li><a href="/wiki/Seasoned_equity_offering" title="Seasoned equity offering">Seasoned equity offering</a></li> <li><a href="/wiki/Secondary_market_offering" title="Secondary market offering">Secondary market offering</a></li> <li><a href="/wiki/Underwriting" title="Underwriting">Underwriting</a></li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%;line-height:1.3em;"><a href="/wiki/Mergers_and_acquisitions" title="Mergers and acquisitions">Mergers and<br />acquisitions</a></th><td class="navbox-list-with-group navbox-list navbox-odd" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Buy_side" title="Buy side">Buy side</a></li> <li><a href="/wiki/Contingent_value_rights" title="Contingent value rights">Contingent value rights</a></li> <li><a href="/wiki/Control_premium" title="Control premium">Control premium</a></li> <li><a href="/wiki/Demerger" title="Demerger">Demerger</a></li> <li><a href="/wiki/Divestment" title="Divestment">Divestment</a></li> <li><a href="/wiki/Drag-along_right" title="Drag-along right">Drag-along right</a></li> <li><a href="/wiki/Management_due_diligence" title="Management due diligence">Management due diligence</a></li> <li><a href="/wiki/Managerial_entrenchment" class="mw-redirect" title="Managerial entrenchment">Managerial entrenchment</a></li> <li><a href="/wiki/Mandatory_offer" title="Mandatory offer">Mandatory offer</a></li> <li><a href="/wiki/Minority_discount" title="Minority discount">Minority discount</a></li> <li><a href="/wiki/Pitch_book" title="Pitch book">Pitch book</a></li> <li><a href="/wiki/Pre-emption_right" title="Pre-emption right">Pre-emption right</a></li> <li><a href="/wiki/Proxy_fight" title="Proxy fight">Proxy fight</a></li> <li><a href="/wiki/Post-merger_integration" title="Post-merger integration">Post-merger integration</a></li> <li><a href="/wiki/Sell_side" title="Sell side">Sell side</a></li> <li><a href="/wiki/Shareholder_rights_plan" title="Shareholder rights plan">Shareholder rights plan</a></li> <li><a href="/wiki/Special-purpose_entity" title="Special-purpose entity">Special-purpose entity</a></li> <li><a href="/wiki/Special_situation" title="Special situation">Special situation</a></li> <li><a href="/wiki/Squeeze-out" title="Squeeze-out">Squeeze-out</a></li> <li><a href="/wiki/Staggered_board_of_directors" class="mw-redirect" title="Staggered board of directors">Staggered board of directors</a></li> <li><a href="/wiki/Stock_swap" title="Stock swap">Stock swap</a></li> <li><a href="/wiki/Super-majority_amendment" class="mw-redirect" title="Super-majority amendment">Super-majority amendment</a></li> <li><a href="/wiki/Corporate_synergy" title="Corporate synergy">Synergy</a></li> <li><a href="/wiki/Tag-along_right" title="Tag-along right">Tag-along right</a></li> <li><a href="/wiki/Takeover" title="Takeover">Takeover</a> <ul><li><a href="/wiki/Reverse_takeover" title="Reverse takeover">Reverse</a></li></ul></li> <li><a href="/wiki/Tender_offer" title="Tender offer">Tender offer</a></li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%;line-height:1.3em;"><a href="/wiki/Leverage_(finance)" title="Leverage (finance)">Leverage</a></th><td class="navbox-list-with-group navbox-list navbox-even" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Debt_restructuring" title="Debt restructuring">Debt restructuring</a></li> <li><a href="/wiki/Debtor-in-possession_financing" title="Debtor-in-possession financing">Debtor-in-possession financing</a></li> <li><a href="/wiki/Dividend_recapitalization" title="Dividend recapitalization">Dividend recapitalization</a></li> <li><a href="/wiki/Financial_sponsor" title="Financial sponsor">Financial sponsor</a></li> <li><a href="/wiki/Leveraged_buyout" title="Leveraged buyout">Leveraged buyout</a></li> <li><a href="/wiki/Leveraged_recapitalization" title="Leveraged recapitalization">Leveraged recapitalization</a></li> <li><a href="/wiki/High-yield_debt" title="High-yield debt">High-yield debt</a></li> <li><a href="/wiki/Private_equity" title="Private equity">Private equity</a></li> <li><a href="/wiki/Project_finance" title="Project finance">Project finance</a></li></ul> </div></td></tr></tbody></table><div></div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%;line-height:1.3em; text-align:left;"><a class="mw-selflink selflink">Valuation</a></th><td class="navbox-list-with-group navbox-list navbox-odd" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Accretion/dilution_analysis" title="Accretion/dilution analysis">Accretion/dilution analysis</a></li> <li><a href="/wiki/Adjusted_present_value" title="Adjusted present value">Adjusted present value</a></li> <li><a href="/wiki/Associate_company" title="Associate company">Associate company</a></li> <li><a href="/wiki/Business_valuation" title="Business valuation">Business valuation</a></li> <li><a href="/wiki/Conglomerate_discount" title="Conglomerate discount">Conglomerate discount</a></li> <li><a href="/wiki/Cost_of_capital" title="Cost of capital">Cost of capital</a> <ul><li><a href="/wiki/Weighted_average_cost_of_capital" title="Weighted average cost of capital">Weighted average</a></li></ul></li> <li><a href="/wiki/Discounted_cash_flow" title="Discounted cash flow">Discounted cash flow</a></li> <li><a href="/wiki/Economic_value_added" title="Economic value added">Economic value added</a></li> <li><a href="/wiki/Enterprise_value" title="Enterprise value">Enterprise value</a></li> <li><a href="/wiki/Fairness_opinion" title="Fairness opinion">Fairness opinion</a></li> <li><a href="/wiki/Financial_modeling" title="Financial modeling">Financial modeling</a></li> <li><a href="/wiki/Free_cash_flow" title="Free cash flow">Free cash flow</a> <ul><li><a href="/wiki/Free_cash_flow_to_equity" title="Free cash flow to equity">Free cash flow to equity</a></li></ul></li> <li><a href="/wiki/Market_value_added" title="Market value added">Market value added</a></li> <li><a href="/wiki/Minority_interest" title="Minority interest">Minority interest</a></li> <li><a href="/wiki/Mismarking" title="Mismarking">Mismarking</a></li> <li><a href="/wiki/Modigliani%E2%80%93Miller_theorem" title="Modigliani–Miller theorem">Modigliani–Miller theorem</a></li> <li><a href="/wiki/Net_present_value" title="Net present value">Net present value</a></li> <li><a href="/wiki/Pure_play#Pure_play_method" title="Pure play">Pure play</a></li> <li><a href="/wiki/Real_options_valuation" title="Real options valuation">Real options</a></li> <li><a href="/wiki/Residual_income_valuation" title="Residual income valuation">Residual income</a></li> <li><a href="/wiki/Stock_valuation" title="Stock valuation">Stock valuation</a></li> <li><a href="/wiki/Sum-of-the-parts_analysis" title="Sum-of-the-parts analysis">Sum-of-the-parts analysis</a></li> <li><a href="/wiki/Tax_shield" title="Tax shield">Tax shield</a></li> <li><a href="/wiki/Terminal_value_(finance)" title="Terminal value (finance)">Terminal value</a></li> <li><a href="/wiki/Valuation_using_multiples" title="Valuation using multiples">Valuation using multiples</a></li></ul> </div></td></tr><tr><td class="navbox-abovebelow" colspan="2"><div> <ul><li><span class="noviewer" typeof="mw:File"><span title="List-Class article"><img alt="" src="//upload.wikimedia.org/wikipedia/en/thumb/d/db/Symbol_list_class.svg/16px-Symbol_list_class.svg.png" decoding="async" width="16" height="16" class="mw-file-element" srcset="//upload.wikimedia.org/wikipedia/en/thumb/d/db/Symbol_list_class.svg/23px-Symbol_list_class.svg.png 1.5x, //upload.wikimedia.org/wikipedia/en/thumb/d/db/Symbol_list_class.svg/31px-Symbol_list_class.svg.png 2x" data-file-width="180" data-file-height="185" /></span></span> <a href="/wiki/List_of_investment_banks" title="List of investment banks">List of investment banks</a></li> <li><span class="noviewer" typeof="mw:File"><span title="List-Class article"><img alt="" src="//upload.wikimedia.org/wikipedia/en/thumb/d/db/Symbol_list_class.svg/16px-Symbol_list_class.svg.png" decoding="async" width="16" height="16" class="mw-file-element" srcset="//upload.wikimedia.org/wikipedia/en/thumb/d/db/Symbol_list_class.svg/23px-Symbol_list_class.svg.png 1.5x, //upload.wikimedia.org/wikipedia/en/thumb/d/db/Symbol_list_class.svg/31px-Symbol_list_class.svg.png 2x" data-file-width="180" data-file-height="185" /></span></span> <a href="/wiki/Outline_of_finance" title="Outline of finance">Outline of finance</a></li></ul> </div></td></tr></tbody></table></div> <div class="navbox-styles"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1236075235"><style data-mw-deduplicate="TemplateStyles:r1038841319">.mw-parser-output .tooltip-dotted{border-bottom:1px dotted;cursor:help}</style><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1038841319"><link 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