This document provides an overview of business valuation, including definitions of key valuation concepts and techniques. It discusses the purpose of valuation in areas like business acquisitions, corporate finance, and dispute resolution. Some of the main valuation concepts covered include market value, fair value, book value, intrinsic value, investment value, liquidation value, and replacement value. The document also outlines the basic steps in the valuation process as understanding the business, estimating performance, selecting a model, converting estimates to a value, and applying inputs.

1. MODULE 1: BASICS OF BUSINESS
VALUATION
Contents: Introduction, Purpose of valuation,
distinction between price and value, Principles
and Techniques of Valuation, Role of Valuation,
key areas of valuation, Concepts of value:-
Market Value, Fair value, Book Value, Intrinsic
value, Investment value, Liquidation value,
Replacement value. Role of valuation in Business
acquisition and Corporate finance, Valuation
process.

2. VALUATION-MEANING
• The technique of estimation or
determining the fair price or
value of property such as
engineering structures
building, a factory, other
of
various types, land etc.
• By valuation the present value
of a property is defined
• The present value of property
may be decided by its selling
price, or income or rent it may
fetch
• The value of property depends
on its structure, life,
bank
maintenance, location,
interest etc.

3. VALUATION-INTRODUCTION
• A process and a set of
procedures used to estimate
the Economic value of an
owner's interest in a business
• Used by financial market
participants to determine the
price theyarewilling to pay
or receive to effect a sale of a business
• Used to resolve disputes related to estate and gift taxation,
divorce litigation, allocate business purchase price among
business assets, establish a formula for estimating the value of
many other business and legal purposes such as
partners' ownership interest for buy-sell agreements, and
in
shareholdersdeadlock, divorce litigation and estatecontest

4. PURPOSE OF VALUATION
• Buying orselling property
• Taxation
• Rent fixation
• Securityof loans or
mortgage
• Compulsoryacquisition
• To claim insurance return
• Court fee stamp
• Partitions

6. PRINCIPLES OF VALUATION
• The value of a business is defined
onlyata specific point in time
• Value primarily varies in
accordance with the capacity of a
business to generate future cash
flow
• The market commands what the
proper rate of return for acquirers
is
• The value of a business may be
impacted by underlying net
tangible assets
influenced by
of future cash
• Value is
transferability
flows
• Value is impacted by liquidity

7. CONCEPTS OF VALUE-MARKET
VALUE
• Commonly used to refer to the
market capitalization of a
publicly traded company
• Obtained by multiplying the
of its outstanding
by the current share
number
shares
price
• Easiest to determine for
exchange-traded instruments
such as stocksand futures
• Challenging to ascertain for
over-the-counter instruments
like fixed income securities

8. FAIR VALUE
• Investment-it refers to an
asset's sale price agreed
upon by a willing buyer and
seller, assuming both parties
are knowledgeable and enter
the transaction freely.
• For example, securities have
a fair value that's determined
by a market where they are
traded.
• Accounting: represents the
estimated worth of various
assets and liabilities that
must be listed on a
company's books.

9. BOOK VALUE
• Book value is equal to its
carrying value on the balance
sheet, and companies calculate
it netting the asset against its
accumulated depreciation.
• Book value is also the net asset
value of a company calculated
as total assets
intangible assets
minus
(patents,
goodwill) and liabilities.
• For the initial outlay of an
investment, book value may be
net or gross of expenses such
as trading costs, sales taxes,
servicecharges and soon.

10. INTRINSIC VALUE
value is the
• Intrinsic
perceived or calculated
value of an asset, an
or a
investment,
company
• The term finds use in
fundamental analysis to
estimate the value of a
company and its cash
flows

11. INVESTMENT VALUE
• The amount of money an
investor would pay for a
property
• It refers to an asset’s
specific value based on
certain parameters
• It is an individual’s
measurement of the asset’s
propertyvalue
• Important to potential
buyers of a property
because of anticipated rate
of return

12. LIQUIDATION VALUE
• Liquidation value is the total
worth of a company's
physical assets if it were to go
out of business and the assets
sold
• The liquidation value is the
value of company real estate,
fixtures, equipment, and
inventory
• Intangible assets are
excluded from a company's
liquidation value
• Important in the case of
bankruptcies and workouts

13. REPLACEMENT VALUE
• The amount that an entity would
have to pay to replace an asset at
the present time, according to its
current worth
• Replacement cost is the actual
cost to replace an item or
structure at its pre-loss condition
• For insurance policies for
property insurance, a contractual
stipulation that the lost asset
must be actually repaired or
replaced before the replacement
cost can be paid is common
contributes to arson
• Prevents overinsurance, which
and
insurance fraud

14. ROLE OF VALUATION IN BUSINESS
ACQUISITION
• Better Knowledge
of Company Assets
• Understanding
of Company Resale
Value
• Obtain a True Company
Value
• Better During
Mergers/Acquisitions
• Access to More
Investors

15. ROLE OF VALUATION IN
CORPORATE FINANCE
• Expansion decision
• Venture capital and
private equity
• Tool of value
enhancement

16. VALUATION PROCESS
Understand your business in which you are operating
Have an estimate of the company performance
Select the appropriate valuation model suitable foryour business
Convert estimates to a valuation
Applying the inputsof valuation

17. END OF MODULE 1