book

Business Valuation

Name: Business Valuation
ISBN: 9781394204731

by NACVA, Parnell Black, Lari B. Masten

March 2026

Beginner

464 pages

19h 4m

English

Wiley

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Cover
Table of Contents
Title Page
Copyright
About NACVA’s Business Valuation Credential: Certified Valuation Analyst (CVA)
About NACVA’s Financial Forensics Credential: Master Analyst in Financial Forensics (MAFF)
Foreword
Introduction
Chapter 1: Overview: Basics of the Engagement Process and Foundation for Valuation Analysis
BRIEF HISTORY OF THE VALUATION INDUSTRYVALUATION CONCEPTSPURPOSES FOR VALUING A BUSINESSSTANDARDS OF VALUEPREMISE OF VALUEOTHER FOUNDATIONAL CONSIDERATIONSDIFFERENCE BETWEEN A VALUATOR AND AN ADVOCATEVALUATION PROFESSIONAL ORGANIZATIONSOVERVIEW OF LEGAL AND REGULATORY REQUIREMENTS DRIVEN BY REGULATORY BODIESPROFESSIONAL STANDARDS AS A VALUATION ROADMAPREVIEW QUESTIONSNOTES
Chapter 2: Qualitative Analysis
APPLICATION TO STANDARDS AND GENERALLY ACCEPTED PRACTICESGATHERING THE INFORMATIONAPPLYING THE INFORMATIONSITE VISITS AND INTERVIEWSECONOMIC ANALYSISINDUSTRY ANALYSIS AND INDUSTRY ANALYSIS TOOLSOTHER QUALITATIVE FACTORSIMPACT OF QUALITATIVE FACTORS ON THE VALUATION PROCESSQUALITATIVE ANALYSIS—REPORT PRESENTATIONREVIEW QUESTIONSNOTES

Chapter 3: Quantitative Analysis
VALUATION DATE CONSIDERATIONSQUANTITATIVE ANALYSIS FRAMEWORKFINANCIAL STATEMENT AND TREND ANALYSISKEY FINANCIAL RATIOS—FORMULAS AND INTERPRETATIONSOTHER USEFUL FINANCIAL TESTS TO CONSIDERINDUSTRY BENCHMARKING ANALYSIS AND SOURCES OF DATA—COMPARISON OF THE SUBJECT COMPANY TO ITS INDUSTRY PEER GROUPSTATISTICAL ANALYSIS USED IN COMBINATION WITH FINANCIAL STATEMENT ANALYSIS, NORMALIZING ADJUSTMENTS, AND OTHER QUANTITATIVE TECHNIQUESCONSIDERATION OF OTHER EVIDENCE IN THE FORECASTING PROCESSREVIEW QUESTIONSNOTES
Chapter 4: Normalization Process
TAX VERSUS GAAP VERSUS ECONOMIC SUBSTANCE IN VALUATIONOBJECTIVES OF THE LAYERS OF NORMALIZING FINANCIAL STATEMENTSLEVELS OF VALUELAYERS OF NORMALIZING ADJUSTMENTS—OVERVIEWLAYER ONE: NORMALIZING FINANCIAL STATEMENTS FOR TREND ANALYSIS AND BENCHMARKINGCATEGORIES OF LAYER ONE: NORMALIZATION ADJUSTMENTS FOR FINANCIAL STATEMENT TREND ANALYSIS AND BENCHMARKINGLAYER TWO: METHODS-BASED AND LEVELS OF VALUE ECONOMIC NORMALIZATION ADJUSTMENTSCATEGORIES OF LAYER TWO: METHODS-BASED AND LEVELS OF VALUE NORMALIZATION ADJUSTMENTSUNDERSTANDING COST OF CAPITAL5 CONSIDERATIONS IN THE NORMALIZATION PROCESSCRITICALLY EVALUATING NORMALIZATION ADJUSTMENTSCOMMON METHODS-BASED ECONOMIC NORMALIZING ADJUSTMENTS TO THE BALANCE SHEETCOMMON METHODS-BASED ECONOMIC NORMALIZING ADJUSTMENTS TO THE INCOME STATEMENTSINCOME TAX EFFECT ON ECONOMIC AND NORMALIZING ADJUSTMENTSREVIEW QUESTIONSAPPENDIX 4.A: CONSTRUCTING METHODS-BASED NORMALIZING ADJUSTMENTS FOR THE NORMALIZED BALANCE SHEETSAPPENDIX 4.B: CONSTRUCTING METHODS-BASED NORMALIZATION ADJUSTMENTS FOR THE NORMALIZED INCOME STATEMENTSNOTES
Chapter 5: Approaches and Methods Overview
THE VALUATION PROCESS PYRAMIDNATURE OF THE BUSINESSVALUATION APPROACHESAPPLYING MULTIPLE VALUATION METHODSREVIEW QUESTIONSNOTES
Chapter 6: Benefit Streams
FORECASTS AND PROJECTIONSEQUITY VERSUS INVESTED CAPITAL ECONOMIC BENEFIT STREAMTYPES OF ECONOMIC BENEFIT STREAMSCONSIDERATION OF ECONOMIC AND INDUSTRY BENCHMARKING AND OUTLOOKSHORT-TERM VERSUS LONG-TERM CONSIDERATIONSCAPITALIZED CASH FLOW (STABLE OR CONSISTENT BENEFIT STREAM ASSUMPTIONS)DISCOUNTED CASH FLOW (VARIABLE BENEFIT STREAM ASSUMPTIONS)GROWTH ASSUMPTIONSTAX-AFFECTING PASS-THROUGH ENTITIESREVIEW QUESTIONSAPPENDIX 6.A: VAN VLEET MODELNOTES
Chapter 7: Cost of Capital Concepts
DISCOUNT RATES AND CAPITALIZATION RATESRISK ADJUSTED FACTORSKEY VARIABLES IN ESTIMATING THE COST OF CAPITALCOST OF CAPITAL MODELSCAPITAL ASSET PRICING MODEL (CAPM)BUILD-UP MODEL (BUM)WEIGHTED AVERAGE COST OF CAPITAL (WACC)MODIFICATIONS TO THE COST OF CAPITAL TO MATCH DIFFERENT BENEFIT STREAMSGROWTH RATESDO NOT DOUBLE COUNTEXERCISE: MATCHING BENEFIT STREAMS TO THE APPROPRIATE DISCOUNT OR CAPITALIZATION RATEREVIEW QUESTIONSAPPENDIX 7.A: BEYOND CAPM-BASED MODELS: WHAT TO KNOW AND WHAT TO AVOIDNOTES
Chapter 8: Asset Approach and Methods
BOOK VALUEADJUSTED NET ASSETS METHODLIMITATIONS AND APPLICABILITY OF THE ASSET APPROACHREVIEW QUESTIONSNOTES
Chapter 9: Income Approach and Methods
ORIGIN OF THE THEORY: THE GORDON GROWTH MODELOVERVIEW AND EXAMPLES OF SINGLE-STAGE AND MULTI-STAGE PATTERNSSELECTING A SINGLE-STAGE OR A MULTI-STAGE MODEL4ADDITIONAL CONSIDERATIONS FOR THE BENEFIT STREAMSNET CASH FLOW TO EQUITY VERSUS NET CASH FLOW TO INVESTED CAPITALSINGLE STAGE IN DEPTH: CCF METHODEXAMPLES USING THE CCF METHODMULTI-STAGE IN DEPTH: DISCOUNTED CASH FLOW METHODMULTI-STAGE: TWO-STAGE MODELEXAMPLES USING A TWO-STAGE DISCOUNTED CASH FLOW METHODOTHER FACTORS TO CONSIDEREND-OF-PERIOD VERSUS MID-PERIOD CONVENTIONADVANTAGES AND DISADVANTAGES OF THE INCOME APPROACHOTHER TERMINAL VALUE CALCULATIONSHYBRID MODELS FOR VALUING INTANGIBLES AND GOODWILLEXCESS EARNINGS TREASURY METHODCAPITALIZED EXCESS EARNINGS METHOD (REASONABLE RATE METHOD)ADVANTAGES AND DISADVANTAGES OF THE EEMREVIEW QUESTIONSAPPENDIX 9.A: IMPACT OF VARIOUS GROWTH RATES ON THE CAPITALIZATION PROCESSNOTES
Chapter 10: Market Approach and Methods
PRIMARY MARKET APPROACH METHODSTOTAL MARKET ANALYSIS IN THE CTM VERSUS BEST-FIT BENCHMARKING IN THE GPCMCOMPLETED TRANSACTION METHODGUIDELINE PUBLIC COMPANY METHODPRIOR TRANSACTIONS INVOLVING THE SUBJECT COMPANYSTATISTICAL ANALYSIS COMMONLY USED IN THE MARKET APPROACHREVIEW QUESTIONSNOTES
Chapter 11: Discounts, Premiums, and Other Adjustments
LEVELS OF VALUEDEVELOPMENT OF ADJUSTMENTS FOR CONTROL OR LACK OF CONTROLSOURCES OF EMPIRICAL DATA ON CONTROLLING/NONCONTROLLING INTERESTSCALCULATING THE PREMIUMNONCONTROLLING DISCOUNTS AND FAMILY TRANSFERSSWING VOTE PREMIUMSOTHER JUDICIAL DEVELOPMENTS AFFECTING CONTROL PREMIUMS AND NONCONTROLLING DISCOUNTSDISCOUNTS FOR LACK OF MARKETABILITY/LIQUIDITYESTIMATING A DISCOUNT FOR LACK OF LIQUIDITYEMPIRICAL DATA SUPPORTING DLOMSTHE MANDELBAUM DECISION AND ITS EFFECT ON MARKETABILITY DISCOUNTSJUDICIAL DEVELOPMENTS AND THE DLOMQUANTITATIVE MARKETABILITY DISCOUNT MODELOTHER DISCOUNTSCONCLUSIONREVIEW QUESTIONSNOTES
Chapter 12: Reconciliation and Sanity Checks
RECONCILIATIONSANITY CHECKSIMPORTANCE OF RECONCILIATION AND SANITY CHECKSBEST PRACTICES FOR RECONCILIATION AND SANITY CHECKSCOMMON ERRORS IN THE DEVELOPMENT AND REPORTING OF A VALUATION ANALYSISCONCLUSIONREVIEW QUESTIONSNOTE
Chapter 13: Conclusion or Calculated Value—Professional Standards
NACVA PROFESSIONAL STANDARDSUS AND INTERNATIONAL STANDARDS COMPARISON CHARTSINTERNATIONAL BUSINESS VALUATION GLOSSARIESREVIEW QUESTIONSNOTES
Chapter 14: Special Purpose Valuation
MERGERS AND ACQUISITIONSLITIGATIONCOMPLEX CAPITAL STRUCTURESREVIEW QUESTIONSAPPENDIX 14.A: ESOPSAPPENDIX 14.B: FINANCIAL REPORTINGAPPENDIX 14.C: INTANGIBLE ASSETSAPPENDIX 14.D: PENSION BENEFITSAPPENDIX 14.E: INSURANCE POLICIESNOTES
Chapter 15: Engagement Acceptance and Planning
VALUATION ENGAGEMENT ACCEPTANCEENGAGEMENT ACCEPTANCE AND CHECKLISTSADDRESSING CONFLICTS OF INTEREST IN VALUATION ENGAGEMENTSREFERRAL SOURCESCLIENTSQUALIFICATIONSSUBJECT TO BE VALUEDINTEREST TO BE VALUEDVALUATION DATEPURPOSE AND USE OF THE VALUATIONSTANDARDS OF VALUEPREMISE OF VALUEASSUMPTIONS, LIMITING CONDITIONS, AND SCOPE LIMITATIONSENGAGEMENT LETTERSRETAINERSEFFECTIVE RESEARCHCONCLUSIONREVIEW QUESTIONSNOTES
Chapter 16: Effective Report Writing
TYPES OF REPORTSUSE OF APPENDICES AND EXHIBITSLIABILITY ISSUES AND DISCLAIMERSEFFECTIVE REPORT WRITINGWRITING TECHNIQUES FOR VALUATION REPORTSCONCLUSIONREVIEW QUESTIONSNOTES
About the Contributors
Glossary
Afterword
Court Case Index
Subject Index
End User License Agreement

Content preview from Business Valuation

Introduction

THE VALUATION PROCESS PYRAMID

Pyramid diagram of 13 steps in a valuation process, from determining objectives at the base to ensure alignment with standards at the top.

This book is structured around the valuation process pyramid, which serves as both a conceptual framework and a navigational guide for Chapters 1 through 13. The pyramid illustrates key business valuation principles and outlines the steps involved in constructing a solid valuation, beginning with determining the valuation’s purpose and establishing the other foundational elements that support the structure.

Purpose is the cornerstone of any valuation analysis. It drives the applicable standard of value and premise of value, which in turn drive the financial analysis that informs the applicable valuation approaches and methods. A business valuation is only meaningful if the valuation analyst properly considers the assumptions, standard of value, and regulatory environment that align with the valuation’s purpose.

Each step in the pyramid builds on the one before it, starting with an understanding of the engagement and ascending through the analysis of financial and economic data, the application of valuation approaches and methods, and the adjustment and validation of the results. Ultimately, this progression reaches the capstone—a credible conclusion of value that aligns with professional standards. By following this pyramid structure, readers are introduced to valuation as a carefully layered process, starting with foundational ...

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Business Valuation

by NACVA, Parnell Black, Lari B. Masten

Introduction

THE VALUATION PROCESS PYRAMID

Become an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
and much more.