Data Driven Decisions

Introduction

Systems Engineering Overview: Customer Affinity and Context Diagram

This book is primarily concerned with corporate valuations and systems engineering in relation to how they can be combined to help business owners, analysts, investors, and advisors understand the intangible assets of a business.

To achieve an adequate examination of the three issues of corporate valuations, systems engineering, and intangible assets, we have to break each of them down into their components to understand exactly what we mean by the respective terms.

Corporate valuation is a simple term to understand; it simply means the value of a company. Valuation, as we will get into later in this book, is generally determined by one of the two methodologies – the income methodology and the comparable methodology. The income methodology is derived from the forecast of the cash flow of the business that is then discounted back based on the time value of money. One arrives at the present value of the business based on its cash flows. The second method of corporate valuation that is commonly used is the comparable methodology, where one locates similar companies that have gone through transactions in capital markets based on some kind of multiple or based on some kind of identifier and then applies that identifier to the business in question.

Multiples are most commonly the enterprise value of revenue or enterprise value over earnings before interest, taxes, depreciation, and amortization (EBITDA), ...