The purpose of the Business Valuation is the most important factor in the valuation process and drives how the assignment is to be performed. A valuation performed on a going-concern basis would be very different than a valuation of the same business performed for liquidation purposes.
When performed on a going-concern basis, the valuation of a company is, in general, based on the projected earning of the company. (In other words, how much could a hypothetical buyer of the company expect to receive as a return on his or her investment.) These projections are based on the current and historical financial condition of the company as represented by the financial information provided to the appraiser. They are also based on company management's estimate of future earnings.
The entire valuation assignment generally takes approximately three (3) weeks after all pertinent company information has been received by the valuation analyst. This information includes five (5) years of historical financial statements, (or tax returns), including the most recent interim statements (or quarterly returns). This information also includes any company background information (i.e. year of incorporation or formation, management experience, information on facilities, customer base and competition, shareholder/ownership breakdown), extraordinary expenses incurred during the year, and managements projected earnings for the next five years.
Prior to the completion of the assignment, a Discussion Draft is sent to management to verify that an accurate financial picture has been presented to FT Solutions, Inc. and that the projections made are a realistic expectation of future results. After this Discussion Draft is reviewed and accepted by the company's management, the final report is issued.
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