Corporate Valuations
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Advanced Business and Financial Management — CAIIB.
One-liners from this chapter
Free sample — 8 of 102 rapid-fire Q&A cards.
Define corporate valuation.
Process of determining economic worth of a business entity; underpins equity, M&A, lending, IPO pricing, NPA resolution decisions.
What are the three families of valuation methods?
Market Approach (compare peers), Income Approach (discount future cash flows), Cost Approach (sum underlying assets).
Define Book Value.
Value of asset or business recorded in audited Balance Sheet; equals Historical Cost minus Accumulated Depreciation.
What is Book Value of Equity?
Share Capital plus Reserves & Surplus; also called Net Worth or Shareholders' Funds.
State the weakness of Book Value.
Ignores inflation, replacement cost, brand value, organisational capital, growth prospects; understates going-concern value.
Define Market Capitalisation.
Number of outstanding equity shares multiplied by current market price per share; equity value only, excludes debt.
Define Enterprise Value.
Value of entire company including debt, preference shares, minority interests, net of surplus cash; price acquirer pays for debt-free firm.
When is Enterprise Value the right denominator?
When comparing companies with different capital structures (e.g., geared cement firm vs. cash-rich IT firm).
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