Earlier this method was quite popular among the corporate for determining the value of the firm, but with the increase in the volatility in the Valuation approaches to accounting essay, this method is not used by the organizations nowadays.
Now, as the number of outstanding shares of linked in are In that case, Cash flow discounting method In this method, the company uses cash flow which the firm will generate in future for determining the value of the company.
Where CF are the cash flow generated by the firm Vn is scrap value of the company after n years k is discounting factor.
For Example currently LinkedIn is valued 23 times its sales Goodwill Method This value is generally above all the value of the company, then be it book value of adjusted value. In most of the cases m ranges between 3 and 5. In this, the buyer agrees to pay the seller the value of the firm and in addition also ready to pay super profits for certain years Hill, n.
Where tm is the interest rate earned of fixed income securities which is multiplied by a coefficient which lies between 1. The future cash flow are first discounted using a suitable discounting factor and then are used Hill, n.
In this method, following expression is used for determining the value of a firm: This is similar to above method; just the value of goodwill becomes equal to the number of years of super profits. In this method, the value of the company is determined by multiple the sales of the company with certain number.
In other words it can be said that goodwill of the company can be valued as the n times the net income of the company or a certain fixed percentage over its revenue or turnover Gabehart, Risk bearing and Risk Free Rate Method: It can be also calculated by subtracting liabilities from total assets.
It is calculated by multiplying the PER of the firm with that of its net annual income. Where i is risk free rate of return and t is risk bearing rate of return. Value of the dividends Since LinkedIn does not give dividends, thus this method is not applicable on this company for its valuation.
It can be expressed as: This method makes use of earnings of the Valuation approaches to accounting essay, that is, its net annual income and PER Gregory and Hicks, Direct Method or Anglo Saxon Method: Super profit is defined as difference between the net profit of the company and capital equal to the value of the assets of the company placed at interest rate i Yegge, Therefore, in the case of LinkedIn, if m is assumed to be 5, its value on the basis of this method will be: Alternative uses The subsequent paragraphs will discuss various kinds of valuation techniques and in addition to this, will apply these techniques on LinkedIn to determine its value.
In revenue based model the annual revenue generated by the company is multiplied by a times factor depending upon the market trend. Generally good will reflects the value of the intangible assets of the company which are mostly not reported on the balance sheet, but when compared to other companies they deliver significant advantage to the companies.
For LinkedIn let i be 10 per cent and t be 15 per cent. This is not an example of the work written by our professional essay writers. This method makes use of below shown formula Where I is the normal interest rate paid on the long term treasury bonds. Similarly, The above method is also known as net asset value method.
For LinkedIn, Equity value can be calculated as: Value of Earnings PER: IN this case, the company calculates its value by determining the super profit generated by the company.Goodwill Valuation Approaches, Methods, and Procedures.
Robert F. Reilly, CPA. the generally accepted goodwill valuation approaches, methods, and procedures. And, this dental, legal, accounting, engineering, or other type of professional practice. This goodwill type is distinguished from the other goodwill types because. Valuation Approaches to Accounting for the Simple Company Historical Cost Throughout the financial history of the United States, historical costing has been the orthodoxy in published financial statements.
But severe inflationary periods in this. Approaches Valuation Methods Techniques Cost Underlying Assets Adjusted net asset value, liquidation Typical Techniques Accounting book value, adjusted book value, liquida-tion value Summary of Business Valuation Approaches 84 No matter what technique is chosen, consideration must be given to the selec.
Valuation Approaches and Metrics: A Survey Article there are four approaches to valuation. The first, discounted liquidation and accounting valuation, is built around valuing the existing assets of a firm, with accounting estimates of value or book value often used as a starting point. The third, relative valuation, estimates the value.
Dissertation and Essay Samples: How can we measure the valuation of a company like LinkedIn The following essay or dissertation on the topic of accounting has been submitted by a student so that it may help you with your research work and dissertation help.
Challenges and approaches in international company valuation - Case study. valuation methods: balance sheet-based methods, income statement-based methods, mixed Accounting Experts Abbreviated income Others Equity cash flow Dividends Free cash flow Capital cash flow APV EVA Economic profit Cash value added CFROI Black and Scholes Investment.Download