Business Valuation
• Karen Grossman Tabak
• 529-9678 or Alma 529-9418 or email
tabak@maryville.edu
Agenda
Time Item
6:00 Housekeeping
Purpose
To clear up questions
6:15
Paula Hubbard
To strengthen research skills
6:30
Review of Strategy
To Review Material
6:45
Accounting Analysis
Understand Issues
7:15
Manufactured Homes – Understand Accounting
in groups
Analysis
Summary of Man.
To Stress Key Points
Homes
Meet with MBA students Plan Group projects
8:30
9:00
Framework
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Business Strategy Analysis
Accounting Analysis
Financial Analysis
Prospect Analysis
Strategy Analysis
McDonalds
• Competitive Strategy analysis
• Industry Analysis
• Corporate Strategy Analysis
Competitive Advantage
• Cost Leadership
• Differentiation
Industry Analysis – Existing Firms
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Industry growth
Concentration
Differentiation
Switching costs
Scale/learning economies
Fixed-variable costs
Excess capacity
Exit Barriers
Industry Analysis – New Entrants
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Scale of economies
First mover advantage
Distribution access
Relationships
Legal Barriers
Industry Analysis - Substitute Products
• Relative price and performance
• Buyers’ willingness to switch
Industry Analysis Power of
Buyers/Suppliers
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Price Sensitivity
Importance of Product
Number of Buyers/Suppliers
Volume per Buyer/Supplier
Corporate Strategy Analysis
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What is the corporate structure
What is the corporate culture
Consequences of managing all business
Do economies of scope or scale exist
Achieving & Sustaining Comp Adv.
• Key risk factors with chosen strategy &
resources available
• Is Comp Adv Sustainable?
• Are there industry structural threats?
• Is structure of firm set to sustain Comp Adv.?
Review of Questions
Accounting Analysis
• Key Changes
• Useful Resources
Accounting Analysis General
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How is the economics of the business
Captured in the Financial Statements
After determining the key success factors and
risks, use Financial Statement Analysis to
evaluate how well the factors and risks are
being managed
Financial Statements
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Who Cares about them and why
Doesn’t historical cost make them backward?
What is an asset?
Accrual Accounting?
Isn’t all just rules set by GAAP?
Flexibility
Realsitic
Steps
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Identify Key Accounting Policies
Look for Accounting Flexibility
Evaluate Accounting Strategy
Evaluate Quality of the Disclosure
Look for red flags
Restate Accounting number to remove distortions
Critical Accounting Theories/Principles
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Cost Benefit
Understandability
Historical Cost
Matching
Conservatism
Neutrality
Comparability & Consistency
What is an Asset
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Something of value
Clear ownership
High certainty of measurable benefits
Value should be accurate
What is a Liability
• Future Obligation
• Can be estimated
• Footnote disclosure is often necessary
Expenses & Revenues
• Flip side
• Issues are very similar