Significance of a Business Valuation

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Significance of a Business Valuation

CFO Tech Outlook | Thursday, August 19, 2021

Companies need professional CPAs to understand their business's accurate value as they can analyze the company's asset values. 

FREMONT, CA : Making the right business decisions is usually based on the details available. It explains why some companies invest large sums of money in data analytics and management tools every year. Even though most business owners believe that good quality data helps them make better decisions, only a small percentage of them use the annual business valuation data.

Several businesses cannot get a professional valuation if they are not a part of an acquisition or merger. An annual market valuation can be a crucial process for companies looking to expand, proceed with a contract or agreement, or benchmark or monitor their progress.

An annual market valuation is a service provided by professional CPAs that analyzes the company's asset values, income values, and competitive environment. Annual business valuations may be used by publicly traded companies or ones with private investors to display year-over-year growth.

SUCCESSION PLANNING

Gifting ownership to family members may be used to achieve business succession transactions. Family successions are the most common explanation for gifting.

The company can be sold to employees, third parties, or it could be coupled with some gifting. This form of ownership transfer is based on the value calculated when the company is priced on an ongoing basis.

A strategic buyer (someone from the industry) may be interested in purchasing a company. A deal with a strategic buyer usually is worth more than a conventional transfer to families, employees, or an individual buyer with no other industry ties.

ESTATE & GIFT TAX

A business valuation may be necessary to file an estate tax return and advise the personal representative to carry out the terms of the decedent's will. As long as the federal (and some state) estate tax persists, donating to reduce the ultimate estate tax would almost certainly need the valuation of a business or a business interest.

SALES, MERGERS & ACQUISITIONS

A valuation is conducted when a corporation acquires another company targeted for acquisition, restructures its financial structure, splits up, or files for bankruptcy while in liquidation or reorganization. In a merger, all parties must obtain a valuation while only one party can do so in an acquisition. These valuations can be complex due to which the valuation analysts have to analyze cash equivalents for payment.

See Also :- Top Business Continuity Service Companies

 

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