CIMA F3 Syllabus D. Business valuation - Valuations - Introduction - Notes ^{1 / 15}

When are Valuations needed?

1. Takeovers (Price paid would be MV + a takeover premium)

2. When setting a price for an I.P.O (Initial Public Offer)

3. Selling ‘private’ shares

4. When using shares as loan security

5. When negotiating a sale of a private company

6. For liquidation purposes

What information helps Valuation?

• Financial statements

• Non current asset summaries

• Investments held

• Working capital listing (debtors, creditors and stock)

• Lease agreements

• Budgets

• Current industry environment

What are the limitations of the information provided?

• Does the PPE need a costly revaluation?

• Are there any contingent liabilities not taken into account?

• Has deferred tax been calculated appropriately?

• How has stock been valued?

• Are all debtors receivable?

• Are there any redundancy costs?

• Any prior charges on assets?

• What shareholding is being sold? Does it mean the business carries on?