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CS Professional · Corporate Restructuring, Valuation and Insolvency · Overview of Business Valuation

Two companies are being valued for a merger. A valuer says the result is 'an estimate of worth for a specific purpose, date and premise', not a single true figure. Which feature of valuation does this reflect?

The statement reflects that business value depends on the purpose of valuation, the valuation date and the premise of value, such as going concern or liquidation. It is a judgement-based estimate, not one exact figure, so different purposes can legitimately give different values.

  1. AValuation is an exact science with one correct value
  2. BValue depends on purpose, valuation date and premise of valueCorrect
  3. CValue is fixed by statute for all purposes
  4. DValue equals the last traded market price always

Explanation

Valuation involves judgement, so the result varies with why it is done, the date and whether going concern or liquidation is assumed. It is not exact, not statutorily fixed for all uses, and market price is only one input.

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