RC Business Valuations & Forensic Accounting Ltd
Understanding Business Valuation
Creating a valuation today helps in critical business planning and reorganization issues, and an effective and regular valuation of your business is also an invaluable tool to help you decide on an important issue or planning an ownership transfer of your company.
Business valuations are also needed for the determination of the real value of a Business. If you own a business, it is an important asset, and it is vital that business owners know the value of their business. But how exactly does a business valuation work? Though not quite as easy as assessing the value of an asset such as shares, where you simply multiply the amount of shares you own by the closing price of the shares, a skilled business appraiser can supply you with a sound business valuation.
Many people try to create their own business valuation simply by factoring in the historical financial statements of the company, but to correctly perform a business valuation; many other factors need to be considered.
Independent business valuations performed by an expert appraiser can have direct ramifications in the selling price of the business.
Financial statements are created using GAAP (generally accepted accounting principles). This means that amortization, depreciation and other expenses are recorded based on accounting rules and not on economic realities. A financial statement is also unable to apply to the statement any intangible assets that a company might have, thus not reflecting an accurate business valuation.
Valuation Process
We believe credible and defensible business valuations can only be achieved by Accredited Business Appraisers who normally follow correctly all the necessary steps in the process described below.
•Full information (operational, financial and non-financial underpins sound valuations. Curiosity is as important as calculating ability and the appraiser must ask lots of questions.
•The value lies in the future earnings of the business so both internal and external risks and opportunities must be considered.
•Financial accounts for most SMEs will require “normalization” i.e. identification of discretionary expenses and reasonable owner’s remuneration.
•All approaches should be considered and appropriate methods applied.
•A Sanity Test should be applied to all valuation conclusions and a range is generally more accurate than a precise figure.
That said there are three fundamental ways to measure what a business is worth: The Asset Approach, The Market Approach and The Income Approach. Within these Approaches there are a number of other methods.
Understanding Forensic Accounting
Forensic accounting services generally involve the application of specialized knowledge and comprehensive investigative skills possessed by CPA’s or other Professional Accountants to collect, analyze and evaluate evidential information and to interpret and communicate their findings in the courtroom, boardroom or other legal administrative venue.
Forensic, under the circumstances described above, means working in a legal environment. Forensic accounting implies an in depth professional accounting expertise necessary for use in public debate and/or legal forum.
Due to heightened awareness and growing intolerance of fraudulent activity, Forensic Accountants play today an important role in the financial investigation process.
Forensic Accountants investigate different crimes related to financial fraud, such as corporate, securities fraud, mass marketing, hedge fund, business valuation, tax evasion, health care etc. Money laundering, contract disputes, embezzlement and bankruptcy are among other crimes explored. They are often used as expert witnesses and assist in dispute resolutions and damage calculations.
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