How to be more Productive with Types of Valuation?

Need for Valuation:

It is correct to say that valuation is part of each and every transaction. It is required by a company or a person to make important financial decisions. Valuation actually specifies the path whether monetary decisions based on certain assets will be successful and meet the person or company’s expectations or not.

Types of Valuation in a company | Need for valuation

Different Types of Valuation:

Here, we have discussed all types of transactions that require valuation or are constituted in the types of valuation service. These are as follows-

  1. Property Valuation: The valuation of property totally depends on the kind of transaction that a person or company is about to make. This type of valuation is required for the following purposes:
  • Purchasing
  • Selling
  • For providing guarantee
  • For property division
  • Stamp duty
  1. Stock Valuation: For any organization stock is an integral part as it generates revenue. It is always recommended to do stock valuation for the current value of stock specially for creating any charge on the stock, transactions for merger etc.
  2. Portfolio Management: Valuation plays a major role in the portfolio management. It is determined by the investor’s philosophy on investment. This type of valuation plays a greater role for the active investors whereas its role for the passive investors is minimal.
  3. Valuation in Acquisition Analysis: This type of valuation is performed to agree on a fair value of the target firm before the individual or the bidding firm makes any bids. It helps the target firm to determine a value that is reasonable while deciding whether to accept the offer or reject the offer given by the bidding firm or the individual for acquisition.
  4. Valuation for Legal and Tax Purposes: Most of the valuations performed in the private companies are basically done for the taxation or legal purposes. Businesses are required to be valued for the purpose of estate taxes in cases of divorce proceedings, death of the owner, for taking on a new partner, on retirement of an existing partner.
  5. Valuation of shares of Company: This type of Valuation of shares is required for many purposes like restructuring, to avail advanced loan on the security of shares, for going public etc.
  6. Valuation in Corporate Finance: This type of valuation plays a critical role for small private businesses whenever they think about expanding their business horizons. It plays a key role when such companies approach private equity investors and venture capitalists for more capital. In such scenarios the venture capitalists usually demands a share in the organization in exchange for infusing the capital or making the investment and this can only be done by estimating the value of the firm. Whenever companies go public and become larger, this type of valuation actually determines the price for which the company is making a public offering in the market. Once the prices are established the valuation also affects the investment decisions, borrowing or lending capital and the extent of returns to be provided to the owners.

 

Author: Anil Agrawal
EZYBIZ India Consulting LLP, New Delhi. The firm is business and tax consultancy firm providing consultancy in Taxation, Regulatory, Transfer pricing, Valuation, Corporate funding and Business set up matters. He may be reached at 9899217778 or anil@ezybizindia.in.