Financial valuation is the process of estimating the financial value of a business, asset or liability. This estimation is done by using financial valuation methods and mathematical models to determine the market value of an asset or business.
Financial valuation can be used in a variety of contexts, including business purchase and sale transactions, mergers and acquisitions, asset or liability valuations in receivership proceedings, or business performance evaluations.
The financial valuation methods used to estimate the value of a company or an asset may vary depending on various factors such as the nature of the asset or company, the industry, the regulations in force or the valuation objectives.
Some of the most common financial valuation methods include:
- The comparable method : this method consists of evaluating the company by comparing it to similar companies in the same sector of activity.
- The discounted cash flow method (DCF) : this method consists of estimating the future value of the cash flows generated by the company and then discounting them to account for time and risk.
- The patrimonial method: this method consists in estimating the value of the company by taking into account the value of its assets and liabilities.
Many assets can be evaluated, including :
- Tangible assets, such as land, buildings, equipment and vehicles ;
- Intangible assets, such as patents, trademarks, software, copyrights, licenses and contracts ;
- Financial investments, such as stocks, bonds, investment funds, derivatives and currencies (preference shares (ADP), stock warrants (BSA)) ;
- Receivables and liabilities, such as accounts receivable, accounts payable, loans and borrowings (convertible or simple bonds…) ;
- Inventories and raw materials ;
- Cash, such as bank accounts and short-term investments.
We are involved in various valuation contexts requiring the implementation of relevant approaches to the valuation of financial securities (ordinary shares, preference shares, warrants, convertible bonds) and intangible assets (trademarks, patents, molecules, customer relationships, etc.).
Accounting valuation is a method of valuation that involves estimating the value of an asset or liability in a company’s accounting records. This valuation method is used in the preparation of a company’s financial statements, such as the balance sheet, income statement and cash flow statement.
Accounting valuation is generally based on historical costs, i.e., the original costs of acquiring or producing the asset, and adjustments for wear and tear, obsolescence, or depreciation of the asset over time.
For example, to value property, plant and equipment, the company may use the net book value method, which involves subtracting accumulated depreciation from the original value of the asset. Similarly, to value inventories, the company may use the weighted average cost method or the cost method.
Accounting valuation may differ from market or current value valuation, which take into account current market conditions and may result in a different estimate of the value of an asset or liability. However, accounting valuation remains an important method for valuing a company’s assets and liabilities in the financial statements and providing a true and fair view of the company’s financial position.
We work in various valuation contexts (accounting, transactional, tax or litigation).
We use the methods implemented with regard to the standards commonly applied by valuation professionals and the recommendations issued by the various private equity professional associations :
- Company of Financial Advisors and Experts
- AFIC, EVCA, BVCA, etc.
- International Private Equity and Venture Capital Valuation Guidelines (IPEV Guidelines).
- Société Française des Analystes Financiers (French Society of Financial Analysts)
- Autorité des Marchés Financiers
For more information depending on your needs see below :
- Company Valuation
- Interest rate certification
- Management Packages / Carried Interest
- Transfer Pricing
- Intangible Assets Valuation
- Valuation of technology companies