This article was written in collaboration with James Lecher, CEP with 718 Valuations LLC. Relative Total Shareholder Return (“TSR”) Awards are very popular, utilized by over 49% of S&P 500 companies in 2014. These plans are attractive because they align total compensation with the company’s stock price performance relative to that of its peers. Under Relative
The financial forecast is the basis for most valuation engagements. Through the magic of valuation science, management’s outlook is combined with financial-market-derived discount rates to produce a reasonably accurate valuation. The effectiveness of this approach is demonstrated by the countless transactions that have been priced using the same methods. In financial reporting, the army of
Purchase accounting follows every M&A transaction. It typically requires a valuation analysis that covers acquired intangible assets, earn-outs, and other elements of the transaction. While relegated to the post-transaction activities, these valuations offer substantial amount of information that can assist management in making important strategic decisions. Below are 5 reasons to take a closer look
Economic rate of return is a key concept in financial management and valuations. It is a single measure that represents all of the following: i) the discount rate used in present value calculation ii) the expected rate of return iii) opportunity cost. For example, a business opportunity may have a 20% expected rate of return.
A typical common stock valuation analysis attempts to determine how much a share of common stock can be sold for. The stock market sets the value for public companies. Private companies have to rely on relatively well-standardized, but often subjective valuation studies. While the range of reasonable estimates can be broad, there are clear limits
Valuations are quantitative by nature. They are heavily reliant on numerical inputs; valuations improve with additional financial information. This is why start-ups can be difficult to value during certain stages of development. Somewhere between seed funding and the emergence of sustainable financial performance, most start-ups encounter a period when there are few reliable numbers to
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