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Valuation: Measuring and Managing the Value of Companies
The Journal of Finance
Abstract
Contenido: 1. El valor de la empresa y la misión del director: ¿Por qué valorar el valor?; El gestor del valor; Principios fundamentales para la creación de valor; Los parámetros de medida: cómo sobrevivir al bombardeo de parámetros de medida del valor; El cash flow manda; Cómo generar valor; Fusiones, adquisiciones y joint ventures; ; 2. Valoración por el cash flow: una guía para profesionales: Esquemas para la valoración; Análisis de los rendimientos históricos; Estimación del coste de capital; Previsión de los resultados; Estimación del valor residual; Cálculo e interpretación de los resultados; 3. Aplicar la valoración: Valoración de empresas multinegocio; Valoración de las dot.com; Valoración de empresas cíclicas; Valoración de filiales extranjeras.
... CVM is the -Comissão de Valores Mobiliários‖ or, roughly, the -Brazilian Security Exchange Commission -SEC‖. The following tables follow a methodology adapted to Brazilian accounting standards based on the definitions of Ferná ndez (2008), Damodaran (2012), and Copeland, Koller, and Murrin (2001). In Table 9, we aggregated the sources/uses in a table for the bank sector, as defined by Copeland, Koller, and Murrin (2001). ...
... The following tables follow a methodology adapted to Brazilian accounting standards based on the definitions of Ferná ndez (2008), Damodaran (2012), and Copeland, Koller, and Murrin (2001). In Table 9, we aggregated the sources/uses in a table for the bank sector, as defined by Copeland, Koller, and Murrin (2001). It is useful to highlight that this table is a proxy of a cash flow model, given that banks do not have cash flow demonstrations, only non-financial companies used to have to. ...
... =) Free cash flow to the share capital Sources: Balance sheet, income statements of Itaú Unibanco, Banco do Brasil, Bradesco, Santander and BTG Pactual. Elaboration of authors based on Ferná ndez (2008),Damodaran (2012),and Copeland, Koller, and Murrin (2001). ...
This paper investigates the transmission channels of monetary policy in the economy. Therefore, an economic and financial simulation model was developed based on the five main valuation models to estimate the intrinsic value of the five largest Brazilian banks as basic interest rates vary. This approach, in short, attempts to complement the traditional analysis of the transmission mechanism through the asset price channel by considering the intrinsic value channel of assets. The results show that the impact of these changes on the banking sector does not tend to affect its intrinsic values negatively. In fact, in most situations, banks increase their intrinsic value with lower base interest rates and lose very little intrinsic value when those rates rise. These findings demystify the notion that the main Brazilian banks prefer a macroeconomic environment with high basic interest rates and are useful to policymakers, investors, and other economic agents.
... One other important aspect that has received less attention in the literature is the cost of ownership and lifetime value [9]. Ownership costs include purchase, maintenance, and operational costs, while lifetime value reflects the potential revenue generated over the operational life of the machine [10]. For example, some studies discuss the cost of ownership without linking it to the revenue cycle, while others focus solely on lifetime value without considering the cost structure [11]. ...
... Lifetime is data in the form of time that is time series in nature [19]. Meanwhile, "Value" is a value that is measured due to a comparison of the assessment of a particular object [10]. Then "Lifetime Value" (LV) is a method for assessing the income of a particular object over its lifetime. ...
... While Value Driver Analysis is a very useful tool, management often lacks deep insight into the key factors that influence value and performance. As a result, decision-making and resource allocation are less effective, which ultimately hinders the optimization of enterprise value [10]. ...
The purpose of this paper is to develop a model for analyzing the heavy equipment business to support investment decisions through a new perspective of lifetime value and ownership cost. The research design of this study utilizes SEM-PLS (Structural Equation Modeling – Partial Least Squares) and develops a new model for heavy equipment investment analysis using mathematical modeling. This model is formed by combining several theoretical factors validated by practitioners in the heavy equipment field. The findings of this study indicate that all variables have a significant relationship with lifetime value and ownership cost. All variables also have a significant relationship with the feasibility study of the heavy equipment business. The practical implications of this research show a return on investment value of 93%, with a maximum profit value of 4,177 achieved at 8 years of age or 16,000 working hours. This model provides an illustration that heavy equipment reaches its most optimal value at a specific age when the predetermined variables are applied. The heavy equipment analysis model can serve as an assessment tool for the heavy equipment business.
... kde: n VK(z)t -náklady vlastního kapitálu při konkrétní úrovni zadlužení v roce t, n VK(n) -náklady vlastního kapitálu při nulové úrovni zadlužení, n CKt -náklady cizího kapitálu v roce t, d -sazba daně ze zisku, CK t-1 -úročený cizí kapitál k počátku roku t, Hn t- 1 -hodnota netto, tj. přeceněná hodnota vlastního kapitálu k počátku roku t. ...
... Přijetí předpokladu zatížení daňových štítů rizikem na úrovni nezadlužených nákladů vlastního kapitálu bývá doporučováno například v případě stabilní kapitálové struktury (viz např. Copeland 2000). Takový předpoklad platí zejména pro druhou fázi, kdy nezbývá než pracovat se stabilním poměrem cizího a vlastního kapitálu v tržních (obecně přeceněných) hodnotách a výši cizího kapitálu, výše úroků a tím i daňových úspor je tak vázána na výši tržní hodnoty vlastního kapitálu. ...
... CK k 1.1. (z tab.1) ...
... 1. onikonomikos, as a science of management, including the ability to earn from additional sources, 2. chermatistics, that is, the ability to obtain and accumulate money, 3. the last part refers to the science of money. ...
... In a very simple and convincing way, the cost of capital is perceived by A. Damodaran (Damodaran, 2000): "The cost of capital is the rate that investors need from capital investment in a company." Recognizing that the cost of capital applies to both debt and equity investments, it is very accurate to say: "Both creditors and shareholders expect compensation from the investment made in one particular business instead of in another with the same level of risk" (Copeland, Koller, Murrin, 2000). "The true cost of capital depends on the purpose of the capital". ...
Introduction/background: The issue of company valuation is undoubtedly one of the very complex, poorly recognizable and controversial. Theories of estimating the cost of capital are characterized by high dynamics of development resulting from new experiences and challenges arising from the practice of valuation. It should be noted, however, that the application of the cost of capital in the practice of economic activity still leaves much to be desired. Aim of the paper: This work focuses on the theoretical aspects of the cost of capital and practical issues in terms of how it is determined in developed capital markets. Materials and methods: A company capital structure essentially-its blend of equity and debt financing-is a significant factor in valuing the business. In this research we demonstrated that the WACC method, generally reflects the return that hypothetical investors require. This work is conducted to bridge several methods: type of investment decisions, purpose of the capital, management plans. Results and conclusions: A company's capital structure fluctuates over time as the effect of change in equity securities and its debts. We believe it is appropriate to use optimal capital structure if the business environment activity temporarily has veered off of actual capital structure. Keywords: the value of the enterprise, the cost of capital, the structure of capital.
... Several authors (Copeland, Koller & Murrin, 2000;Pratt, 2008;Koller, Goedhart & Wessels, 2015;Jiang & Koller, 2007 etc.) agree that companies are efficient only when the return on invested capital exceeds the cost of capital. When this condition is met, the company creates added value. ...
... c. Cash flow (CF) The third component in the model shown in Fig. 1 represents the cash flow generated by business activities, which is the most effective indicator for accurately assessing a company performance. Several authors, including Damodaran (1994Damodaran ( , 2001Damodaran ( , 2012, Madden (1998Madden ( , 1999 and Copeland, Koller & Murrin (2000), as well as Martin and Petty (2000), view discounted cash flows as a reliable tool for estimating a company value. Free cash flow (FCF) refers to the cash generated by the core operations of the business after accounting for investments in new capital: ...
In the modern economic environment, the awareness of owners and managers about the value of the company is an important precondition for its effective management. Determining the value is a complex process because it changes over the time and depends on many criteria. The assessment of the value is essential not only for the development of the individual enterprise, but also for the directions and growth rates of each industry and the economy as a whole. The purpose of this research is to determine the main components of value that should be managed. It is found that for the adequate approximation of the value of the company, it is necessary to consider the value of the “intangible assets”.
... However, GARCH models require more complex data inputs and assumptions, making them less accessible for smaller datasets (Karavias et al. 2022). Value-at-risk (VaR), as utilised by Copeland et al. (1991), provides a probabilistic measure of the maximum expected loss over a given time horizon. While effective for extreme risk scenarios, VaR is often criticised for ignoring potential losses beyond its threshold, thus underestimating tail risk (Ross et al. 1999). ...
... Of the seven value generators proposed by Rappaport, only the variability of the generators that can be determined based on the income statement was examined. Using the metrics proposed by Rappaport means, in the context of risk analysis, taking into account the interests of owners, both present and future, which helps to make decisions that maximise the long-term value of the company, which is beneficial to all shareholders of the company (Copeland et al. 1991). The analysis of the volatility of the selected value generators was extended to analysis of the volatility of the share prices of the analysed entity in order to determine the changes that occurred in the case of real decisions of investors operating on the Warsaw Stock Exchange in relation to the share prices of the analysed entity. ...
This study analyses the impact of two major macroeconomic shocks—the COVID-19 pandemic and the Ukraine war—on the financial stability of LPP SA, a leading apparel company in Poland and Central and Eastern Europe. This research uses the coefficient of variation to assess changes in financial volatility and evaluates the effectiveness of LPP SA’s risk management strategies. The findings reveal that, while the COVID-19 pandemic had a more destabilising effect on the company’s performance, the Ukraine war’s impact was mitigated by strategic diversification and resource reallocation. The study’s implications are relevant for risk management practices in the apparel industry and other consumer-driven sectors.
... Milan Dlabaja, student Fakulty financí a účetnictví VŠE Praha. 1 Pojem podnik zde používáme v návaznosti mimo jiné na zahraniční literaturu jako obecný pojem. Chápeme jej ale jako synonymum pojmu obchodní závod, který od 1. 1. 2014 zavedl Občanský zákoník • 9 % posudků sice obsahovalo iterační vyladění kapitálové struktury, ale pouze k datu ocenění s tím, že tato struktura pak byla jako stabilní aplikována na celý budoucí horizont. ...
... Jak již bylo uvedeno, všech 56 posudků, které nyní podrobujeme analýze, pracovalo se stejnou reagenční funkcí pro přepočet koeficientu beta, tj. funkcí(1). Tento nedostatek spočívající ve velmi zjednodušené funkci mají tedy zkoumané posudky shodný. V další analýze ale rozčleníme vzniklé chyby podle toho, jakým způsobem zpracovatelé přistoupili ke stanovení kapitálové struktury, protože zde již rozdíly byly. ...
... In the current corporate scenario, marked by turbulence and exponential transformations, financial management transcends its traditional function, becoming a strategic instrument for survival and growth. As Damodaran (2009) andCopeland (2002) point out, financial resilience represents much more than a mere defense mechanism, it is configured as a dynamic capacity to create value in challenging and unpredictable economic environments. The complexity that characterizes global markets, combined with economic instability, implies that organizations develop and adopt a dynamic, even proactive, approach to the management of financial resources. ...
In the contemporary business landscape, characterized by turbulent changes and growing uncertainty, Adapted
Business Continuity represents a strategic revolution for organizations that not only want to survive, but thrive during turmoil.
This book is a complete roadmap for leaders, managers, and entrepreneurs, based on an innovative methodology that transforms crises into opportunities for growth and reinvention. It proposes an approach based on resilience, agility, and continuous learning, challenging the traditional premises of business management.
Advancing with a combination of academic research, case studies, and intriguing scenario analyses, the book provides concrete tools to:
• Understanding the dynamics of business crises
• Develop adaptive organizational capabilities.
• Deploy resilience strategies.
• Use technology as an empowerment factor in managing adversity.
• Turning challenges into vectors of innovation
A must-read for anyone who wants not only to survive, but to thrive in an increasingly complex and uncertain market.
... As mentioned in the introduction, adjusted present value separates a company's value into its present value and the financing benefits (mainly composed by tax shields). Adjusted present value uses unlevered cost of equity to discount the company's future free cash flow in order to obtain the present value, which makes this valuation method distinctive compared to other valuation methods like DCF [8]. Here, the paper uses Weighted Average Cost of Capital (WACC) to calculate the company's unlevered cost of equity (R u ). ...
This paper conducts an overall valuation for Nvidia by applying three major valuation methods: Relative Valuation, Discounted Cash Flow (DCF) and Adjusted Present Value (APV). The purpose is to provide a clear analysis for the real value of Nvidias share price. The Relative Valuation method evaluates Nvidia by comparing the company to its peer companies, using the comparable companies operating conditions to provide insights to the target company's value. The DCF valuation method estimates Nvidias share value by discounting the companys future cash flows to present value, taking into account the company's expected growth rate and market risks. Lastly, the APV method captures the impact of the companys financing structure on its firm value, adding benefits received from financing to the firms value. The paper will introduce these three distinctive valuation methods specifically, and provide investment reference and valuable insights to investors and shareholders evaluating Nvidias firm value by analyzing the valuation results produced by these valuation methods.
... Management projects are implemented in conditions of high uncertainty, which is associated with market instability, changes in legislation, technological innovations and macroeconomic fluctuations [33]. ...
In the modern realities of economic development, investment conditions for entrepreneurial and project activities are of particular importance. The object of this research is the processes of project management that are carried out in the conditions of formation of investment attractiveness. Investment conditions for the formation of management projects become a key factor in the development of project networks both at the national and international levels. One of the most problematic areas is the isolation of investment attractiveness at the macro level of the existence of an economic system for the effective development of management projects. During the study, the following logic of constructing the study was used, which provided for the isolation of the interpretation of investment attractiveness as an economic and theoretical category, which can be defined as a set of external environmental factors, including economic, legal, political, social and cultural factors. These factors are formed at different levels of the economic system: nano-, micro-, meso-, macro-, mega-. The results obtained suggest that in the process of forming investment attractiveness, project networks acquire special importance. They should reflect the availability of project infrastructure and personnel that can initiate, develop and implement projects that relate to a certain industry or region of a particular country. In addition, the results obtained indicate that after determining the theoretical features of project investment attractiveness, approaches to using the category of "investment climate" in the context of project management were outlined. The conditions for forming the investment climate in Ukraine were also assessed and how investment attractiveness is formed in different countries of the world was indicated. In connection with all the above aspects of forming investment attractiveness, the work provided conditions for increasing the efficiency of implementing management projects. As a result of the research, conclusions were drawn regarding the features of the influence of investment attractiveness factors on increasing the profitability of management projects and on the use of methods for their optimization.
... According to Brigham and Ehrhardt (2013), firm value refers to the current worth of a company, determined by its financial performance and market conditions. Copeland, Koller, and Murrin (2014) define firm value as the total cash flow a company can generate over time, discounted back to present value using an appropriate discount rate. Koller, Goedhart, and Wessels (2010) state that firm value represents the intrinsic value of a company, reflecting its future cash flows and potential for growth. ...
... Both creditors and shareholders expect compensation for the opportunity cost of investing their money in a specific business instead of other ventures with equivalent risk (Copeland et al., 2000;Exley & Smith, 2006;Neves, 2002). Opportunity cost encompasses both profitability and risk and serves as the discount rate for future financial flows in various valuation models (Pacheco et al., 2021). ...
This study examines the valuation process of small and medium-sized enterprises (SMEs), using a Portuguese SME as a case study. The analysis focuses on calculating the cost of equity, with particular attention to the unique characteristics of these companies. The valuation was conducted using the discounted cash flow (DCF) method, with a preference for the average cost model. Two different approaches were employed to forecast free cash flows: (a) the geometric growth rate of sales, and (b) free cash flow projections derived from a model based on historical results. To calculate the cost of equity, three distinct models were used: (a) the capital asset pricing model (CAPM) with modifications proposed by Damodaran (2014), (b) the model developed by the Spanish Association of Accounting and Business Administration (AECA) from Rojo-Ramírez et al. (2012), and (c) the build-up model proposed by Ibbotson. These models serve as alternatives to the traditional CAPM, which is less suitable for unlisted companies due to the absence of a market beta. The study compares the results obtained from each model, focusing on their impact on the company’s valuation. Valuing SMEs is crucial for enhancing corporate decision-making. Furthermore, the approaches utilized in this study provide valuable guidelines for financial analysts involved in SME valuation.
... These parameters depend on both the duration of the real option and the implied volatility of the underlying assets (Mun, 2003, p. 74). Following the development of the underlying lattice, the real option valuation lattice or decision tree lattice (Copeland et al., 2000) has to be built. ...
This paper investigates the valuation of international acquisitions of multinational corporations (MNCs) using real options theory, focusing on L’Oréal’s acquisition of Aesop. It explores how MNCs create growth and deferral options simultaneously in M&A deals, enhancing market value and promoting sustainable practices. The study addresses two key questions: the role of MNCs in advancing sustainability and the measurement of market value added through parallel compound options. Using L’Oréal’s acquisition of Aesop as a case study, the paper demonstrates the strategic benefits of combining growth and deferral options. Examples include L’Oréal’s expansion into new markets like China, leveraging Aesop’s sustainable practices, and achieving competence-based collaborative synergies. The findings provide a framework for assessing collaborative synergies in international transactions, contributing to the literature on strategic management, international business, and financial management. In conclusion, the paper highlights the importance of strategic flexibility and sustainability in MNC acquisitions, offering valuable insights for future research and practical applications in international business.
... Economists T. Copeland, T. Koller, and J. Murrin proposed a more effective approach for identifying the factors of value that was based on the calculation of the index of value as the discounted money flow of a company [5]. This approach is focused on assessing the efficiency of the company's performance (including its management) and considers the many factors of both the internal and external environments that influence the results of its activities. ...
This article is devoted to studying the peculiarities of applying the valuation approach toward assessing the efficiency of agricultural land use. In particular, it was determined that the main link of the valuation approach was the value of the land use. Value is the basis of quantitative correlation under the equivalent exchange; the value of land use can be determined by applying three common approaches: comparison, cost, and income. The authors of the research present a methodology for assessing the value of the right to manage agricultural land use and its efficiency. The work supplies the calculated book value of land use under the actual status of agricultural lands in Ukraine according to the average indicators (in the present research, this was the period of 2017–2021) and the economic market value of land use while considering innovative investments in land improvement that are focused on establishing the more effective use of agricultural lands. It is stated that the valuation approach toward assessing the efficiency of agricultural land use can be used to specify the value of the right to manage land use in the amount of its general value as well as assess its efficiency. The suggested algorithm and statistical indicators were used to calculate the right and efficiency of agricultural land use management for all categories of farms and, particularly, in terms of agricultural enterprises of the different forms of economic activity.
... The distinctive feature of the comprehensive assessment instrument is its integration of actions tailored to the stages of the value pentagram with the distinctive actions to be undertaken in each valuation phase. The pentagram of value was initially devised by Copeland, Koller and Murrin (Copeland et al., 1995) and subsequently refined by Dolgoff (Copeland & Dolgoff, 2005). This scheme is also referred to as the structural adjustment model. ...
The present study is a comprehensive evaluation of a business enterprise, with the objective of assisting its management in identifying and addressing the consequences of organisational difficulties, including the formation and distribution of the economic fund created as a result of the prevention of incurred losses. The subject of this assessment is the decision-making methodology, which serves as the basis for drawing conclusions about the states of the process and includes elements for training personnel involved in the implementation of the new version of the system. The objective of methodological foundations is to facilitate the timely identification of potential vulnerabilities that could lead to future losses in sustainability. From an organisational perspective, the conditions that facilitate the implementation of unproductive proposals are being circumvented. The object under discussion is a standardised, unique management tool developed for the purpose of assessing the operational states of an organisation. The objective of this study is to develop a procedure for identifying effective methods to enhance organisational performance, while preventing unauthorised disruption to the control system. The full-scale assessment is performed through three conceptual transitions. The first of these transitions is from the initial application points to the subsequent anomaly capability principles. Finally, the standard clauses are reached. The standard provides a detailed, step-by-step account of the organisation's status. A significant element of the investigation is the provision of decision-making based on objective ratios. In order to form objective conclusions regarding the state of the organisation, recommendations are made to recover the loss of value, taking into account the localisation of the places that lead to inefficiencies. The novelty of the study lies in the development of a comprehensive document containing instructions for experts on implementing measures aimed at improving performance by eliminating the shortcomings of the original version of the real control system. The existence of the standard allows for a well-founded conclusion to be drawn regarding the organisation's performance through a combination of cost indicators designed to meet conditionally specified standards and dimensionless indicators of process capability that belong to the category of objectively defined standards. This combination permits the unlocking of the organisation's growth potential in a novel environment through the synchronisation of performance standards and efficiency metrics. Consequently, the organisation is safeguarded from implementing ineffectual changes that could result in a reduction in efficiency.
... To calculate the terminal value (TV), we apply a parametric formula based on the approach by Copeland et al. (1994), with modifications following Damodaran's (2012) methodology, as shown below: ...
... The second reason was the development of textbooks in the 1980s and 90s that placed greater emphasis on DCF-models (e.g. Rappaport, 1986;Copeland et al., 1990;Damodaran, 1994;Penman, 1997), which had a delayed effect on the valuation models used by financial analysts. The third reason was increased demand from institutional investors for more detailed information on valuation preferences, which could not be provided through multiples (Brown et al., 2016). ...
Purpose
Surprisingly little is known of the various methods of security analysis used by financial analysts with industry-specific knowledge. Financial analysts’ industry knowledge is a favored and appreciated attribute by fund managers and institutional investors. Understanding analysts’ use of industry-specific valuation models, which are the main value drivers within different industries, will enhance our understanding of important aspects of value creation in these industries. This paper contributes to the broader understanding of how financial analysts in various industries approach valuation, offering insights that can be beneficial to a wide range of stakeholders in the financial market.
Design/methodology/approach
This paper systematically reviews existing research to consolidate the current understanding of analysts’ use of valuation models and factors. It aims to demystify what can often be seen as a “black box”, shedding light on the valuation tools employed by financial analysts across diverse industries.
Findings
The use of industry-specific valuation models and factors by analysts is a subject of considerable interest to both academics and investors. The predominant model in several industries is P/E, with some exceptions. Notably, EV/EBITDA is favored in the telecom, energy and materials sectors, while the capital goods industry primarily relies on P/CF. In the REITs sector, P/AFFO is the most commonly employed model. In specific sectors like pharmaceuticals, energy and telecom, DCF is utilized. However, theoretical models like RIM and AEG find limited use among analysts.
Originality/value
This is the first paper systematically reviewing the research on analyst’s use of industry-specific stock valuation methods. It serves as a foundation for future research in this field and is likely to be of interest to academics, analysts, fund managers and investors.
... Así que la medición y análisis del desempeño financiero de una organización empresarial es una tarea en la que siempre hay espacio para la investigación. A medida que la evolución de los negocios lleva a entornos más complejos, competitivos e inciertos, surgen medidas de análisis que permiten evaluar las decisiones de una empresa para la creación de valor (Vera-Colina, 2000), término fundamentado en la Teoría de la Gerencia de Valor, que destaca la necesidad de decisiones que maximicen la riqueza de los accionistas Copeland et al. (1994). Investigaciones recientes, como las de Smith (2021) y Farouk et al. (2021) han confirmado que la Gerencia de Valor sigue siendo base para contribuir a mejorarel desempeño en términos de calidad, costo y tiempo, demostrando su pertinencia en el análisis financiero y estratégico de las empresas. ...
La investigación analiza las decisiones operativas y financieras tomadas en empresas del subsector “productos farmacéuticos, biotecnología y ciencias de la salud” durante los años 2019, 2020, 2021 y 2022, para determinar qué inductores de valor contribuyeron a la generación de valor. Se empleó un enfoque descriptivo, cuantitativo, longitudinal y correlacional, con una muestra de 30 empresas listadas en la Bolsa Mexicana de Valores. Se evaluaron el EVA como indicador de generación de valor, y Margen EBITDA, PDC y Escudo Fiscal, como inductores de valor. Los resultados revelaron que el subsector experimentó un crecimiento significativo en ingresos y utilidades durante el periodo estudiado, en especial en el ramo de biotecnología, que tuvo el mayor aumento porcentual. El ramo de productos farmacéuticos mostró la mayor generación de valor, seguido de herramientas y servicios para la salud. El análisis de correlación mostró que la PDC está más positivamente relacionada con la generación de valor en biotecnología, mientras que el margen EBITDA tiene una fuerte correlación positiva en herramientas y servicios para la salud. Para el ramo de productos farmacéuticos, ninguno de los inductores de valor mostró una relación fuerte con la generación de valor. En conclusión, el subsector muestra que las empresas tuvieron que adaptarse, aprovechar oportunidades de crecimiento y gestionar sus operaciones de manera eficiente ante los años atípicos del periodo en estudio. Los inductores de valor variaron su impacto según el ramo, lo que hace inferir la importancia de entender las dinámicas específicos de cada área en la toma de decisiones operativas y financieras.
... However, the most helpful information in estimating cash flows is discussed. For example, Copeland et al. (1990) believe that though the traditional accounting criteria can be a valuable tool for understanding and recognizing cash flows, the traditional criteria cannot be substituted with direct indices such as cash flows. Besides, conceptual statement 1 in FASB says that the information related to earnings is better than cash flows' information on protecting the benefits of investors. ...
... The residual cost will therefore consist of depreciation costs plus LMC in perpetuity. This perpetual cost can be estimated by using the standard perpetuity formula for residual value [91]. Unfortunately, there is much confusion around valuation and how to handle inflation, and Cornell et al. [92] demonstrates that even a 2 % inflation can have major impact. ...
... Подальшого розвитку концепція набувала до кінця XX століття і у 1990-х роках Б. Стюарт, Т. Коупленд, Т. Коллер, Дж. Муррин отримала більш ґрунтовне пояснення у праці «Valuation: Measuringand Managing The Value of Companies» («Вартість компанії: оцінка та управління») [10]. Саме тоді з'явилась абревіатура VBM, а також принципи, що наразі використовуються підприємствами при застосуванні цього підходу. ...
The article is devoted to substantiating the need to improve the financial management system of industrial enterprises on the basis of value-based management. The key elements of the financial management system and their interaction are studied. The main problematic aspects of the financial management system of domestic industrial enterprises are identified. The need for the transformation of financial management with an orientation towards maximizing market value, which is achieved by implementing value-based management (Value-Based Management, VBM), is considered. The main tools and mechanisms that contribute to the implementation of the VBM concept are studied. Ways of adapting these tools to the business environment are proposed to increase the sustainability and competitiveness of enterprises.
... The reason for this is very simple: when the market goes up, it pulls up the prices of not only the best stocks, but also the weak ones. When the Murrin, and Koller (Copeland et al. 2000). They are proposed to use in this analysis and the valuation of individual stocks and are an elegant way to align relative valuation with DCF valuation. ...
The subject of this research is the performance of stocks on the Bulgarian Stock Exchange (BSE). The main issue of interest is whether the index price levels are supported by fundamentals or if there is a bubble or undervaluation on the BG stock market. The purpose of this research is to explore the true level of indexes at the BSE, as dictated by fundamentals, and compare it with actual index levels. The research method is based on the comparative analysis of price-earnings ratios (PEs) and price-to-book ratios (PBVs) of the index during the analyzed period. The 2024 PE and PBV of the index are compared with fundamental PE and PBV ratios of the BGBX 40 index, which are derived from the fundamentals, determining the value of stocks in the index. The actual PE and PBV ratios of BGBX 40 look rather low compared with the ones in the leading developed stock markets. At the same time, however, the results of this analysis show that these current PE and PBV ratios are much higher than the benchmark values of the fundamental PE and PBV ratios. In this regard, the current price levels of stocks at the Bulgarian Stock Exchange in 2024 do not seem supported by fundamentals.
... These cash flows are discounted back to present value using a specific discount rate (Brealey et al. 2011). This method is used to assess the attractiveness of an investment or project (Copeland et al. 2000). There are several financial parameters to calculate within the Discounted Cash Flow, which are Net Present Value (NPV), Internal Rate of Return (IRR), and Debt Service Coverage Ratio (DSCR). ...
... Since no method universally dominates the others, it is not surprising that financial analysts frequently estimate DCF as well as method of comparable values for a more complete analysis. Accordingly, new valuation textbooks-for example, Copeland, Koller, and Murrin 2000;Damodaran 2002;English 2001;Penman 2001-promulgate multiple techniques and view them as being simultaneously and contextually informative, with no dominating method. When available, market value serves as yet another estimate of value. ...
Obtaining more accurate equity value estimates is the starting point for stock selection, value-based indexing in a noisy market, and beating benchmark indices through tactical style rotation. Unfortunately, discounted cash flow, method of comparables, and fundamental analysis typically yield discrepant valuation estimates. Moreover, the valuation estimates typically disagree with market price. Can one form a superior valuation estimate by averaging over the individual estimates, including market price? This article suggests a Bayesian framework for combining two or more estimates into a superior valuation estimate. The framework justifies the common practice of averaging over several estimates to arrive at a final point estimate.
... First, the emphasis on multiperiod models gained traction in response to the stock market collapse after 2000 and the subsequent criticism of research quality, particularly concerning short-term valuation using multiples (Rutterford, 2004). The second reason behind this shift was the development of textbooks in the 1980s and 1990s that placed greater emphasis on DCF models (e.g., Rappaport, 1986;Copeland et al., 1990;Damodaran, 1994;Penman, 1997). This had a delayed effect on the valuation models used by analysts. ...
... The value of getting an MBA education has also attracted much attention in light of the evaluation of the effects of a CEO's educational background on the firm's performance (Copeland et al., 2000). This is because an MBA is widely assumed to be an enabler of efficient corporate leadership due to the set of skills an MBA program inflicts on learners (Acemoglu et al., 2023). ...
This study aims to investigate the relationship between CEO tenure, MBA education-particularly from elite business schools and the financial performance of S&P 500 companies. It seeks to determine whether long-serving CEOs with high-caliber educational backgrounds deliver superior corporate results. A cross-sectional study design was adopted, drawing on six years of financial performance data from Capital IQ. Key performance metrics- Gross Profit Margin, EBITDA Margin, Return on Assets (ROA), Return on Equity (ROE), and Year-Over-Year (YOY) net income growth analyzed. Descriptive statistics, Pearson's correlation coefficient, and multiple regression analysis were used to explore the influence of CEO tenure and MBA education on these financial outcomes. Data on CEO tenure and educational qualifications were sourced from corporate documents, official biographies, and public databases. The results indicate that longer CEO tenure is positively correlated with enhanced financial performance, with CEOs holding MBAs from elite business schools contributing even further to corporate success. The study underscores the role of accumulated organizational experience and advanced educational qualifications in driving efficiency and profitability in S&P 500 companies. This research contributes new insights into the combined impact of CEO tenure and elite educational background on company performance. It highlights the importance of not only experience but also the quality of education in delivering sustained corporate success, offering valuable lessons for leadership development and management training programs.
... Další vliv na hodnotu ocenění mohou mít diskonty a prémie (např. Goedhart - Koller -Wessels, 2005), při nákupu minoritního či majoritního balíku akcií. Tato metoda není vhodná pro podniky, jejichž akcie nejsou aktivně obchodovány nebo jsou obchodovány pouze v omezeném objemu transakcí, zde můžeme hovořit například o českých společnostech obchodovaných na pražské burze. ...
... • Nejjednodušší funkce pro přepočet koeficientu beta často používaná v praxi a uváděná v literatuře (např. Copeland, 2000): ...
... Corporate decisions and policies are affected by many factors, a CEO's managerial characteristics and traits may be one of these factors. For example, Copeland et al. (1991) show that qualified CEOs often possess value-oriented views of investment activities that match their firms' business strategies and create shareholder values. This may be because high-ability CEOs are more likely to anticipate trends in the industry and the economy, and their knowledge of corporate operations leads to efficient evaluation of investment opportunities. ...
... Por otro lado, Wood (2000) presenta resultados importantes en materia de generación de valor, de dos estudios de casos de empresas en Sudáfrica y Nueva Zelanda, en donde se resaltan sus experiencias durante y después de la implementación del EVA, y sugieren que la aplicación de esta herramienta en la gestión de resultados en las empresas trae como resultado mayor capitalización de estas en el mercado de valores. Copeland et al. (2000), destacan la importancia de la relación entre el retorno del capital invertido (ROIC) y el costo promedio ponderado del capital (WACC) para la generación de valor de una firma, por lo tanto, este se constituye en elemento esencial para la medición de la generación de valor económico agregado (EVA) de una compañía. ...
En esta investigación se ha analizado la relación entre el economic value added (EVA) y el market value added (MVA). Dichos indicadores han sido utilizados como medida de desempeño empresarial en términos de generación de valor agregado. El trabajo se ha desarrollado mediante un estudio de tipo cuantitativo, utilizando como herramienta el análisis correlacional. Para el desarrollo de este, ha sido empleada como variable dependiente el valor de mercado agregado, y como variable independiente el valor económico agregado, tomando como base la información financiera de 29 empresas colombianas que cotizan en la Bolsa de Valores de Colombia, para el periodo comprendido entre los años 2016 y 2021. Para realizar los cálculos de los dos indicadores mencionados, se ha tenido en cuenta el costo promedio ponderado del capital, el retorno del capital invertido y la utilidad operativa después de impuestos. El resultado del estudio sugiere que existe una correlación positiva y significativa entre el EVA y el MVA, de manera similar a estudios previos realizados para compañías de otros países. De igual manera, se cumple, para el caso colombiano, que el MVA resulta ser el valor presente del EVA, cuando este descuenta con la tasa del costo promedio ponderado del capital.
This chapter discusses how the ten dimensions of our spirituality build a leadership culture and how both these dimensions and leadership culture maximize what Leif Edvinsson describes as the intellectual capital (IC) of nations and organizations, their human, social, process, and renewal capital, which help in promoting economic growth, social justice, organizational success, and social well-being.
This chapter presents a new interdisciplinary framework that relies on the intuition of IC as the backbone to connect political economy, strategic management, cultures, leadership, philosophy, and spirituality.
Our spirituality builds our capacity to perceive phenomena; build our consciousness, knowledge, relationships, ideals, and values; and reinforce human and social capital, which are pillars of IC.
Our spirituality promotes inspiration and creation, reinforcing renewal capital, a pillar of IC.
Our spirituality is an engine of leadership in every person and society, generating transcendence, a vision of the future, a mission, and stronger relationships, building communities that promote continuous individual and social transformation processes, and building IC.
The book is structured to guide readers from core concepts and governance theories to advanced practices shaped by innovation, international regulations, and global stakeholder expectations. Beginning with internal governance mechanisms and foundational theories such as agency, stewardship, and stakeholder theory, the early chapters provide a base for understanding how governance frameworks operate within different organizational settings. As the book progresses, it addresses increasingly complex aspects of governance, including the strategic role of boards in shaping long-term value, the integration of Environmental, Social, and Governance (ESG) factors into corporate policy, and the implications of technological innovation on reporting and accountability. Detailed case based discussions—such as executive compensation practices in the French CAC40— illustrate how ESG metrics are reshaping remuneration and performance evaluation. The book also considers global governance dynamics, including cross-border regulatory frameworks, EU-specific governance principles, and the rise of shareholder engagement in driving sustainability agendas. Special attention is given to contemporary challenges such as crisis leadership, business continuity, human capital policy, and board agility in unpredictable environments. The book examines how governance models must evolve to address ethical expectations, geopolitical risks, and rapid changes in digital infrastructure. The final chapters look ahead to the future of governance, covering AI driven analytics, adaptive governance frameworks, and transformative technologies that are redefining corporate oversight. This comprehensive and practice-oriented volume is designed for corporate executives, board directors, scholars, graduate students, policy advisors, and governance professionals. It serves as both a theoretical foundation and a strategic guide for those committed to building organizations that are transparent, resilient, ethically grounded, and prepared for the long-term challenges of sustainable global enterprise.
The work aims to determine the optimal methodological approaches to assessing the value of a company in the context of its financial transformation. For the study, the author used the method of scientific observation and comparison, the bibliographic method, the graphical method, and methods of empirical research. A necessary condition for the growth of the company’s market value is its access to capital markets (internal and external) to attract financial resources. In the modern economic environment, the following types of company value are distinguished: market, balance sheet, divisional, economic, and liquidation. A set of factors affecting the company’s intrinsic value has been established: the value of the company’s assets; probable future cash flows (when using the DCF model); possible future interest and dividends, which affect the share price; probable future growth rate of the company. It has been established that a complex system of value indicators includes factors of value formation, financial indicators, intrinsic value, and share price on the stock exchange. Financial methods for assessing the company’s value are presented, including financial reporting, cash flow, market, and valuation methods. In Ukrainian realities, the most widespread is the income approach, based on assessing cash flows and calculating economic profit. The income approach identifies four methods for determining the value of a company: capitalization of income flows, capitalization of dividends, capitalization of excess income, and discounting of cash flow. The market approach includes all methods based on comparative valuation, but analysts usually use only three key methods: industry coefficients, sales comparison, and the capital market method. Keywords: transformation, reorganization, restructuring, financial resources, capital markets, company.
This chapter examines the strategic implications of Corporate Social Responsibility (CSR) activities mandated by Indian regulations, specifically focusing on companies’ investments in the education sector. With the legal requirement to devote at least 2% of average net profits to CSR initiatives, this research employs a standard event study methodology to analyze the market response to 44 unique announcements made by 38 companies in the S&P BSE 500 index between January 2011 and December 2022. The investigation delves into various forms of CSR investments, such as establishing schools and universities, supporting girls’ education, and providing financial aid to underprivileged children. Using a market model approach and the BSE 30 Sensex as the market portfolio proxy, the chapter hypothesizes the absence of abnormal returns associated with the announcements of educational initiatives by Indian firms. Preliminary findings reveal nuanced market reactions, with certain days showing significant positive or negative abnormal returns. The Cumulative Average Abnormal Returns (CAAR) across diverse event windows provide a comprehensive picture of the magnitude and direction of market responses. The chapter contributes to the understanding of CSR’s strategic role in the education sector and opens avenues for further research on the long-term impact of such initiatives on corporate sustainability and societal development.
O caso:
A empresa Aggregate S.A abriu uma nova filial em Uberlândia-MG e contratou colaboradores para realizarem o valuation das empresas. Os referidos funcionários revisaram a avaliação da empresa SLC Agrícola S.A para utilizá-la como caso prático de treinamento de pessoal futuramente. Para se certificar de que a avaliação da empresa realizada é adequada, os funcionários resolveram entrar em contato com a chefia. Foram discutidas diferentes abordagens de valuation e as influências nas decisões estratégicas. Você, na posição de chefe desse setor, está preparado(a) para responder essas perguntas?
Objetivo de ensino: Possibilitar que os estudantes comparem os métodos de valuation e suas premissas. Busca-se avaliar a eficácia e a aplicabilidade desses métodos, verificando eficiência operacional, capacidade de gestão de riscos e expansão do negócio. Logo, os objetivos educacionais são: a) Promover reflexão dos estudantes acerca das premissas de valuation; b) Propiciar oportunidades de avaliação crítica de escolha de investimentos; c) Alinhar conhecimento teórico com situações práticas; d) Instigar a capacidade de comparação entre as métricas de valuation.
Fontes e Métodos de coleta: O período de análise corresponde aos anos de 2017 a 2022, tomando como parâmetro as demonstrações contábeis consolidadas deste período para a realização de projeções para períodos futuros (2023 a 2027). Essas informações foram coletadas na base de dados Economática. Utilizouse os relatórios da administração e as informações das Notas Explicativas, extraídos do site da empresa SLC Agrícola e da Brasil, Bolsa, Balcão (B3). Para as questões de ensino, foram elaboradas questões que levam os discentes a ter pensamento crítico em relação ao valuation realizado e o que poderia ser feito diferente.
Disciplinas sugeridas para uso do caso: Este caso de ensino é recomendado aos cursos de graduação e pós-graduação, lato sensu e stricto sensu, nas disciplinas de Avaliação de Empresas, Administração Financeira, Análise das Demonstrações contábeis, Valuation, Gestão Econômica e Financeira, dentre outras que envolvam a avaliação econômica de empresas. Pode ser aplicado também em cursos de extensão da área de business, cuja proposta seja a utilização de técnicas de avaliação empresarial, o qual proporcionará ao docente um suporte essencial e prático da metodologia de valuation.
Impact of Data Transparency and Accessibility on
the Accuracy of Fair Value for Financial
Reporting Purpose in the context of
Information Asymmetry
İşletmelerin ayakta kalmasını zorlaştıran çeşitli faktörler vardır. Bunlar;
rekabetin artması, müşteri ihtiyaçlarının değişkenlik göstermesi, maliyetlerdeki
değişiklikler ve teknolojinin hızla gelişmesi ve değişmesi olarak sıralanabilir. Bu
faktörler şirketlerin finansal tablolarında etkili değişimler göstermektedir. Bu
çalışma, şirketlerin değerlerini belirleme sürecine dair derin bir anlayış
kazanmanızı ve bu kritik beceriyi geliştirmenizi amaçlamaktadır. Şirket
değerlemesi, günümüz iş dünyasında kritik bir öneme sahip olan bir alan olup,
yatırımcılar, girişimciler, finans profesyonelleri ve yöneticiler için vazgeçilmez
bir araçtır. Şirket değerleme, bir şirketin maddi ve finansal değerini belirlemek
için kullanılan bir dizi yöntemi içerir. Bu süreç, gelecekteki nakit akımlarını
tahmin etmek, riskleri değerlendirmek ve bir şirketin finansal performansını
analiz etmek gibi birçok faktörü dikkate alır. Doğru bir değerleme yapmak,
yatırımcıların, hissedarların ve diğer paydaşların karar vermeleri için güçlü bir
temel sağlar.
Free Cash Flow to the Firm (FCFF) is sn important financial metric utilized in corporate finance and valuation to assess the cash flows generated by a company's core operations that are available to all capital providers, both debt and equity. It serves as a fundamental indicator of financial health, operational efficiency, and a firm’s ability to sustain long-term growth and profitability. This paper explores the calculation of FCFF, emphasizing its role within the Discounted Cash Flow (DCF) model for enterprise valuation, where future FCFFs are discounted using the Weighted Average Cost of Capital (WACC) to estimate a company's intrinsic value. The discussion also examines the limitations of FCFF, including its reliance on assumptions, potential unsuitability for highly leveraged or volatile firms, and the complexity of its calculation. Moreover, practical approaches to analyzing FCFF, such as trend analysis, industry benchmarking, and integration with other financial metrics like Return on Invested Capital (ROIC), are highlighted. Ultimately, the comprehensive analysis of FCFF provides investors, analysts, and corporate finance professionals with actionable insights to make informed financial and strategic decisions
The paper analyzes the latest research on outsourcing in
business practice as an element of a complex business system.
There is proposed approach to analyze the impact of outsourcing on
companies from the point of view of systems theory and graph theory. It is shown
that any complex business organization with the aim of sustainable and long-term
increase of its fundamental value can be conceptually described with the help of
two types of graphs. The first type is a graph of material flows, where the
processes of processing material flows are carried out at the vertices.
The material flows themselves are determined by the edges of the graph.
The second type is an information graph at the vertices of information processing
and managerial decision-making processes.
This is a reasonably general descriptive scheme, but it allows us to
separate two fundamentally different graphs in terms of achieving the
organization's goal. The material graph is relatively stable and represents a
general description of material flow processing. The information graph
on contrary, has a rather dynamic nature and can change, responding to changes
in information flows affecting the organization.
In addition, it is the information graph that plays a primary role in
changing the structure of the material graph and, in fact, controls the change in
the structure of the material graph.
In the framework of information theory, an essential characteristic of an
information graph is its information capacity. From an information theory
perspective, outsourcing represents an additional "information word."
If the balance between information capacity and information diversity is
disturbed, the information graph of the organization will not be able to process
all the information diversity, and, as a result, this leads to problems in achieving
the organization's goal due to the inconsistency of the structure of the material. Further research will be aimed at finding adequate methods that would
make it possible to reasonably describe the influence of the organization's
material and information graphs on its purpose.
Constant variability of the external environment is one of the key features affecting the business activity of domestic organizations and generates the need for constant updating of managers’ professional skills. The issues of assessment efficiency of commercial companies are always relevant not only for owners, but also for managers, employees and other stakeholders. In the conditions of economic instability, the interest to the indicators of organizations’ efficiency increases and, accordingly, their clarification and adjustment is required. and adjustment. The purpose of the study is to summarize the profitability indicators depending on the goal-setting of the participants of commercial organizations and to establish the possibility of using these indicators to assess the effectiveness of the company’s activities. Many years of experience of the authors of this article in the field of business valuation allowed to systematize the techniques of calculation of the main profitability indicators, to present an updated system of their grouping, as well as to classify the factors affecting them. Also, theoretical approaches to the calculation of invested capital were generalized in the course of the work. The research applied the methods of analysis, comparison, synthesis, classification, collection and generalization, logic, graphical and tabular display of information. Theoretical significance of the obtained results consists in the development of the methodology of value-oriented management in order to actualize and adapt the algorithms for calculating profitability indicators to domestic conditions, taking into account the interests of the participants of the organization. The practical significance of the work consists in the development of methods for assessing the performance indicators of the company, which can be used in the corporate governance of commercial structures, as well as in making management decisions by stakeholders.
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