scholarly journals THE ROLE OF DATA IN THE VALUATION OF AN ENTERPRISE - THE COST OF EQUITY

2020 ◽  
Vol 49 (49) ◽  
Author(s):  
Edyta Piątek
Keyword(s):  
Research Problem ◽  
Cash Flows ◽  
Joint Stock Company ◽  
Cost Of Equity ◽  
Stock Company ◽  
Enterprise Valuation ◽  
Valuation Method ◽  
Valuation Process ◽  
The Right ◽  
The Cost

The valuation of a company is a complex process and requires comprehensive knowledge. The decisions made at each stage have consequences for the next step. The first fundamental stage is to choose the standard of value that the valuer wants to determine. Only then is the appropriate valuation method selected. One of the further factors influencing the outcome of the valuation process is the cost of equity, which takes into account important parameters of the company's operation. It is the cost of equity that causes the most controversy and dilemmas. The research problem analyzed in the article is a way of calculating the cost of equity in enterprise valuation. The example of a specific valuation indicates that the cost of capital cannot be a parameter (data item) covering all risks, but only those that cannot be programmed in cash flows. In the course of research works, the valuation of enterprise B organized in the form of a general partnership as of 29.08.2014 in connection with its contribution by the shareholders to the joint-stock company A as an in-kind contribution increasing the capital was performed. Due to the fact that there is a minority shareholder in joint-stock company A, there is a dilemma of choosing the right value and valuation method and the method of calculating the cost of equity. Neither the literature on the subject in this respect, nor the parties to the transaction, indicate a clear solution, especially as regards the value of the cost of equity.

scholarly journals THE VALUE OF AN ENTERPRISE AND FORMATION OF REQUIREMENTS TO THE SYSTEM OF ITS ASSESSMENT INDICATORS

2019 ◽  
Keyword(s):  
Well Being ◽  
Added Value ◽  
Economic Conditions ◽  
Enterprise Management ◽  
Joint Stock Company ◽  
Stock Company ◽  
Strategic Objectives ◽  
Managerial Decisions ◽  
The Right ◽  
The Cost

In modern conditions there is a strong need for theoretical and methodological generalizations and development, as well as practical recommendations, which would be aimed at building an effective mechanism for assessing the value of an enterprise in rapidly changing economic conditions. This study focuses on the part of this problem, especially the identification of the requirements to be met by the indicators used for such an assessment. In addition, in order to avoid unilateralism, the main approaches to determining the value of an enterprise are considered and its types are defined in the article. In our work, we rely on the concept of «enterprise value» in its broad sense. Value is a characteristic of production process encapsulated in economic well-being, which expresses its internal potential ability to bring effect that exceeds not only the cost of creating this benefit, but also its opportunity value, i.e. the benefit of lost opportunities as a result of investing resources in production of this benefit. The value becomes socially recognized if it allows the resource owner to have this effect in the form of accumulated economic added value based on economic profit. However, no matter what approach is used, the value of the assessment will depend on the right indicators that allow to make an analysis and to provide objective results. The main features of the system of indicators for assessing the value of an enterprise are: adequacy, accuracy, objectivity, trustworthiness, unambiguity, profitability, value, compatibility, timeliness and regularity, defining cause-and-effect links and indicators of assessment and evaluation of business opportunities. Taking into account the above-mentioned, the following conclusions are made: the choice of indicators for value assessing is individual in nature, as there are specific characteristics of appraisal objects and current and strategic objectives of the appraisal; to form a system for assessing the value of a particular joint-stock company, it is necessary to take into account the development or absence of market institutions, environment, factors of their stability, level of business capitalization, degree of control, etc.; usage (application) of a balanced system of assessment indicators should be the basis for making managerial decisions. The perspective for further research in this area needs to be guided in the development of tools for assessing the value of enterprises, as well as improving the integrated assessment of financial and economic conditions and efficiency of enterprise management, based on the highlighting of the most influential indicators of financial, property and management nature taking into account the specificity of an entity activity.

scholarly journals THE USE OF VALUATION METHODS ON THE EXAMPLE OF PJSC “CENTRENERGO”

2020 ◽  
Keyword(s):  
Electric Power Industry ◽  
Cash Flows ◽  
Business Value ◽  
Comparative Approach ◽  
Joint Stock Company ◽  
Present Value ◽  
Stock Company ◽  
Business Valuation ◽  
Net Assets ◽  
The Cost

The article is devoted to the consideration of the peculiarities of using approaches to business valuation using the example of PJSC "Centerenergo". In the course of the study, the choice of the object of research was justified, a description of approaches and methods for assessing the value of a business was carried out, the features of using the costly, comparative, and profitable approaches using the example of the company under study were considered. According to the research of the study, the market value of PJSC "Centrenergo" was determined. PJSC "Centrenergo" was chosen as the object of the study, since; firstly, the company is one of the largest state-owned enterprises of the country’s electric power industry in the form of a public joint-stock company. Secondly, the company was approved in the list of objects of large privatization of state assets; therefore, the assessment of business value is an urgent topic for PJSC "Centrenergo". The assessment of the value of the enterprise was carried out using the cost approach, the method of net assets, and adjustments were made to the existing assets and liabilities of the enterprise. The cost of the company was calculated using a comparative approach, comparative sales. A search was carried out and the choice of analogous companies was substantiated. The corresponding multipliers were selected and, on their basis, the values for each analog enterprise were calculated. Because of the calculations performed, the value of the enterprise was obtained. Within the framework of the income approach, the value was estimated using discounted cash flows. The choice of the cash flow model and the forecast period of receipts was selected and justified. The constituents of the discount rate and its definition have been substantiated. The present value of the net cash flows and reversals is determined. The business value was calculated as the sum of the present value of net cash flows and reversion. Based on the results of the study, the value of the company was established by three approaches to business valuation. The final value of the cost of Centrenergo PJSC was calculated as a result of applying the results matching method. In the calculations, all previously obtained values were used and specific weights were assigned, as a result, the final cost of the surveyed company was calculated.

scholarly journals The Effect of Corporate Tax Avoidance on the Cost of Equity

2016 ◽  
Vol 91 (6) ◽  
pp. 1647-1670 ◽  
Author(s):  
Beng Wee Goh ◽  
Jimmy Lee ◽  
Chee Yeow Lim ◽  
Terry Shevlin
Keyword(s):  
Information Quality ◽  
Tax Avoidance ◽  
Cash Flows ◽  
Equity Capital ◽  
Testable Hypothesis ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Corporate Tax ◽  
Long Run ◽  
The Cost

ABSTRACT Based on Lambert, Leuz, and Verrecchia's (2007) derivation of the cost of equity capital in terms of expected cash flows, we generate a testable hypothesis that relates tax avoidance to a firm's cost of equity capital. Using three broad measures of tax avoidance—book-tax differences, permanent book-tax differences, and long-run cash effective tax rates—to test our hypothesis, we find that the cost of equity is lower for tax-avoiding firms. This effect is stronger for firms with better outside monitoring, firms that likely realize higher marginal benefits from tax savings, and firms with higher information quality. Overall, our results suggest that equity investors generally require a lower expected rate of return due to the positive cash flow effects of corporate tax avoidance. JEL Classifications: G32; H26; M41.

The Principle of Joint-Stock Companies

2016 ◽  
Vol 5 (4) ◽  
pp. 16-19 ◽  
Author(s):  
Галанов ◽  
Vladimir Galanov ◽  
Галанова ◽  
A. Galanova
Keyword(s):  
Reproductive Activity ◽  
Social Benefits ◽  
Main Trend ◽  
Joint Stock Company ◽  
Stock Company ◽  
Personal Consumption ◽  
World Income ◽  
High Level ◽  
The Cost ◽  
Rich Countries

Development of capital relationship occurs in many areas. We can identify the main two of them: the development of the main organizational form of business activity as joint-stock companies and the development of their reproductive activity, which is reflected in the fundamental change in the processes of formation of the cost of the goods produced by these companies. The main trend in the development of a joint stock company may be called the “socialization of capital”, which not only retains many of the old ways of the private appropriation of profits, but also creates new kinds of them. The chain of commercial structures development involves conversion of the national jointstock companies into the international joint-stock companies, or multinational companies. This, in turn, leads to the transformation of a number of states, among which we include the developed or rich countries of the world, into a kind of “joint-stock” societies, whose citizens have an opportunity to increase (through an appropriate system of maintenance of a high level of wages and social benefits) their personal consumption financed by appropriating a disproportionately large part of the total world income by the country as a whole. Such a country objectively turns into a special economic-social form of existence of the joint-stock company. The basis for such a transformation of the state into a sort of joint-stock company is a new nature of production of the majority of modern goods. It consists in the change of the creation process of goods’ value which leads to the complete subordination of all its stages to the corresponding MNC groups.

Corporate investment in social responsibility versus dividends?

2012 ◽  
Vol 8 (2) ◽  
pp. 199-207 ◽  
Author(s):  
Michel T.J. Rakotomavo
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Design Methodology ◽  
Corporate Investment ◽  
Cash Flows ◽  
Cost Of Equity ◽  
Content Type ◽  
Corporate Social ◽  
The Cost ◽  
Practical Implications

PurposeThe paper aims to examine whether corporate investment in social responsibility takes away from expected dividends.Design/methodology/approachThe article builds two hypotheses that are tested empirically through the analysis of 17,670 US firm‐year observations covering the period 1991‐2007. The tests are conducted in both univariate and multivariate settings.FindingsThe evidence supports the hypothesis that mature firms tend to invest more in corporate social responsibility (CSR). Specifically, firms investing highly in CSR tend to be larger, more profitable, and with greater earned (rather than contributed) equity. The evidence also supports the hypothesis that CSR investment does not subtract from dividends. Instead, CSR effort and dividend tend to increase together. Thus, CSR investment tends to be effected by companies who can afford it, and it does not lower value by lowering investors' expected payout.Practical implicationsThese results imply that spending resources on CSR does not lower the cash flows paid out to investors. When combined with the finding that CSR lowers the cost of equity, they also mean that CSR increases the value of a company's stock.Originality/valueThis is the first study that explicitly links CSR to the dividend flow.

scholarly journals Shareholders’ Lawsuit in Georgian Legislation and Case Law

2021 ◽  
Vol 17 (20) ◽  
pp. 1
Author(s):  
Khatuna Jinoria
Keyword(s):  
Case Law ◽  
Joint Stock Company ◽  
Legal Institution ◽  
Minority Shareholders ◽  
Stock Company ◽  
Legal Nature ◽  
The Right ◽  
Legal Mechanism

Obtaining shares in a joint stock company grants the owner important rights and imposes several obligations on them. In the list of shareholders’ rights, one of the most important subjects is the right to sue the shareholder’s lawsuit. The right to bring in front of courts certain aspects of company-related activities is the legal mechanism of protecting the shareholders other rights. Shareholders’ lawsuit plays an important role in the protection of minority shareholders. Shareholders’ lawsuit also includes two types of legal actions: direct lawsuit and derivative lawsuit. Georgian case law is not very advanced in this area. When shareholders bring matters in front of courts, the number of precedents adhered to is rare. As for the derivative lawsuit, the relative novelty of this legal institution in Georgian legislation causes the lack of deeper understanding. Georgian doctrine does not provide thorough analysis of legal nature and divergence of shareholders’ lawsuits when it comes to case law. As mentioned above, it is quite scarce.

scholarly journals Perlakuan Akuntansi Persediaan Barang Dagangan Dan Pengaruhnya Terhadap Beban Pokok Penjualan

2017 ◽  
Vol 9 (2) ◽  
pp. 157-171
Author(s):  
Aloisius Hama
Keyword(s):  
Internal Control ◽  
Balance Sheet ◽  
Physical Method ◽  
Net Income ◽  
Manufacturing Companies ◽  
Valuation Method ◽  
Input Material ◽  
Income Statement ◽  
The Right ◽  
The Cost

Objectives to be achieved in this study is to know the accounting treatment of Merchandise Inventory which affects the Cost of Goods Sold on PT. Setia Makmur, Surabaya and can be used as input material of the company, to be able to use more accurate inventory method in determining Cost of Goods Sold in relation to Financial Statement. The accounting treatment for inventory is important for many companies, especially trading and manufacturing companies, as it has a significant effect on the presentation in the Balance Sheet and Income Statement. PT. Setia Makmur, Surabaya uses the Physical Method to record its inventory and LIFO Method (MTKP) to conduct an assessment of its Merchandise Inventory. The use of the Physical Method for the recording of Merchandise Inventory has a disadvantage from the point of internal control. The use of the LIFO Method (MTKP) in the Merchandise Inventory assessment is not in accordance with the Financial Accounting Standards which only allow the Special Identification Method, the FIFO Method (MPKP) and the Average Method. The mistake in choosing the right inventory valuation method will result in the presentation of Inventory, Cost of Goods Sold and Net Income which is overstated or understated.

scholarly journals MANAGEMENT OFCASH FLOWS OFINVESTMENT ACTIVITY OFENTERPRISES

2017 ◽  
pp. 111-120
Author(s):  
Petro RENDOVYCH
Keyword(s):  
Stock Market ◽  
Financial Management ◽  
Financial Stability ◽  
Cash Flows ◽  
Internal Source ◽  
Joint Stock Company ◽  
Stock Company ◽  
Investment Activity ◽  
Operational Activity ◽  
Market Relations

Introduction. In joint-stock companies there is a problem of shortage of money not only for carrying out of investment activity, but also for maintenance of sufficient level of the operational activity. One of the main instruments of a market economy that contributes to the formation of a cash flow system is the stock market. The purpose ofthe article is to study some aspects ofcash flow management in the system of financial management, to characterize cash flows of joint stock companies, which determine the potential of forming their internal source of financing for their development and provide the formation of additional investment resources for the implementation of financial investments in the securities market. Results. One of the important tasks of the Ukrainian economy development is the development of mechanisms for the formation of investment-attractive and innovative-oriented joint-stock companies. The development of market relations requires an increase in the effectiveness of their activities. The assessment of the effective activity of the entity was determined by analyzing the profit of the enterprise, and subsequently, economists supplemented its coefficients of liquidity, solvency, financial stability. The analysis and identification ofthe reserves for increasing profits is also carried out by analysts of the stock market in orderto furtherstimulate the investor. Conclusion. We believe that the analysis of cash flows by their dynamics and structure allows us to identify the negative factors of the organization of financial and economic activity of the entity, immediately reflects the size, quality and direction of change in the financial state of the joint-stock company, and also contributes to the development of concrete measures for its improvement. Since inbound and outbound cash flows of investments are the main factors in creating the value ofenterprises, which ultimately reflects the management of the result of investment activity in terms of Modern Value Approach, therefore, in our view, the process of reproduction of capital and the formation of investment flows can be expressed through the movement of value in the field Investment activity. In the process of studying investment flows of enterprises, it was found that the level of investment attractiveness of enterprises depends on the efficiency of the movement oftheirinvestment cash flows.

scholarly journals A Better Way To Measure The Cost Of Equity Capital For Small Closely Held Firms

2012 ◽  
Vol 10 (2) ◽  
pp. 97
Author(s):  
Denis O. Boudreaux ◽  
Praveen Das ◽  
Nancy Rumore ◽  
SPUma Rao
Keyword(s):  
Cost Of Capital ◽  
Average Rate ◽  
Equity Capital ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Publicly Traded ◽  
Simple Method ◽  
Valuation Process ◽  
The Cost ◽  
Privately Owned

A companys cost of capital is the average rate it pays for the use of its capital funds. Estimating the cost of equity capital for a publicly traded firm is much simpler than estimating the same for a small privately held firm. For privately owned firms there is the lack of market based financial information. In business damage cases, valuation of the firm is often a prime interest. A necessary variable in the valuation process is the estimate of the firms cost of capital. Part of the cost of capital is the equity holders or owners required rate of return. The purpose of this paper is to explore the theoretical structure that underlies the valuation process for business damage cases that involve privately owned businesses. Specifically, cost of equity capital estimate methods which appear in the current literature are examined, and a theoretically correct and simple method to measure cost of equity capital for closely held companies is offered.

scholarly journals Oferta Pública Inicial no Brasil (2004-2006): Uma Abordagem da Avaliação através de Múltiplos e do Custo de Capital Próprio

2008 ◽  
Vol 6 (2) ◽  
pp. 157
Author(s):  
Felipe Pretti Casotti ◽  
Luiz Felipe Jacques da Motta
Keyword(s):  
Statistical Evidence ◽  
Cost Of Equity ◽  
Short Term ◽  
Pricing Process ◽  
Valuation Process ◽  
The Cost

The pricing process of new shares in IPOs has been under study in several countries. This paper initially looks at the valuation process using multiples and seeks to classify the new shares under two categories: underpriced or overpriced at the time of the IPOs. Analysis of the cost of equity, comparing betas at the time of the offerings (usually calculated as the betas of comparable companies) and the betas of the companies after 12 months of trading, is also carried out. Companies in the sample are those that went public between 2004 and 2006. Results indicated that companies were not undervalued, even after some high short-term returns. However there is no statistical evidence that they were overvalued. Finally, results indicated that betas after twelve months of trading are significantly higher than the comparable companies’ betas used at the time of the IPOs.

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