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Valuation Purposes

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Valuation Purposes

Valuation Purposes.

The purpose of valuation may be summarized as under –

  1. For return on investment – Purchase of a business return on investment is an important consideration.
  2. Purchasing the controlling interest in a business –  This serves the same purpose as the purchase of an active business. However, the part purchased should have a higher value than its strict proportion to the whole.

3. Marketing a company’s share – A sufficient number of people should be interested in buying shares.

  1. Buying a share in a business: The likely pattern of income receivable in terms of income and capital gain is an important consideration.
  2. Acquiring assets: The purpose here is to acquire a business or a part thereof in order to obtain the assets which it holds.
  3. For estate duty purpose: An unquoted business requires a value to be placed upon its shares for estate duty purpose, since in this case no market price is available.

            vii. For insurance cover: This is largely concerned with the costs of replacing the relevant assets.

            viii. Security against loan: The lender is concerned with the realizable value of the assets of a firm.

Valuation Purposes

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