The purpose of valuation may be summarized as under –
- For return on investment – Purchase of a business return on investment is an important consideration.
- 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.
- Buying a share in a business: The likely pattern of income receivable in terms of income and capital gain is an important consideration.
- Acquiring assets: The purpose here is to acquire a business or a part thereof in order to obtain the assets which it holds.
- 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.