What is a Business Valuation Report?
The business valuation report is the analysis of the business valuation recording the net worth and the future aspects of a business. Business valuation methods and the procedures used to calculate the valuations are required when they need to be presented for an investment purpose, taxation or litigation requirements. The valuation report presents an analysis of the acceptability of the long calculations and multiple inputs entered into the valuation.
What are the kinds of business valuation reports?
Two kinds of valuation reports are into practice - verbal valuation reports and written valuation reports. Except in a few situations, a verbal valuation report is not called for, only for certain internal discussions where the valuation of the company requires to be referred to informally.
Technically, a valuation report should be the financial story in brief of the business journey and its struggle. The valuation report to that extent is the adaptability of the research, calculation and analysis method used in the business valuation. During the evaluation the aim should be to prepare a clear and logical conclusion of the business finance.
How is the quality of the Business Valuation Report ensured?
The business valuation report requires to be accurate and a good quality business valuation report should contain the following factors:
At the time of the evaluation, the identification of the company should be mentioned clearly - name, shares, the requirement of the valuation report and the date it is being prepared or finalized on. The standard of value of the company in the form of fair market value and the strategies used by the company should also be mentioned in the valuation report.
The nature of the business operations must be demonstrated briefly and mention the strengths and weaknesses of the business, opportunities, as well as the perils of the business.
External factors such as industry and economic trends affect cash flows in future, predict the risks. A comparative study of businesses of a similar kind under the same industry.
The profits and losses made in the immediate financial years provide an analysis of future cash flows. The adjustments made in the financial statement of the business must be shown in a section clearly.
The valuation method used is important to mention. There are several methods of evaluation, and accordingly, enter the inputs. Therefore, for preparing the business valuation reports, it is necessary to identify that the inputs for the purpose are mentioned.
Discounts are called for in some valuation assignments and the valuation report must mention whether the discounts are appropriate and the reason behind them.
The valuation process should be depicted in the report, supported by the evidence documents and records provided.
A valuation report in a comprehensive manner explains the journey of the business, which acts as evidence to support the future assumptions made under the market trends and valuation. Moreover, the technical details must be mentioned to avoid any mistakes or wrong analysis.