The following Owner-Managed Businesses guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
The value of a company needs to be determined for commercial reasons, for example when the owners intend to sell the company. The main valuation methods are:
industry standard methods
net assets basis
discounted cashflow, and
These are discussed below.
The capitalised earnings basis of valuation is probably the most commonly applied technique in valuing private company shares.
The formula is:
Future maintainable earnings x Price / Earnings (P / E) multiple
Future maintainable earnings are determined as follows:
determine the future anticipated profits:
these should be calculated based on historic audited results
if results are stable then the previous period’s results should be an acceptable basis for determining sustainable profits
if results have fluctuated in the
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