The Value Of Asset Valuation Essay - 2029 Words

An asset can be described as any unit that has value in terms of money, or has a potential creating monetary value in the future. (Phatak 2016) What a business is worth is usually determined by the net value of its assets. Asset valuation is critical when making investment decisions. Valuation, simply put, is the process analysts’ use to ascertaining whether an investment decision is worth it or not. Investments are usually made with an expectation that the value of the asset will grow enough to pay back not only the sum of the money invested but also to give a profitable return, even after considering the risks involved. This is expected of all investments including bonds, shares, derivatives etc. (Koller, Goedhart, Wessels 2010 p. 1). To be able to determine the investment potential of business, asset valuation must be considered. Through asset valuation one can analyze the future potential in terms of returns if investment is done on the asset. 1. The importance of asset valuation Asset valuation is significant in ensuring that the right price of an asset is paid when investing. In making an investment decision, it is important to know the exact amount that will be paid for an asset. If valuation is done correctly, an investor can be able to budget and plan for their investment and taking into consideration market factors, approximate how much returns they will make from their investment. If valuation is done poorly, an investor may overpay for an Asset resulting inShow MoreRelatedAccounting And Financial Methods And Tools1745 Words   |  7 PagesFirm valuation relates to accounting in that it uses a combination of both accounting and financial methods and tools. Some of the accounting tools used includes the valuation of firms’ assets, valuation of a firm’s profit and loss and also the valuation of a firm’s obligations, which are liabilities. Just like accounting, firm valuation process follows defined steps so as to arrive at the corre ct value of the firm that is free from errors. â€Å"There are five steps involved; preparation and planningRead MoreThe principle of historical cost is still used in accounting when there is a large measure of agreement that it is inappropriate. Discuss.1226 Words   |  5 PagesHistorical Cost Accounting is a traditional valuation method as it reflects only on the past cost of the asset, however in the contemporary business environment companies must remain flexible and transparent. This belief has lead to the creation of several other valuation methods, due to word constraints I have focused primarily on Fair Value Accounting as an alternative to Historical Cost Accounting. Although Fair value accounting is a theoretically superior valuation methodology, there are several severeRead MoreWhy Is Asset Valuation Important? An Investment Decision? Describe And Compare Major Techniques For Valuing Bonds And1665 Words   |  7 PagesWhy is asset valuation important in an investment decision? Describe and compare major techniques for valuing bonds and shares. Asset valuation is an integral part of finance management where the valuation process will support the decision making process regarding merger and acquisition related decisions, capital budgeting process and investment analysis. Asset valuation is the process to determine the correct worth of any asset where the risk and return are the important factor to assess the worthRead MoreStanford Health Care Consolidated Financial Statements1593 Words   |  7 Pagesthe total current assets, total assets, total current liabilities, total liabilities, total net assets, and total net assets and liabilities, 2014 data remains high throughout as 2013 is lower in data. First of all, in the 2013 and 2014 financial statements pertaining to balance statement shows the financial standing of an organization at a certain point in time. The financial statements in 2013 and 2014 follow the accounting equation widely known as (Assets= Liabilities + Net Assets). Overall, theRead MoreCapital Valuation: Ta rget1488 Words   |  6 PagesCapital Valuation Paper YOUR NAME COURSE Instructor NAME DATE Capital Valuation Paper A business valuation of a company, especially one the size of Target, is a mystery but is often an integral part of planning, decision-making, strategic assessment, and maybe an equitable resolution to a touchy concern.  Knowing what a business is worth and placing a value on it builds confidence so undervalue or overvalue of the business does not happen. Team C will perform a capitalRead MoreKPMG Deferred Tax Issues1194 Words   |  5 Pagesï » ¿KPMG Deferred Tax Issues: Valuation Allowance Issue 1: Conclude on the appropriateness of the engagement team’s decision for valuation allowance. 1. Clarify Issues Objectives ASC 740-10-05-5 defines a deferred tax asset as: A deferred tax asset is measured using the applicable enacted tax rate and provisions of the enacted tax law. A deferred tax asset is reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or allRead MoreFood for Thought1339 Words   |  6 Pagesbuildings should be recorded using the â€Å"in-use† valuation premise and intangible assets should be recorded at fair value. The following pronouncements have been used in making our decision: ASC 718, ASC 805-10-25-23, ASC 805-20-25-4, ASC 805-20-30-6, ASC 805-30-25, ASC 805-30-30-7, ASC 805-30-30-9, ASC 805-30-30-11, ASC 820-10-35-10, ASC-820-10-35-11. Consideration Transferred ASC 805-30-30-7 requires that an acquirer measure and recognize the fair value of the consideration transferred in a businessRead MoreCase Mw Petroleum1167 Words   |  5 PagesAPV and option valuation Valuing MW Acquisition by using APV method assumes in practice that exploiting of all MW’s reserves is certain and happens right after the acquisition. In other words, the APV method excludes the flexibility in future decision making. In this case, Apache has both an option to defer the exploiting of reserves into future and Apache may also choose not to exploit the MW reserves at all. As some of MW’s reserves are actually real options, the APV valuation method actuallyRead MoreAdjusting Lower Cost Of Market Inventory On Valuation1466 Words   |  6 PagesAdjusting lower cost of market inventory on valuation Inventory valuation is a financial method which assist the companies in providing monetary value to the products which make up the inventory of the company. The most important asset of the companies are their inventories. The measurement of the value of the inventory is essential to make correct financial statements. In case the measurement of the inventory is not proper, the revenues will not match properly with expenses, this will affect theRead MoreCapital Valuation Paper1634 Words   |  7 Pagesdebt, if any, and equity, using various capital valuation models. Complete the following in your paper: †¢ Show calculations that support your findings, including those involving rates of return. †¢ Defend which valuation model best supports your findings. Capital Valuation Paper Capital Valuation Paper Berkshire Hathaway Inc. is an American multinational