| Corporate finance course | Evaluation based on book value |
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| • Book value Equity book value = total equities (par value, capital surplus +total accumulation of retained earnings) – dividends to pay or, it is the same: total assets – due for payment liabilities – dividends to pay • Corrected book value The value of the assets is an accounting value, that may be different from the real value of the assets because: - the provisions may have a tax origin - the book depreciation may differ from the economic depreciation - the inflation makes the figures totally inadequate (unless reevaluation for inflation like in Bulgaria) - the value of the business (for commercial firms, generally not production ones): usually assessed by a percentage of turnover defined for each sector by unions, chamber of commerce and so on. - the lease: some firms lease machines because they can not afford to buy them. This is in fact a debt, but it doesn’t appear in the balance sheet The real value can be different according to the purpose of the evaluation. It can be the replacement value (for goods that can be sold), the utility value (for goods that are to stay in the firm ; Pb: experts can have different views on this), the liquidation value: How much we could get if we had to sell the firm very quick. In that case, don’t forget the cost of lay off, administrave costs for liquidation... Evaluation in terms of returns >> |
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Corporate finance PART ONE: CAPITAL EXPENDITURE PART TWO. BASICS OF FINANCE PART THREE FINANCING DECISIONS PART FOUR FINANCIAL MANAGEMENT Course created and updated by Dr David Chelly, PhD in Management sciences from the University of Tours.
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