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New Venture Options
Published in David C. Kimball, Robert N. Lussier, Entrepreneurship Skills for New Ventures, 2020
David C. Kimball, Robert N. Lussier
Business valuation byasset valueis based on the balance sheet. A starting place is with (1) book value or net worth. You take the total assets minus the total liabilities, which equals book value. It is commonly stated as net worth or owner equity. (2) Adjusted book value. The balance sheet figures are often not based on the current market value. The asset may be worth more or less, so they need to be adjusted accordingly. Balance sheets also don’t tend to include goodwill—the value of an established business with its reputation, which often needs to be added. (3) Replacement value. If you were starting a new business, what would it cost for the same assets the business has now? (4) Liquidation value. How much would be left if you sold all the assets and paid off the liabilities?
The Underpinnings of Intellectual Property Rights (IPRs)
Published in Uday S. Racherla, Intellectual Assets for Engineers and Scientists, 2018
“Book value” of a firm may be defined as, the value of total assets of the company (tangible and intangible assets) minus its total liabilities. It is calculated based on the data reported in the balance sheet on assets and liabilities. In today’s knowledge economy, companies invest far more in ITAs (such as IPRs, TSs, CPK, and CIs), than in tangible assets (such as property, plant, and equipment). In the present system of accounting rules, however, companies don’t report all their ITAs on their books (NOTE: some companies report the value of patents and goodwill). Moreover, valuation of the ITAs of a firm—such as all IPRs, TSs, CPK, and CIs—is not simple, precise, and foolproof. Consequently, a firm’s investments in ITAs often remain almost completely hidden from the investors. As a result, three scenarios may result: (a) if a firm’s ITAs go unrecognized and underrepresented on the balance sheet, as is usually the case, then the book value of the firm will be significantly lower than its net worth; (b) if a firm’s ITAs are improperly undervalued, then also the book value of a firm will be lower than its net worth, and, finally (c) if a firm’s ITAs are improperly overvalued, then the book value of the firm will be higher than its net worth. In essence, the book value of a firm may not be a reliable indicator of its net worth. For this reason, the investment community often looks to other indicators for the net worth of firms, such as—market capitalization and true market value.
The world of foundation engineering
Published in Rodrigo Salgado, The Engineering of Foundations, Slopes and Retaining Structures, 2022
There is another accounting report, also produced every accounting period (typically, every quarter), called the balance sheet. The balance sheet lists all assets and liabilities of the firm. Assets are all that the firm owns that has value. Liabilities are in essence the firm’s debt. Both assets and liabilities are classified as current (or short term) or long term. Current assets are assets that we expect will naturally convert to cash within 1 year. Current liabilities are debts that must be paid within 1 year. Subtraction of liabilities from assets gives us the firm’s net worth, equity, or book value.
Impacts of sustainability and resilience research on risk governance, management and education
Published in Sustainable and Resilient Infrastructure, 2021
Linda Nielsen, Michael H. Faber
While all organizations, public or private, aim to create value through their activities or business models, the concept of value creation has different meaning for different stakeholders and in different contexts. A common measure for value is the value that the stock market gives a company, i.e., market value. Value can also be expressed in terms of the value in a balance sheet, which is the accounting or book value of a company’s assets minus its liabilities. Value can have different temporal dimensions as in the value based on expected future performance. In financial terms, value creation is the revenue (return on investment) that exceeds expenses (costs of capital). Traditional methods for assessing organizational performance are based precisely on profit and asset bases. A traditional model of value creation is a function of economies of industrial-scale characterized by mass production, high efficiency of repeatable tasks and constant, hierarchical structures of organization. Risk management in such a context is not much different from accounting.