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Glossary of Business Terms A-F G-Z Common used terminology used in the mergers and acquisitions industry. Going Concern Value The gross value of a company as an operating business. This value may exceed or be at a discount from the liquidation value. The intangible elements of Going Concern Value result from factors such as having a trained work force, an operational plant, and the necessary licenses, systems, and procedures in place. Goodwill The amount by which the price paid for a company exceeds the company's estimated net worth at market value of the underlying tangible assets and liabilities. Goodwill is a result of name, reputation, customer loyalty, location, products, etc.
Income (Income Based) Approach General way of determining the value of a business, business ownership interest, security, or intangible asset using one or more methods that calculate the present value of anticipated future income. Investment Value The value to a particular investor based on individual investment requirements and expectations. Intrinsic Value An analytical judgment of value based on the perceived characteristics inherent in the investment as distinguished from the current market price. Investment Value The value to a particular investor based on individual investment requirements and expectations.
Lien Liquidation or Liquidating Value The estimated value, net of liabilities, of a company based on the market value of its assets.
Market (Market-Based) Approach General way of determining a value indication of a business, business ownership interest, security, intangible asset by using one or more methods that compare the subject to similar businesses, business ownership interests, securities, or intangible assets that have been sold. Net Book Value With respect to a business enterprise, the difference between total assets (net of depreciation, depletion and amortization) and total liabilities as they appear on the balance sheet (synonymous with Shareholder's Equity). With respect to a specific asset, the capitalized cost less accumulated amortization or depreciation as it appears on the books of account of the business enterprise. Net Cash Flow Cash available for distribution after taxes and after the effects of financing. Calculated as net income plus depreciation less expenditures required for working capital and capital items. Present Value The value today of a future payment, or stream of payments, discounted at some appropriate compound interest (discount) rate. Pro Forma Financial Statements Hypothetical financial statements. Financial statements as they would appear if some event, such as increased sales or production had occurred or were to occur. Also used to make projections for future years. Procuring Cause Projection Prospective financial statements which present an entity's expected financial position, results of operation and changes in financial position, based upon one or more hypothetical assumptions. Recasting Financial recasting eliminates from the historical financial presentation, items such as excessive and discretionary expenses and nonrecurring revenues and expenses, since they reflect the financing decision of the current owner and may not represent financing preferences of a new owner. Recasting provides an economic view of the company, and allows meaningful comparisons with other investment opportunities. Recast Book Value See also Adjusted Book Value. The value of a balance sheet item(s) (asset, liability, or equity) after recasting adjustments have been made. Representation Residual Value The estimated market value of an asset at the end of the period being considered. Return on Investment (ROI) The rate of return at which the sum of the discounted future cash flows plus the discounted future residual value equals the initial cash outlay. Stock Sale A form of acquisition whereby all or a portion of the stock in a corporation is sold to the purchaser. Transaction Value Total of all consideration passed at any time between the Buyer and Seller for an ownership interest in a business enterprise and may include but is not limited to all remuneration for tangible and intangible assets such as: furniture, equipment, supplies, inventory, working capital, non-competition agreements, customer lists, employment and/or consultation agreements, franchise fees, assumed liabilities, stock options or redemptions, real estate, leases, royalties, earn-outs, and future considerations. Valuation Approach A general way of determining a value indication of a business, business ownership interest, security, or intangible asset using one or more valuation methods. There are three Approaches generally used to value a business: Asset Approach, Income Approach, and Market Approach. Variable Interest Rate An interest rate that adjusts periodically to a predefined margin above or below an index rate. A commonly used index is the bank prime rate. Valuation Method Within a Valuation Approach, a specific way to determine value. Valuation Procedure The act, manner and technique of performing the steps of an appraisal method. Working Capital The excess of current assets over current liabilities. CLP (Certified Lender Program) FF&E (Furniture, Fixtures & Equipment)
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