Assessment of the company's value using the income method. Assessment of the value of a business using an income method: what to look for. Preparing a cash flow plan

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Course work

Assessment of the value of an enterprise with an income approach

Introduction

business profitable value

Business appraisal in modern Russia a lot of attention is paid. Enterprises are sold, bought, merged with each other, some go bankrupt and come under the control of another owner.

In our country, many firms have even been created that, for a certain fee, assess the value of a business.

In modern literature, there are several main approaches. This is a costly approach, it takes into account the state of the research object. The second approach is comparative, it compares analogs, and based on them, the value of the business is deduced. The third approach is profitable. It takes into account the net profit and risks of the enterprise.

The purpose of this work is to conduct a business valuation.

The object of research is JSC "Elecond".

Work tasks:

1. To study the theoretical foundations of business valuation approaches.

2. Estimate the cost of JSC "Elecond" using the income method.

The coursework includes two chapters. The first chapter presents a business valuation and its role in the activities of an enterprise, a classification of the main approaches to business valuation.

The second chapter describes a brief description of JSC "Elecond", analysis of the main performance indicators of JSC "Elecond", profitable approach to business valuation.

1. Approaches toappraisalebusiness: theoretical basis

1.1 Otsenkabusinessand her rolein the activities of the enterprise

Business valuation is the value of an enterprise as a property complex that can generate income for its owner.

Business appraisal includes in-depth financial, organizational and technological analysis of the enterprise. Past, present and projected income, development prospects and competitive environment in this market.

The role of business valuation is great. Every business owner should know the real value of their business. This is necessary in case of selling a business, to attract investments, etc.

1.2 Classificationmain approachesin the assessment of the business of the enterprise

There are three main approaches to business valuation:

1. Profitable.

2. Costly.

3. Comparative.

Consider a profitable approach.

The income approach is based on cash flows. Cash flows represent the movement of the monetary system in the process of making settlements or payments and receiving the latter. Cash flows are made up of receipts (inflows) Money and payments (outflow).

Let's consider a comparative approach. It is based on comparing the value of its assets with similar marketable assets. The basis of this approach is the opinion free market, expressed in the prices of completed purchase and sale transactions of similar companies or their shares (stakes).

The comparative approach is used where there is a sufficient database of sales and purchases. Therefore, the price of the actually completed transaction takes into account the market situation as much as possible.

The cost approach is used if it is impossible to find an analogue object, there is no experience in the implementation of such objects, or the forecast of future income is not stable.

The cost approach involves determining the value of a business based on the calculation of the costs required for the creation or acquisition, protection, production and sale of an intellectual property object at the time of valuation.

2 . Cost estimateOJSC « Elecond "

2.1 a brief description ofOJSC « Elecond "

JSC "Elecond" is one of the leading manufacturers and suppliers on Russian market, to the CIS and Baltic countries of aluminum, niobium and tantalum capacitors.

The history of the enterprise begins with the fact that on January 22, 1963, the Council of Ministers of the USSR issued a decree No. 121 on the construction of a plant for the production of electrical capacitors in Sarapul.

In 1968 the plant began its work on the production of oxide-semiconductor capacitors. To ensure compliance production plans and development technological process in 1974, a special design bureau was created at the enterprise, which carried out a number of works on the introduction of advanced technologies for the production of oxide-semiconductor capacitors, and also developed new types of capacitors. In addition to capacitors, the enterprise has been producing goods since 1975 popular consumption and industrial and technical purposes.

On February 10, 1993 the enterprise became a joint stock company. The shareholders include the Ministry of Property Relations of the Udmurt Republic, financial industrial group Uralskie Zavody, a number of individuals and legal entities.

JSC "Elecond" was created without limiting the period of its activity, is legal entity... Operates on the basis of the charter and legislation Russian Federation.

Legal address: 427968, Udmurt Republic, Sarapul, st. Kalinina, 3.

The main goal of the company is to make a profit. For this, the following tasks are solved:

1. Release of high quality products that are in demand in the market.

2. Search for new sales markets.

3. Incentives for staff.

4. Creation of new jobs, etc.

At present, the enterprise is operating in crisis conditions, but this did not affect its activities in any way. There was no staff reduction, wages, working week... This is due to the fact that the company has large government orders.

Open Joint Stock Company "Elecond" carries out the following main activities:

Development, production and sale of electronic products (IET), including with the use of precious metals, production of special-purpose products and other products for industrial and technical purposes;

Development, production and sale of military products;

Ensuring the protection of information constituting a state secret in accordance with the tasks assigned to the society within the limits of its competence;

Production and sale of consumer goods;

Execution of design, research, development and technological work, technical, technical and economic, legal and other expertise and consultations;

Trade, trade and intermediary, purchasing, sales, creation of wholesale and retail trade divisions and enterprises;

Organization and holding of exhibitions, sales exhibitions, fairs, auctions, auctions, both in the Russian Federation and abroad;

Provision of services to enterprises Catering, including the organization of the work of restaurants, cafes, bars, canteens;

Conducting entertainment, variety, cultural events;

Production and processing of agricultural products;

Export-import operations and other foreign economic activity in accordance with applicable law;

Provision of services for the transmission of electrical and thermal energy;

Carriage of passengers by road;

Development of communication facilities and provision of communication services;

Non-state (private) security activities exclusively in the interests own safety within the framework of the security service created by the society;

Other types of activities not prohibited by the legislation of the Russian Federation.

Governing bodies of the Open joint stock company Elecond are:

General Meeting of Shareholders;

Board of Directors;

General manager.

The supreme governing body is the general meeting of shareholders, at which the board of directors and the general director are elected.

The Board of Directors of the Open Joint Stock Company "Elecond" carries out general management of the company's activities, with the exception of resolving issues related to federal laws and the Charter to the competence general meeting shareholders.

Management current activities society is carried out executive body- the general director of the company. Competence general director all issues related to the management of the current activities of the company, with the exception of issues attributed to the competence of the general meeting of shareholders and the board of directors of the company.

The general director has several departments directly subordinate (second department, legal department and department of technical and economic research). His deputies are directly involved in the areas: chief engineer, for economic issues, Chief Accountant, for production and marketing, for commercial issues, for personnel, safety and social issues, the head of the quality service.

The personnel of the plant is divided into four categories: managers, specialists, workers, office workers.

As can be seen from Table 1, workers occupy the largest share in the structure of personnel by category. So, in 2013 the share of this category was more than 67%, in 2014 - more than 69%, and in 2015 - more than 68%. Thus, there is a decrease specific gravity workers in 2015 compared to 2014.

It is also necessary to conduct a qualitative analysis of personnel, it is presented in table 2.

Based on table 2, the following conclusion can be drawn. The largest number of personnel falls on the age from 30 to 40 years for all analyzed periods, less by the age under 20 years. In general, the structure of personnel by age has not undergone major changes during the analyzed periods.

Table 2. Qualitative analysis of the personnel of JSC "Elecond"

Index	The change 2015/2013	Growth rate, % 2015/2013
Employee groups: By age, years: 20 to 30 30 to 40 40 to 50 50 to 60 Over 60

Of Education: The average Specialized secondary Two higher

Labor experience, years: 5 to 10 10 to 15 15 to 20 Over 20 years

As for the education of personnel, as can be seen from the table, the largest number is accounted for by personnel with secondary specialized education. The positive aspects include an increase in the number of personnel from higher education, and the decline in staff with secondary education.

It can also be seen from the table that, in terms of work experience against the background of hiring new employees, the number with work experience of up to 5 years has grown, and by other criteria of work experience, there has also been an increase.

2.2 Analysiskey indicatorsactivities of JSC « Elecond "

Analysis of the main economic indicators allows us to identify the dynamics of the deviation of revenue, cost, to track the growth rates of these indicators, since the dynamics of these indicators has a direct impact on the gross profit.

Analysis of the main indicators of JSC "Elecond" is presented in table. 3.

Table 3. Analysis of key performance indicators

Indicator name					Growth rate, %
Sales proceeds, thousand rubles
Cost, thousand rubles
Gross profit, thousand rubles
Selling expenses, thousand rubles
Administrative expenses, thousand rubles
Profit from sales, thousand rubles
Net profit, thousand rubles
Return on sales,%
Labor productivity, thousand rubles

The data in Table 3 show that in the reporting period in 2015 compared to the base year 2013, the company's revenue increased by 37.9%, cost growth was 35.3%, gross profit increased by 40.2%. In addition, selling expenses increased significantly by 68.8%, and administrative expenses - by 43.8%. Sales profit growth was 32.7%. The amount of net profit increased by 25.4%.

Thus, the activity of the company is profitable and profitable.

In table 4 we will consider the indicators characterizing the financial condition of OJSC "Elecond".

Based on Table 4, the following conclusions can be drawn. The average monthly revenue of the enterprise increased in 2015 compared to 2013 by 30,178 thousand rubles. Its growth rate was 40.3%. This fact is positive point in the activities of the enterprise and speaks of the expansion of the scale of production.

Table 4. Analysis of indicators financial condition JSC "Elecond" for 2013-2015

Index	Period, year

1. General indicators
1. Average revenue
2. Share of funds
3. Average headcount
2. Indicators of solvency and financial stability
4. Degree of general solvency
5. Ratio of debt on loans
6. Degree of solvency for current obligations
7. Coefficient of coverage of current liabilities by current assets
8. Equity in circulation
9. Share of equity capital in turn. assets
10. Ratio of financial autonomy
11. Coefficient of maneuverability 0.2-0.5
12. Financial dependence ratio<0,7
13. Current liquidity ratio 1.5-2.5
14. Quick ratio 0.6-1.0
15. Absolute liquidity ratio> 0.2
3. Indicators business activity
16. Duration of turnover of current assets
17. The duration of the turnover of funds in production
18. Duration of the turnover of funds in settlements
4. Indicators of profitability
19. Return on working capital
20. Return on sales
21. Product profitability
22. Return on equity
23. Return on permanent capital
24. Profitability of core business

In 2015, compared to 2013, the share of cash in revenue increased, which increases the company's ability to fulfill its obligations in a timely manner.

The indicator characterizing the overall solvency of the enterprise in 2015 in relation to 2013 is increasing. The recommended dynamics for this indicator is growth.

The debt ratio of the enterprise in 2015 is lower than the indicator of 2013. A decrease in this indicator is definitely a positive trend.

The degree of solvency for current liabilities in 2015 in relation to 2013 is decreasing. Negative dynamics of the degree of solvency for current liabilities caused by an imbalance in the rate of borrowed funds and the rate of growth of income from economic activities.

Coefficient of coverage of current liabilities by current assets has a growth dynamics. In general, the growth of this indicator indicates an increase in the company's solvency.

Equity capital in circulation tends to grow, which is a positive trend.

The share of equity capital in current assets in 2015 in relation to 2013 increased, which indicates an increase in the degree of provision of the enterprise with its own circulating assets.

The financial autonomy ratio in 2014 tended to grow; there were no dynamics in 2015 compared to 2013. On the whole, this suggests that the financial dependence of the enterprise has not grown or decreased.

In 2015 compared to 2013, there is an increase in the duration of current assets. The duration of the turnover of funds in production, as well as funds in calculations, also increases.

The return on working capital in 2015 decreased in relation to 2013 from 0.27 to 0.20, which is a negative trend.

Return on sales decreased from 0.21 to 0.20, a negative trend is also a negative moment in the financial activities of the company.

The indicator of profitability of products shows that in 2013 the cost per ruble products sold accounted for 44 kopecks, in 2014 the profit per ruble of sales amounted to 42 kopecks. profit, in 2015 - 44 kopecks. arrived.

In 2015 in relation to 2013, the return on equity indicator decreases, which is a negative trend.

The return on permanent capital decreased from 0.28 to 0.18, which can also be attributed to negative dynamics.

In 2014-2015. in relation to 2013, the profitability of core activities decreased from 0.27 to 0.26.

Summing up, we can draw the following conclusion. At this point in time, the enterprise is solvent and financially stable, at the same time, a set of measures is needed to increase the stability, solvency, and liquidity of the enterprise in order to minimize financial risks.

2.3 Income approachToappraisingkeOJSC « Elecond "

The profitable approach to business valuation is the most common in our time. The advantages of this approach is that it takes into account the impact on the value of the enterprise of such an important factor as profitability, which compensates for the disadvantages of other approaches. Since buying a business is an investment option, profitability is the main criterion for investment attractiveness. It is impossible to convince an investor to invest money in a business by simply summing up the assets of an enterprise. Therefore, the income approach is a priority when assessing the value of an enterprise, which determines the choice this method.

One of the methods income approach is the discounting method. To use this method, it is necessary to calculate the discount rate (Table 5).

Table 5. Calculation of the discount rate

The discount factor at a rate of 17% is presented in table 6.

Table 6. Discount factor

Discount coefficient

In 2015 JSC "Elecond" opened a new production - the production of LED lamps. Due to this, JSC "Elecond" plans to increase its net profit by 30% in 1 year, by 35% - in the second year, by 37% - from 3 to 5 years.

Let's calculate the net profit for each year:

P1 = 342323 * 1.3 = 445,020 thousand rubles.

P2 = 445,020 * 1.35 = 600,777 thousand rubles.

P3 = 600777 * 1.37 = 823,064 thousand rubles.

P4 = 823,064 * 1.37 = 1,127,598 thousand rubles.

P5 = 1,127,598 * 1.37 = 1,544,809 thousand rubles.

The results are displayed in Table 7.

Table 7. Calculation of the value of a business with an income approach

As a result of calculations, we received that the cost of the enterprise of JSC "Elecond" will be 527964.45 thousand rubles.

101124 * 1200/1000 = 124,948.8 thousand rubles.

We got that the market value will be 124,948.8 thousand rubles.

It turns out that the market value by discounting is higher than the value of the company if we take into account the market value of the share.

Let's calculate the cost of OJSC "Elecond" by the method of capitalization of net profit (Table 8).

Table 8 .. Calculation of the value of OJSC "Elecond" by the method of capitalization of net profit

Thus, the cost of OJSC "Elecond" by capitalization of net profit will amount to 27,781,831 thousand rubles.

Let's compare all three methods (Table 9).

Table 9. Comparative analysis Evaluation of OJSC "Elecond" by the profitable approach

As can be seen from Table 9, the calculation of the value of JSC "Elecond" by the method of capitalization of net profit differs from the method of discounting and the method by the value of shares. The high price according to the capitalization method is due to the fact that the calculations take into account the average capitalization rate, and it is always lower than the actual one. The most attractive is the discounting method.

Conclusion

In conclusion, we will draw the following conclusions.

There are three main approaches to business valuation: profitable, comparative, costly.

The object of the research was the JSC "Elecond", the main activity of which is the production of capacitors.

The calculation of the cost of JSC "Elecond" was carried out using an income approach using:

Discounting method;

At the market value of the shares;

Net profit capitalization method.

As a result of calculations using the discounting method, we received that the cost of the enterprise of JSC "Elecond" will be 527964.45 thousand rubles.

According to the market value of the shares, the value of the enterprise will be 124,948.8 thousand rubles.

According to the method of capitalization of net profit, the cost of OJSC "Elecond" will be 27,781,831 thousand rubles.

The most attractive is the discounting method.

Bibliography

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4. Morozov V.Yu. Marketing Basics: A Study Guide. Ed. 5th rev. and add. - M .: Ed. "Dashkov and K", 2011. - 148 p.

5. Pivovarov K.V. Business planning. - M., Publishing and bookselling center "Marketing", 2011. - 215 p.

6. Simionova N.E., Simionov R.Yu. Assessment of the value of an enterprise (business). Moscow: ICC "Mart", Rostov n / a: Publishing center "Mart", 2012. - 464 p.

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Discount rate calculation,%

Indicators	The values
Rf is the rate of return for risk-free investments. The risk-free rate is taken at the level of the average OFZ yield
Rm - average market rate of return
β - beta coefficient
S1 - small business investment risk premium
S2 - risk premiums typical for an individual company (adopted at the maximum level - 5/6 of the risk-free rate of return, according to: S.V. Valdaitsev)
S3 - country risk premiums
Discount rate

The premium for the risk of investing in a small business is zero, since the company being assessed according to the main criteria (revenue, number of employees) does not belong to a small business.

Country risk premium is included in the risk-free rate of return.

Calculation of the value of the cost in the forecast and post-forecast periods.

When constructing a cash flow forecast, we determine the amount of our own working capital required for the smooth functioning of the business.

- Analysis and adjustment of current assets and liabilities at the valuation date. Calculation of the actual value of own working capital as of the valuation date based on the difference between the adjusted value of current assets and short-term liabilities.

Calculation of the actual value of working capital as a percentage of the projected revenue for the corresponding period (Table 34).

Table 34

Calculation of the need for own working capital

Index
Balance currency
Current assets
% Of current assets of the balance sheet total
Current responsibility
% Current liabilities from the balance sheet
Own working capital

Forecasting of income and expenses of GofroPak LLC was carried out on the basis of financial statements. The cash flow was calculated at current prices without taking into account inflation factors. the use of inflationary cash flow in the current economic conditions is extremely difficult due to the impossibility of an accurate forecast of the value of income inflation and cost inflation. The discount rate is 19.5% (calculated above), the post-forecast growth rate is 1%. In forecasting cash flow, own working capital is not taken into account, since there is a surplus.

Determination of value in the terminal period is based on the assumption that the business is capable of generating income and at the end of the terminal period the business income will stabilize and in the residual period there will be stable long-term growth rates or infinite uniform income. Depending on the prospects for business development in the post-forecast period, we choose the calculation of the cost of LLC "GofroPack" according to the Gordon model. In the model, the terminal annual income is capitalized in value using a capitalization rate calculated as the difference between the discount rate and long-term growth rates. Gordon's model is based on a forecast of stable income in the residual period and assumes that the values of depreciation and capital investment are equal.

The final cost is calculated in accordance with the Gordon model using the formula:

V (term) = CF (t + 1) / (Rd - g), (22)

where V (term) is the cost in the post-forecast period;

CF (t + 1) - cash flow of income for the first year of the post-forecast (residual) period;

Rd is the discount rate;

g - long-term growth rate of cash flow.

The resulting business value in the forward-looking period is brought to current values at the same discount rate that is used to discount the cash flows of the forecast period. Based on the calculated discount rate, the calculation of the discount rate is carried out according to the following formula:

Кd = 1 / (1 + Rd) n, (23)

where Kd is the discount factor;

Rd is the discount rate;

n is the forecast year.

Table 35 shows the calculation of the cash flow and the market value of GofroPak LLC using an income approach.

Thus, the market value of GofroPak LLC determined by the income approach (discounted cash flow method) is 2,857,000 thousand rubles. (two billion eight hundred fifty-seven million) rubles.

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General principles of the income approach

The income approach allows you to determine the present value of future income that will arise from the use of the company's assets. In this case, the greatest influence is exerted by the duration of the period of obtaining a possible income, the degree and type of risks accompanying this process, as well as the volume of investments involved in the formation of cash flows.

The cost determined by the income approach is most interesting for a potential buyer, since any investor who purchases operating business, buys not just a set of assets, but a means of generating income. At the same time, the size of the income stream should meet the investor's expectations in terms of the rate of return on invested capital.

To determine the company's ability to generate net income in the future to its owner, the appraiser can use the following sources of information:

- current financial statements of the evaluated company;
- the history of all income, revenue, prices;
- the results of the analysis of competitors' activities.

If we consider the work of innovation-oriented companies or the launch of new business lines, significant restrictions often apply to all categories of information sources. In this case, the company's current financial statements will not be able to fully reflect how profitable the investment in a new business line will be, since the size and dynamics of cash flows, as well as the level of risk, can vary significantly and relate to different periods of time. In this situation, a retrospective analysis of the dynamics of income and expenses will not be able to show the company's growth rates in the new environment. In addition, if the appraised company produces unparalleled products using fundamentally new technological and technical solutions, it is not always possible to determine the pricing policy based on the actions of competitors, since there may not be any analogous firms at all. Therefore, the key and practically the only source of information for evaluating an innovation-oriented company is a high-quality, deeply worked out business plan for its development, containing cash flows planned quarterly for the next few years. It should be borne in mind that the assessment results will be correct only if two prerequisites are met:

1) new products will be in demand and will take its place in the market;
2) the release of products will invariably be accompanied by a positive cash flow.

Consider the principles of business valuation using the income approach.

Principle 1. The main criterion for evaluating a business is cash flow.

In regulatory legal documents cash flow is defined as “dependence on the time of cash receipts and payments, calculated for the entire accounting period, i.e. balance of inflows and outflows ”.

The cash flow more accurately reflects the actual situation at the enterprise than the accounting profit indicator, since it has the following advantages:

- cash flows take into account the real inflows and outflows of funds, including investments, payment of dividends on preferred shares, redemption, servicing, as well as attraction of long-term borrowed funds. Thus, for the investor, the use of the cash flow indicator may be more visual: it reflects a number of parameters that are not involved in calculating the company's net profit;
- cash flow does not account for depreciation charges as cash outflows, since the money that is deducted to the depreciation fund is at the disposal of the enterprise. Thus, within the framework of the cash flow, depreciation is accounted for as a cost when calculating income tax, but it is not an actual outflow.

These advantages allow using the cash flow indicator as a tool strategic planning operating and investment activities of the company and optimize the process of managing its value.

Depending on whether cash flows are taken into account at the beginning or at the end of the period under consideration, they distinguish between pre-numerando and post-numerando cash flows. In this case, cash flows are concentrated on one of the boundaries of the period under consideration: the prenumerando flow - at the beginning of the period, the postnumerando flow - at the end of the period. In investment calculations, post-numerando cash flows are most common.

In addition, depending on the sequence of the nature of cash flows, ordinary and extraordinary cash flows are distinguished. Ordinary cash flows are characterized by the fact that in the initial periods their negative value is observed, which is subsequently replaced by a positive one. If negative and positive cash flows are constantly alternating, there is an extraordinary cash flow.

- cash flow from operating activities, which takes into account the proceeds from the sale of goods, payment of wages, settlements with suppliers, interest payments on debt obligations and other current expenses;
- cash flow from investment activities, which takes into account receipts of funds and payments associated with the sale, acquisition, as well as the modernization and reconstruction of fixed assets;
- cash flow from the financial activities of the enterprise, which takes into account settlements with investors and creditors, as well as transactions related to their own finances (issue and sale of securities, payment of dividends, etc.).

However, according to some experts, for example S.V. Valdaitsva, the proposed classification is reasonable when investment activities an enterprise is treated as a separate business that does not use debt or equity financing and is conducted to generate distributable profits. According to the investment activity of an ordinary enterprise, it is most often just an investment in maintaining and increasing the competitiveness of the enterprise. Therefore, it would be more logical to talk about complete financial plan specific investment projects enterprises where, for example, both short-term and long-term investments in securities(investment portfolio) is understood only as a way of accumulating funds for the planned investments of an enterprise in real assets.

Depending on the method of accounting for borrowed funds, there is a distinction between full and debt-free cash flow - these are the types that are basic in the practice of business valuation.

The total cash flow (cash flow for equity) in composition and structure reflects the way in which all investments made within the business are financed, i.e. takes into account the attraction, maintenance and repayment of borrowed funds.

Since the share and cost of borrowed funds in financing a business are taken into account in the projected cash flow, the discounting of the expected cash flows can occur at the discount rate for equity capital, the specifics of determining which will be discussed below. The total cash flow reflects the amount of cash that the owners of the company can claim after all obligations, including settlements with creditors, have been settled. However, it is far from always possible to predict the conditions for attracting borrowed funds, especially when implementing projects with a long or indefinite duration, and in this case they operate with a debt-free cash flow.

Debtless (free) cash flow does not include the movement of borrowed funds that are used to finance the business. In this case, discounting of cash flows should be made at a rate equal to the weighted average cost of capital of the enterprise. The amount of cash, which is the balance of the debt-free flow, is the amount that all participants in the business can claim. At the same time, situations may arise when, after repayment of loan obligations, the owners will have nothing left. If the business is valued at the initiative of the owners, they are more interested in using the full cash flows, which are more visible to them.

Depending on how price changes are accounted for, nominal and real cash flows may be applied.

Planning nominal cash flows requires an assessment of changes in prices for final products manufactured within the framework of the assessed business, as well as a forecast of the size of inflation, moreover, in all markets in which the resources necessary for the activity are presented.

This type of cash flows can provide even greater accuracy of investment calculations, but only if the appraiser really knows the state of the markets well, is able to track all the changes occurring in them and is able to predict the future situation well. Drawing on relevant marketing research, he must take into account the factors of the possible influence of future competitors, predict price changes, etc. This is due to the fact that an illiterate analysis of the situation when using the nominal cash flow can lead to significant errors in investment calculations.

Real cash flows is the balance of receipts and payments in prices of the base period associated with the sale of products and the purchase of resources. In the future, these prices may have a different meaning, since they depend on how much the initial price will change due to changes in the demand for products and the supply of resources.

When determining prices for products planned for production, a pricing policy that does not take into account inflation can be used. It may, for example, involve keeping prices low in order to conquer their sector of the market.

Principle 2. Within the framework of the income approach, it is necessary to take into account the distribution of cash flows over time.

The procedure for discounting cash flows is related to the need to take into account the time value of money and the trade-off between risk and return. Since a considerable time passes from the beginning of financial planning to the moment income is received, it is necessary to take into account this important factor due to three main reasons:

inflation (the purchasing power of money decreases over time);

- alternative cost(finances could have been invested in another project and receive more income from it);
- the risk of not receiving the amount of money. The more the owner risks when investing his capital in the target business, the more profit he will want to receive, therefore it is very important to find and choose the optimal combination of these parameters when drawing up the financial part of the project.

To account for the distribution of cash flows over time, a discounting procedure is carried out.

Discounting is the calculated reduction of future income to the current moment time. When carrying out this procedure, the appraiser should keep in mind that the first negative cash flows to the newly created business make a much larger negative contribution than the positive cash flows delayed in time. Therefore, one of the most important stages of the income approach is the justification of the discount rate. According to clause 2.7 Methodical recommendations the discount rate is determined taking into account the alternative capital efficiency.

Principle 3. When planning cash flows, it is necessary to take into account and assess the risks of non-receipt.

One of the investment conditions considered in the discount rate is the level of risk. At the same time, the following dependence is observed: the higher the risks of the business, the higher the profitability it provides. Since the most popular way to reflect risks in assessing the value of a business is to take them into account in the discount rate, a high level of risk contributes to its growth.

In the theory of finance, there are many different classifications of risks, however, in valuation practice, the most popular approach is considered to be their division into systematic and non-systematic.

Systematic risks are determined by the market environment in which the assessed business operates. They are also often referred to as external risks, among which general systematic and sectoral ones can be distinguished. The former will determine the activities of all companies operating in a given country, regardless of their industry affiliation. Such risks, in particular, include inflation, changes in exchange rates, the political climate, etc. The latter depend on the industry sector of the company and take into account such factors as the nature of competition among suppliers of resources, the needs of buyers, the specifics of the assets used (for example, special equipment). To determine the industry affiliation of the assessed business, it is most correct to use SIC-kojx (Standard Industrial Classification) - four-digit code taking into account narrow specialization... The first two digits correspond to the main group of the industrial classification, the second two define the subgroup.

Unsystematic risks - internal factors affecting the operation of a particular business, which it encounters this enterprise mainly due to ineffective management. It should be noted that when assessing a business, systematic risks are mainly taken into account, since they can be objectively assessed to one degree or another on the basis of available market information. Taking into account the same non-systematic risks is possible only through an expert assessment, however, they are the main object of risk management and can be significantly reduced.

The main groups of unsystematic risks, as well as measures to minimize them, are presented in Table. 2.1.

Table 2.1

The main groups of non-systematic business risks and some ways to minimize them

Risk group	Description of key factors	Minimization methods
R&D risks	- Negative R&D result; - low efficiency of R&D; - inconsistency of R&D results with the production capabilities of the enterprise	Application of modern and most effective methods conducting research and development; - selection of qualified personnel for R&D; - concluding contracts for work in the research area with verified contractors
Risks in the field of intellectual property	- Risks of parallel patenting; - risks of unauthorized access to know-how; - risks of illegal use of intellectual property rights; - risks of patent disputes when expanding the geography of sales	- Umbrella patenting; - creation of a control system over the use of know-how; - expansion of the geography of the patent (registration of a patent in the national patent offices of the country on the market of which it is planned to enter); - marketing and patent monitoring
Financing risks	- Threat of lack of funding sources; - the threat of deterioration of financial leverage due to an inadequate ratio of debt and equity capital; - the threat of the disappearance of the source of funding	- Diversification of sources of borrowed capital; - planning optimal structure capital; - phased implementation of investments for the possibility of splitting the loan into tranches

Risk group	Description of key factors	Minimization methods
Production risks	- Risks of an increased share of fixed costs; - risks associated with the presence of special assets that pose a threat of lack of return on investment	- Application of new resource-saving technologies; - withdrawal of non-core (surplus) assets; - optimization of the number of administrative personnel; - search for possible options for minimizing rent; - analysis of the feasibility of acquiring more versatile production assets with a possible loss of productivity, but ready for use in another business in case of failure of the target
Contractual risks	- Disruption of negotiations and disclosure of information obtained during them; - refusal of counterparties from further cooperation; - changing the terms of cooperation	- Conclusion of option agreements that do not allow the disclosure of the information received; - conclusion of long-term contracts with counterparties; - expanding the circle of contractors
Sales risks	- Threat of lack of sales of products; - the risk of choosing the wrong pricing policy; - the risk of breaking contracts with sales agents	- Thorough analysis and segmentation of the market at the stage of product planning (even if it is unique); - activities to promote products on the market, allowing to reduce the barriers to its perception; - conclusion of preliminary supply agreements with proven and qualified sales companies

The list of non-systematic risks presented in table. 2.1 is not complete in all cases. There are also risks in the field of management, compliance with the deadlines and stages of the project implementation schedule, risks of a closed nature of the company, the peculiarities of the work of small businesses, and a number of others.

Principle 4. Active application of the principle of the most effective use.

Federal valuation standards oblige to apply the principle of the most effective use in investment calculations. The cost of the appraisal object, including the company, should be determined as the maximum of those values that can occur with different options for using the appraisal object. Even in the case stable business it is advisable to plan investments in improving technology, modernizing equipment, updating products, etc. At the same time, the choice of funding sources becomes a separate area of investment planning. If we do not provide for the renewal of physically worn-out equipment, the company will begin to grow rejects and increase the cost of products ready for sale. In any case, capitalization of constant or constantly falling income will give a very low estimate of the market value.

Obviously, the principle of the most effective use is more convenient to apply when the assessment is carried out based on the investment opportunities of a particular customer of the assessment. When determining the market value of a business for a potential, rather than a specific buyer, certain proposals for optimizing a business plan can significantly increase the value of the company.

This example uses profit capitalization method.

The profit capitalization method is one of the options for a profitable approach to assessing an enterprise as an operating business. Like other variants of the income approach, it is based on the basic principle that the value of ownership of an enterprise is equal to the present value of the future income that the enterprise will generate.

The essence of this method is expressed by the formula: V = I / R,

where: V- the value of the enterprise (business); I- the amount of net profit; R- capitalization rate.

The profit capitalization method is most suitable for situations where it is expected that the company will receive approximately the same profit (or the rate of profit growth will be constant) over a long period of time.

The evaluated enterprise - LLC "XXX" - has been operating and developing as a business since 2000. The enterprise is engaged in the retail trade of men's and women's clothing under the brand name "XXX", which it carries out in its company store located at the address: Moscow, st. XXXXX, d. 0. There are no other stores, offices or branches of XXX LLC as of the date of assessment.

Analysis of the activities of LLC "XXX" as an operating business showed that as of the date of assessment, the company has already passed the stage of formation and is now at the stage of stable operation, when the income and expenses of the enterprise can be predicted with a fair degree of probability. Based on this, the profit capitalization method is used to assess the business of this enterprise.

Practical application of the profit capitalization method when evaluating a business consists of the following steps:

1. Analysis of the financial statements of the enterprise. 2. The choice of the amount of profit to be capitalized. 3. Calculation of the capitalization rate. 4. Determination of the preliminary value of the cost. 5. Adjustment for the presence of non-performing assets. 6. Making adjustments for the controlling or non-controlling nature of the estimated share.

Analysis of the financial statements of the enterprise is an important step in the assessment. At this stage, retrospective and current information about financial and economic activity and its results is analyzed. In real business valuation reports, the analysis of financial statements occupies a separate section. In this model example, we will restrict ourselves only to the conclusions that were made based on the results of the analysis.

Conclusions based on the results of the analysis of the financial statements of LLC "XXX":

1. The structure of the company's assets is well balanced, the share of highly liquid assets roughly corresponds to the share of low-liquid assets, while the share of hard-to-sell assets is quite small - 5% of total assets.

2. The main source of financing for the enterprise is its own funds (78% of all funds of the enterprise), while short-term and medium-term debts are 5% and 17%, respectively, in the absence of long-term accounts payable.

3. The liquidity indicators of the enterprise (coverage ratio, quick liquidity ratio, absolute liquidity ratio) confidently exceed the normative ones, which indicates a high degree of the enterprise's readiness to service its short-term and medium-term debts.

4. The low concentration ratio of attracted capital is a consequence of the prevalence of equity in general structure liabilities of the enterprise and speaks of the high liquidity of the enterprise in the long term.

5. The average period for repayment of accounts receivable is 43 days, which practically coincides with the average standard value (45 days).

6. The index of inventory turnover at the enterprise (9.62) greatly exceeds the conventionally-normative value (3.5), which most likely indicates the absence of obsolete stocks and a high rate of their turnover, but perhaps this is due to a lack of stocks at the enterprise.

7. Indicators of profitability of the enterprise, in the opinion of the Appraiser, are satisfactory and, on the whole, coincide with the average indicators for retailers of non-food products of similar size.

8. The company's net profit has shown stable growth over the past five years at a rate of 15-20% per year, sales revenue for this period grew at about the same rate - 14-22% per year. These facts allow us to make the assumption that the business of the enterprise is functioning stably and predictably in terms of financial results.

Choosing the amount of profit to be capitalized... This stage actually implies the choice of the period of production activity, the results of which will be capitalized. Usually one of the following options is chosen:

1. Profit of the last reporting year. 2. Profit of the first forecast year. 3. Average profit for the last few reporting years (3-5 years).

In this case, the profit of the last reporting year is used for capitalization.

Capitalization rate calculation... The capitalization rate for business valuation is determined by subtracting the expected average annual profit growth rate from the discount rate. That is, in order to determine the capitalization rate, you must first calculate the appropriate discount rate and make a reasonable forecast regarding the growth rate of the company's profit.

Mathematically, the discount rate is the interest rate used to translate future earnings into a single present value. In an economic sense, the discount rate is the rate of return required by investors on capital invested in investment objects of comparable risk.

It might be useful to read:

Indicator name				Forecast period
Indicator name
Acquisition of fixed assets, profitable investments in material values and intangible assets, thousand rubles
Purchase of securities and other financial investments, thousand rubles
Loans granted to other organizations, thousand rubles
Capital construction, thousand rubles
Cash flow from investment activities, thousand rubles

Assessment of the company's value using the income method. Assessment of the value of a business using an income method: what to look for. Preparing a cash flow plan

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Practical application of the profit capitalization method when evaluating a business consists of the following steps: