Financial management 2
CHAPTER 1: THE VALUATION OF LONG TERM SECURITIES
1.1. Distinction among valuation concepts
Liquidation value vs Going concern value
- Liquidation value (giá trị thanh lý) represents the amount of money that
could be realized if an asset or group of assets is sold separately from its
operating organization
- Going-concern value (giá trị tiếp tục hoạt động) represents the amount a
firm could be sold for as a continuing operating business
Main differences
Aspect Going concern value Liquidation value
Assumption Business continues operating Business stops operating
Valuation Future earnings and cash Asset sale value
flows
Intangible assets Fully considered Mostly excluded
Typical value higher Lower
Typical use Business valuation for M&A Used in bankruptcy
cases or investment decisions proceedings; credit risk;
assessment;…
Book value, market value and intrinsic value
- Book value represents either
(1) An asset: the accounting value of an asset – the asset’s cost minus its
accumulated depreciation
(2) A firm: total assets minus liabilities and preferred stock as listed on the
balance sheet
- Market value represents the market price at which an asset trades
- Intrinsic value (giá trị nội tại của một doanh nghiệp) represents the price
a security “ought to have” based on all factors bearing on valuation
,
CHAPTER 1: THE VALUATION OF LONG TERM SECURITIES
1.1. Distinction among valuation concepts
Liquidation value vs Going concern value
- Liquidation value (giá trị thanh lý) represents the amount of money that
could be realized if an asset or group of assets is sold separately from its
operating organization
- Going-concern value (giá trị tiếp tục hoạt động) represents the amount a
firm could be sold for as a continuing operating business
Main differences
Aspect Going concern value Liquidation value
Assumption Business continues operating Business stops operating
Valuation Future earnings and cash Asset sale value
flows
Intangible assets Fully considered Mostly excluded
Typical value higher Lower
Typical use Business valuation for M&A Used in bankruptcy
cases or investment decisions proceedings; credit risk;
assessment;…
Book value, market value and intrinsic value
- Book value represents either
(1) An asset: the accounting value of an asset – the asset’s cost minus its
accumulated depreciation
(2) A firm: total assets minus liabilities and preferred stock as listed on the
balance sheet
- Market value represents the market price at which an asset trades
- Intrinsic value (giá trị nội tại của một doanh nghiệp) represents the price
a security “ought to have” based on all factors bearing on valuation
,
