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Introductory Business and Securities Valuation
MODULE 1: Introduction to Business and Securities Valuation
This module is designed to introduce you to business valuation as an area of specialized practice, various valuation terms and principles, and approaches to business value determinations.
On completion of the notes and assigned readings in this module, you will have a general understanding of:
• Legislative changes and their impact on business valuation;
• The role of the Chartered Business Valuator;
• Open market transactions vs. notional market valuations;
• Special interest purchasers;
• Other value terms;
• Principles of valuation;
• The conduct of the valuation assignment; and
• Approaches to value determination.
This module gives you the foundation knowledge you will need for further course note reading and the assigned readings.
Module 2: Asset-Based Approach to Value Determination
This module provides an in-depth discussion of asset-based approaches to valuation, which are based on the value of a business’ net assets. The going-concern approach is discussed in Module 3. The third approach, the market-based approach, is discussed in Module 4.
Specifically, this module discusses:
• How valuators determine the appropriate approach to use in a valuation;
• Application of asset-based approaches;
• The Liquidation approach to valuation;
• The Adjusted Book-Value approach to valuation;
• Tangible asset backing (TAB); and
• Tax shield considerations.
Once you have gained this knowledge, you will have an opportunity to apply this approach and techniques by completing the Review exercise and Quick Quiz in this module and the Assignments and Case Study.
MODULE 3: Going-Concern Approach to Value Determination
This module provides an in-depth discussion of going-concern (return-based) approaches to valuation, which are based on the prospective return on the investment.
This module discusses the going-concern (return-based) approach, including:
• Redundant assets;
• Return-based valuation methods, including:
• Capitalization of indicated net earnings;
• Capitalization of indicated after-tax discretionary cash flow;
• Capitalization of indicated earnings before interest and income taxes (EBIT) and before depreciation and amortization (EBIT-DA); and
• Actualization (or discounting) of discretionary cash flow;
• The dual capitalization of earnings/cash flow method.
Once you have gained this knowledge, you will have an opportunity to apply this approach and methods by completing the exercises and quizzes in this module and the Assignments and Case Study in Module 6.
Module 4: Capitalization Rates and Market Multiples
The determination of value is prospective and involves the calculation of the present value of the future benefits expected to accrue from the ownership of a business. In valuing a business ownership interest or security, there are three general approaches:
• The asset-based approach (discussed in Module 2);
• The income approach (discussed in Module 3); and
• The market approach.
The method of valuation chosen (whether it be a going-concern or liquidation approach) will dpend on the specific circumstances of a business or company. When adopting a return-based approach, the future benefits are measured in terms of earnings or cash flows. The present value of these earnings or cash flows are determined using a capitalization rate or a discount rate that is reflective of the risk of generating those earnings or cash flows. Market approaches (which are based on comparable company multiples) can also provide objective, empirical data for developing valuation ratios for use in business valuation and generally involve the use of key operating ratios and multiples of similar businesses to assist in determining appropriate rates of return when valuing a business.
Module 5: Ethics, Standards and Discipline Procedure
This module is designed to familiarize you with the Code of Ethics and professional standards that support and promote the integrity of the CBV profession.
On completion of the notes and assigned readings in this module, you will have a general understanding of the profession’s stringent standards of practice, including the purpose and general principles of the:
• CICBV Code of Ethics;
• Practice Guidelines;
• Practice Standards;
• Practice Bulletins; and
• Discipline Procedure.
Once you have gained this knowledge, you will have an opportunity to apply it by completing the Review exercise and Quick Quiz in this module and the Assignments and Case Study in Module 6.
Textbooks required:
- Canadian Valuation Services (Student Edition, 2008), Campbell, I., Carswell Publishers. (Ref.#0459280147)
- The Valuation of Business Interests, Campbell, I. and Johnson, H., CICA.(Ref.#0888006241)
- The Canadian Institute of Chartered Business Valuators Casebook. **
NOTE: ** available from the CICBV office.
The books are available from the York Bookstore.