Research On Business Valuation Of Mineral Enterprises Under The Condition Of Economic Violent Fluctuation

The financial crisis swept the world in 2008, then the world economic situation and development trends have been changed dramatically than before. Firstly, world economic trends are getting confusing. Secondly, the internal driving force of economic growth is switching. Thirdly, capital markets go ups and downs along with the unstable macroeconomic environment. From the industrial perspective, since the outbreak of global financial crisis in 2008, its effects have been gradually spread from the finance industry, the automotive industry and real estate industry to global mining industry. And after this, the drivers and patterns of global economic growth have been changed after; potential economic growth will slow down; and the new economic growth point has not yet formed. So the world economy is stepping into the "rebalancing" stage. In the next period of time, the world economy as a whole will remain a certain degree of volatility. Under such circumstances, the current business valuation system generated under the background of prosperous and progressive economic cycle in an overall is facing serious challenges from quite different economic environment than before. Therefore, under the conditions of economic volatility, conditions of the assumption and the basic theories of "income approach", "market approach" and "cost approach" will be challenged. How those appraisal approaches adapt to requirements of development along with the constant adjustment and improvement of new economic environment needs to be reconsidered. There is also no exception for the business valuation in the cyclical mining industry.Based on this, the author chooses the subject of "Research on Business Valuation of Mineral Enterprises under the Condition of Economic Violent Fluctuation", which is attempt to analyse the applicability of theories and methods for business valuation based on existing research results. Deep studies of issues like adjustment and improvement of business valuation approaches are conducted, and business valuation of mineral enterprises are mainly concerned. This article attempts to carry out some innovative research from the following aspects. Firstly, through the analysis of applicable foundation, assumptions and scope of the three major appraisal methods, the author finds that the applicability of traditional methods of business valuation are considerably decreased under the condition of economic violent fluctuation and the existing business valuation theory of mineral enterprises is facing serious challenges. In this regard, four aspects issues, the general idea, main concerns, specific programs and policy recommendations, are discussed in further. Secondly, with regard to the problem of uncertain parameters selection in the business valuation of mineral enterprises under the condition of economic violent fluctuation, the research suggests that one of the risk analysis method in the investment decisions, the sensitivity analysis method, may generate the basis for decision making for both parties in the transaction as well as the relevant authorities. Thirdly, given the uncertainty and complexity when conducting business valuation of mineral enterprises under the condition of economic violent fluctuation, the paper suggests that the appraiser can rationally apply scenario analysis method to carry out the appraisal and analysis of the weighted value of mineral enterprises. Finally, under the condition of economic violent fluctuation, especially when it's moving downstream of the volatility, business life cycles will be dramatically shortened. Given that, exit multiples method can reasonably be used to generate the business value of mineral enterprises.