Enterprise Value Assessment Study

With the constant development in the market of property right and the establishment of modern enterprise system, it becomes increasingly known that in market economy, an enterprise as merchandise producer is also a kind of merchandise, which can be appraised and sold on market．The quick development of modern capital market has greatly promoted the flow of enterprise resource between different owners. In recent years, the trade of property right such as merger and acquisition, enterprise reshuffles, equity trade, venture capital investment, is vigorously developed. Enterprise appraisal is the core of the transaction. At the same time, since 80s in 20th Century, the goal of modern corporate financial management has already changed from pursuing utmost profits and owners' wealth to utmost corporate value. Therefore, how to know corporate value and how to evaluate corporate value are not only the responsibility of appraisers, but also the consideration of investors, the authorities of business management and investment consulting organizations. In China, from the beginning of 90s in 20th Century, the industry of assets evaluation has made huge achievement. But corporate valuation is an emerging business and has not still get formed its complete theoretical system. For lack of theoretical support, many appraisers just know the essence of corporate value vaguely, consider the factors affecting corporate value incompletely and understand various appraisal models and its parameter shallowly, which leads to lack of objectivity, fairness and scientific quality of appraisal result. At present, the theory of corporate valuation is still in its initial stage. Based on domestic and international experience, this thesis conducts a preliminary research into value theory, basic corporate valuation theory and corporate valuation method. The dissertation includes three chapters.Chapter 1: The research of corporate value theory Firstly, the concept of corporation is discussed. The author holds that corporation is a kind of special asset, i.e., an orderly combination of a series of assets. Secondly, the author explains the connotation of corporate value and points out that what the appraisers evaluate is the corporate price instead of corporate value and what the appraisers pursue is market fair value of corporation. Thirdly, in appraisal field, corporate value reflects the corporation' s ability to make profits and it equals to the present value of the corporation' s future cash flow. There are two factors that directly decide the corporate value, one is future cash flow and the other is discount rate. Fourthly, the author proposes a method to analyze all factors that affecting corporate value. The factors can be divided into direct and indirect factors. Finally, the author discusses the characteristics of corporate value, which are wholeness, effectiveness and overallness. Chapter 2: Basic theory of corporate valuationFirstly, the author analyzes the background of corporate valuation. Secondly, the concept, objects, intention and characteristic of corporate valuation are discussed. Thirdly, the difference between corporate valuation and individual asset valuation is elaborated. The fourth section explains the assumptions and principles of corporate valuation. The assumptions of corporate valuation include continuing operation assumption and public market assumption. The principles of corporate valuation include systematic principle, best use principle, substitute principle, contribution principle, economic reliability principle and prudence principle. The final section proposes a general process of how to evaluate a corporation. Chapter 3: The methods of corporate valuationSection 1 to Section 3 of this chapter elaborates three kinds of methods of corporate valuation, i.e. cost method, market method and income method. Income method is a kind of method, which has the most theoretical value and is adopted in practice frequently. So income method is discussed in detail in this chapter, which embod...