A Case Study Of LS Biomedical Enterprise Value Assessment With Improved Residual Income Approach By Ohlson Model

With the global outbreak of the COVID-19 in recent years and the gradual deregulation of domestic epidemic control measures,the demand from citizens for bio-pharmaceutical has gradually expanded.An unprecedented rapid development in this industry has been seen.Meanwhile,a great number of appraisers get down to think about how to improve the accuracy of enterprise value assessment under the inspiration of the increasing number of investment and financing activities as well as M&A and restructuring transactions in the bio-pharmaceutical field.Compared with the three major traditional asset valuation methods,the residual income method,which makes full use of the financial statement data of enterprises,makes accurate and complete calculations of enterprise value from a financial perspective,thus avoiding the inaccuracy of valuation caused by human aspects.However,the method also has some problems in the process of appraisal calculation.Considering that the Ohlson model has good applicability to the valuation of bio-pharmaceutical enterprises,this model can be taken full advantages to improve the accuracy of the appraisal results.Therefore,in this paper,we takes LS bio-pharmaceutical enterprise as a case study and introduce the Ohlson model to improve the residual income method for the LS bio-pharmaceutical company,hoping to improve the accuracy of the valuation results and put forward some new ideas for the valuation of bio-pharmaceutical companies.Firstly,this paper compares the existing theories and researches from two aspects:the theory and application of the valuation of bio-pharmaceutical enterprises and Ohlson model and finds that there exists a strong subjectivity in the traditional valuation method,while the residual income method has strong reliability because of the data from the financial statements of enterprises and Ohlson model introduces non-financial factors on the basis of financial factors to assess the enterprise value.What’s more,by analyzing the operation and financial situation of LS pharmaceutical enterprises,we summarize the key factors affecting the value of LS enterprises first,and then value them through the residual income method,and finally,the defects existing in this evaluation process can be concluded.This paper tries to apply the Ohlson model to improve the residual income method,including the improvement of operating income forecast and net sales margin,the improvement of continuing operation value by introducing value multiplier weighting,and the calculation of enterprise value by using the mutation level method,in which both financial and non-financial factors have been considered.Finally,the paper compares the valuation value before and after the improvement with the market value of the enterprise on the valuation base date,and finds out only the difference rate after the improvement of0.29 percent,which indicates that the improvement of the accuracy of the valuation conclusion can be achieved in the residual income method with the Ohlson model used.In this case study,by calculating and improving the valuation value of LS Pharmaceuticals,it was concluded that the Ohlson model can improve the residual income method,and evaluate bio-pharmaceutical companies more accurately and reflect the intrinsic value of the companies more completely.This case study is intended to improve the theoretical basis of the residual income method and provide a reference basis for users of valuation reports.