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Paweł Cygański 06 September 2018

Company valuation using P/E and P/BV ratios. Highway to Hell?

P/E and P/BV ratios (Polish abbreviations C/Z and C/WK meaning Price/Net Profit and Price/Book Value, respectively) are commonly used indicators in the valuation of enterprises and companies. Many newspapers and portals provide only these indicators for listed companies, thus emphasizing their importance. We have only one problem - these indicators are generally not suitable for professional company valuation and their use may significantly distort the real value of the company or enterprise.

Paweł Cygański 21 August 2018

Enterprise value does not exist? Value standards in company valuation

Does the value of a given asset exist objectively? Maybe it doesn't exist? Let's imagine that we found ourselves on a desert island with a gold bar (let's assume for the sake of clarity that it is not an Amber Gold bar...); no help, plus we are hungry and thirsty. What is the value of this gold bar to us? Basically, the value is zero - what can we do with this bar? On this unfortunate desert island, we will not sell it to anyone or exchange it for drinks and food...

Paweł Cygański 06 July 2018

Can a reduction in equity may lead to an increase in the valuation of a business?

Experienced financial experts can probably only smile at such a question. After all, we associate a reduction in equity with incurring a loss on operational activities or recognising an impairment loss for some assets; things are not going well, and when things are not gong well, it is hard to suppose that the value of our business would be going up.
But ... never say never...

Paweł Cygański 30 June 2018

A good change in accounting… Treasury shares

Has become. A good change also affected the area of accounting...

This happened some time ago, the change went a bit unnoticed, but it is worth introducing this change to you. On July 23, 2015, the Act amending the Accounting Act and certain acts was passed. Pursuant to this Act, the principle of presenting two items in the balance sheet was changed: "Own shares (shares)" and "Payments due for share capital". So far - that is, until the balance sheet was prepared as at December 31, 2015 - both items were recognized as part of equity with a negative value.

Paweł Cygański 21 April 2015

The Commercial Code and Company Valuation (Part IV)

On bringing in-kind contributions to a joint-stock company, the legislator instructs the auditor to issue an opinion on the value of these contributions. But is the legislator justified in presuming that the auditor should deal with this? Continuing the analysis of article 312 of the Code, let's take a detailed look at the issue of the role of the auditor.

Paweł Cygański 16 March 2015

The Commercial Code and Company Valuation (Part III)

We continue the series of articles on company valuation in the Commercial Code. We have already examined the Registered Partnership and the Limited Liability Company; let us turn to the Joint-Stock Company.

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15 tips for perfect preparation of business valuation by comparative approach

The beginning of the year. A time of new resolutions.
In this time of new resolutions, the resolution to perfectly carry out the comparative (market) approach in the process of business valuation fits perfectly. Readers of my note, a little distant from the fascinating issue of business valuation, I inform you that we have three approaches to business valuation:

property (cost),
income-based,
comparative (market).

Valuation of enterprises and companies in times of inflation

High inflation in Poland and around the world affects many areas of economic life. Such examples may be the rising costs of debt of individual governments - a function of the higher yield on government bonds required by investors, or declines on stock markets reflecting the increasing cost of capital resulting from increased macroeconomic risk.

Transaction and valuation. Locked box or completion accounts? Time for a locked box...

The two most common price setting mechanisms in share sales transactions are locked box and completion accounts . Both approaches address the main issue in business sale transactions in a different way - the possibility of adjusting the transaction price due to the time difference between the date of the last financial data of the sold company available to the buyer and the date of the relevant contract (the so-called closing date ). It is common sense to assume that the latest financial data of the subject of the sales transaction are subject to examination by the buyer and then become the basis for negotiations and setting the price on the date of the preliminary contract (so-called signing date ).

EBIT or EBITDA? Or maybe EBIT?

Of course, EBIT . Next, EBITA . Simple and obvious.
But we also have many supporters of EBITDA . But why? The topic is a bit complex - we have the illusory power of EBITDA, the disadvantages of EBIT and a new quality, i.e. EBITA...

Why are P/E and P/BV multipliers passé in company valuation?

I have already written once about the reliability of commonly used P/E and P/BV multipliers... but the questions and comments sent to us encourage us to address the issue again...