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Business Valuation

The appraisal of a business is the determination of a specific market price for the company as a whole, or a part thereof.

Being subject to civil law, a business is viewed by the law as property rights belonging to a legal entity for all facilities involved in its entrepreneurial activity or property portfolio.

A business (company) is a property portfolio used to conduct entrepreneurial activity. In accordance with Article 1 of the Turkmenistan Law "On Enterprises", a company is an independent entity involved in economic activity, and created for the purposes of producing products, selling goods, performing work and offering services to meet the demands of society, and to make a profit.

When making a business appraisal, the business is viewed as an integral system whose component elements are considered property and the rights thereto.

A company and/or business possesses all of the attributes of goods or products and can be considered subjects of commercial relationships. These goods are of a special kind and therefore the models, methods and approaches used in valuating them are unique.

Appraising the value of a company/business is a process by which the value of the company is determined to be a set of assets capable of turning a profit. When appraising a business, the value of all its assets is calculated: movable and immovable property, machines and equipment, warehoused supplies, financial investments and intangible assets. In addition, also valued is the company's work performance, its past, current and future cash flow, its development prospects and the competition within its particular market. Whenever possible, it is also compared to other analogous companies. Based on this kind of thorough and comprehensive analysis a realistic appraisal of the value of the company can be made.

Preliminary questions to be asked before appraising a business:

  • What kind of strategic goals is the business setting for itself (to survive or to grow);
  • Is there a consumer demand for the company's products, is there strong competition in that sector of the market, and what is the expected demand and level of competition in that particular industry;
  • Is it possible to increase the price of the company's products.

A business appraisal is used to:

  • Determine the value of the company's shares in case they are bought or sold;
  • Determine the value of the company, if it is financed;
  • Make managerial decisions about the company's growth;
  • Restructure a company;
  • Bring an investment project into fruition.
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