R. H. Khasanov, E. K. Kuznetcova
Ugra State University, Khanty-Mansiysk, Russian Federation
Omsk Humanitarian Academy, Omsk, Russian Federation
Abstract:
Multipliers are often used as a simplified alternative to assess a company value, but in the scientific community they are often considered subjective and not well thought out, which ultimately threatens their credibility as a method. The purpose of the study is to determine indicators for industry ratios calculation taking into account the specifics of the industry or economy sector.
A comparative approach was used to assess the business value based on industry ratios (multipliers).
The author defines the price multiplier as a coefficient calculated on the basis of statistical observations, it reflects the relationship between the market price of a company or stock with its most important production and financial indicators. The study analyzes the necessary calculation base to calculate industry ratios (multipliers). In particular, it is proposed to determine the capitalization value or the equity market value of the analog-company based on such indicators as equity value and the value of all invested capital. The author’s classification of multipliers based on two groups (monetary and inkind) and two subgroups (balance multipliers and profitable multipliers) is proposed. It also substantiates the need to use certain groups of multipliers for use in assessing companies of different sizes: for large companies it is proposed to evaluate by net profit, and for small ones by profit before tax, which eliminates the differences in the amount of taxes paid.
To evaluate a business, there are a sufficient number of multiples suitable for a specific sector or industry evaluation. Estimating the value of the company by a comparative method involves the use of several multipliers at the same time, therefore, for a more objective result, it is important to adjust the obtained values by the method of average weighted homogenization.
Keywords:
business valuation, industry ratios, comparative approach to valuation, multiples, classification of multipliers.
Paper submitted:
March 15, 2020
For citation:
Khasanov R. H., Kuznetcova E. K. (2020). Calculation of industrial coefficients as one of the comparative approach methods assessing business. The Science of Person: Humanitarian Researches, vol. 14, no. 2, pp. 164–168. DOI: 10.17238/issn1998-5320.2020.14.2.28
