110 common errors in company valuations
AbstractThis paper contains a classified collection of 110 errors seen in company valuations performed by financial analysts, investment banks and financial consultants. The author had access to most of the valuations referred to in this paper in his capacity as a consultant in company acquisitions, sales, mergers, and arbitrage processes. We classify the errors into six main categories: 1) errors in the discount rate calculation and concerning the riskiness of the company; 2) errors when calculating or forecasting the expected cash flows; 3) errors in the calculation of the residual value; 4) inconsistencies and conceptual errors; 5) errors when interpreting the valuation; and 6) organizational errors.
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Bibliographic InfoPaper provided by IESE Business School in its series IESE Research Papers with number D/714.
Length: 40 pages
Date of creation: 05 Nov 2007
Date of revision:
company valuation; valuation errors; valuation;
Find related papers by JEL classification:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
- M21 - Business Administration and Business Economics; Marketing; Accounting - - Business Economics - - - Business Economics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-02-02 (All new papers)
- NEP-CFN-2008-02-02 (Corporate Finance)
- NEP-FMK-2008-02-02 (Financial Markets)
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