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The Effects Of A Change In The Environment On Business Valuation Using The Income Capitalization Approach

Author

Listed:
  • Maria Reznakova

    (Brno University of Technology, Czech Republic)

  • Michal Karas

    (Brno University of Technology, Czech Republic)

Abstract

Determining the company value in the conditions of unstable development is a very difficult, almost sophisticated activity. The experience of authors confirms high sensitivity of the resulting company value in relation to critical input parameters, which are known as value drivers. One of these drivers, in case of determining the company value using the income capitalization approach, is the expected sales. In practice, some authors, but mainly experts, limit sales forecast to extrapolation of the identified trend of the past development, while neglecting the importance of the strategic analysis. The aim of the strategic analysis is to identify all factors which may influence future company objectives, i.e. also future sales. This article provides a possible approach to the correction of sales forecast based on the information gained from the strategic analysis.

Suggested Citation

  • Maria Reznakova & Michal Karas, 2012. "The Effects Of A Change In The Environment On Business Valuation Using The Income Capitalization Approach," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 7(2), pages 119-137, June.
    • Handle: RePEc:pes:ierequ:v:7:y:2012:i:2:p:119-137
    DOI: 10.12775/EQUIL.2012.014
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    References listed on IDEAS

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    1. Makridakis, Spyros & Taleb, Nassim, 2009. "Living in a world of low levels of predictability," International Journal of Forecasting, Elsevier, vol. 25(4), pages 840-844, October.
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    More about this item

    Keywords

    strategic analysis; business valuation; sales forecast process;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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