75 common and uncommon errors in company valuation
This paper contains a collection and a classification of 75 errors seen in company valuations performed by financial analysts, investment banks and financial consultants. The author had access to most of the valuations that are referred to in this paper when consulting in purchases, sales and mergers of companies, and in arbitrage processes. Some valuations are from public reports by financial analysts. The errors are classified in six main categories: 1) errors in the discount rate calculation and about 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.
|Date of creation:||05 Aug 2003|
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- Jacques Hamon & Bertrand Jacquillat, 1999. "Is there Value‐Added Information in Liquidity and Risk Premiums?," European Financial Management, European Financial Management Association, vol. 5(3), pages 369-394.
- Knez, Peter J & Ready, Mark J, 1997. " On the Robustness of Size and Book-to-Market in Cross-Sectional Regressions," Journal of Finance, American Finance Association, vol. 52(4), pages 1355-1382, September.
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