Enterprise value:
Enterprises include: limited liability companies, joint stock companies, partnerships, private enterprises, state-owned enterprises.
In the market mechanism, an enterprise is an asset, with the following characteristics:
Like other ordinary goods, enterprises are the object of transactions: purchase, sale, consolidation, splitting ... The price and value formation process for this special commodity is also governed. of the laws of value, supply and demand, competition ...
Like Real Estate: Every business is a unique asset. Each business has a different size and asset structure, has a separate and independent location and headquarters, and has different governance structures and environmental impacts. No two businesses are exactly alike. The comparison of the value of one firm with another is for reference only.
And so: Enterprise value is the monetary expression of the income that a business brings to investors in the business process. Enterprise valuation methods must be built on the basis of:
Evaluate the value of tangible assets and organizational factors - relationships
Evaluate the income that the business can generate for investors.
The need to determine enterprise value (enterprise value)
Enterprise valuation derives from the requirements of the merger, acquisition, merger, consolidation or division of an enterprise. This is a regular and popular transaction in the market mechanism, reflecting the need for direct investment in production and business, the need to finance growth and development by means of external factors, to enhance the viability of a free competitive environment. To perform such transactions, it is required to have a wide range of factors affecting enterprises, in which value of enterprise is a decisive factor, a direct basis for people. negotiate with each other in the process of merger, acquisition, consolidation, or division of enterprises.
In the view of investors, suppliers, information about value of business gives people a general assessment of business reputation, financial capacity and credit position so that there is a basis for making the decide on investment, financing or continuing to provide credit to the business.
Enterprise value is an important type of information in macroeconomic management: The prices of securities are determined by the real value of the enterprise whose securities are traded on the market. Therefore, in terms of macro management, information on enterprise value is an important basis for policy makers, securities trading organizations and associations to assess the stability of the market, to identify the phenomenon of speculation, market manipulation, taking over the control of enterprises ... so that suitable regulatory policies can be made. In addition, in the process of transforming the economic management mechanism, determining the enterprise value is also an important step to reform SOEs such as: equitization, merger, consolidation or assignment, sale and lease.
It can be said that management activities and common economic transactions in the market mechanism have set out necessary requirements for determining enterprise value. These may be the requirements of a situational nature, also a daily requirement in production and business activities. They are of interest to three types of subjects: the State, the investor and the business administrator. Therefore, enterprise valuation is an indispensable requirement for countries that want to build and develop their economy according to the market mechanism.
