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2007, vol. 55, iss. 2, pp. 129-140
Problems in valuing businesses with negative earnings
University of Belgrade, Faculty of Law
Keywords: evaluation; negative earnings; earnings normalization
Abstract
The procedure of valuing businesses with negative earnings has some specificity in comparison to the evaluation of companies that are profitable. This is why it is necessary to adjust the process of evaluation not only to the provisional issues but also to the strategic and operational problems. When it comes to the short-term changes in business factors, the normalization of earnings of the enterprise which is subjected to valuation should include all the costs relating to these changes. In case of the long-term problems - namely, those of strategic and operational character the valuation procedure gets more complicated, since the appraiser has to estimate the possibility of their successful solving and to evaluate the capital in the light of this estimation. One of the long-term problems could be over borrowing that leads to negative earnings, and this is one of the issues the appraiser should take into account.
References
Damodaran, A. (2002) Investment valuation: Tools and techniques for determining the value of any asset. New York, itd: Wiley
Rodić, J.L., Tuševljak, S. (2003) Finansije preduzeća. Beograd: Konsseko institut
 

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article language: Serbian
document type: Scientific Paper
published in SCIndeks: 26/03/2008

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