Modern Methods of Business Valuation—Case Study and New Concepts

Ireneusz Miciuła, Marta Kadłubek and Paweł Stępień
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Ireneusz Miciuła: Faculty of Economics, Finance and Management, Department of Sustainable Finance and Capital Markets, University of Szczecin, 70-453 Szczecin, Poland
Marta Kadłubek: Faculty of Management, Department of Logistics and International Management, Czestochowa University of Technology, 42-200 Czestochowa, Poland
Paweł Stępień: Faculty of Economics, Finance and Management, Department of Sustainable Finance and Capital Markets, University of Szczecin, 70-453 Szczecin, Poland

Sustainability, 2020, vol. 12, issue 7, 1-22

Abstract: In the modern world, the terms enterprise value and valuation are of great importance. Knowledge about how much an enterprise is worth is of fundamental importance for both the owner of that company and investors when negotiating the price of an enterprise at the time of conducting a commercial transaction. The article presents the goals of the company’s valuation and characteristic stages of the company’s life at which such valuation is necessary. The article classifies the methods of enterprise valuation used today. On this basis, the valuation methodology is presented according to the MDI-R concept (Assets, Income, Intellectual Capital-Market), which in a broad spectrum measures the effectiveness of the company’s operations and, in accordance with the current features of good valuation, aims to determine the fair value of the company. The purpose of the article is to demonstrate the need to improve the code of conduct and valuation standards. As part of the implementation of the objective, multi-faceted and complex valuation issues are presented, as well as factors that may distort the determination of fair value. The methodology of the study is based on inferences about the methodology of business valuation, and verification is based on practical examples, by which a hypothesis on the existence of critical elements of valuation is verified that allows the use of broad subjectivity in estimating the value of assets. At the same time, the factors that determine the possibility of the existence of too wide a subjectivity in estimating assets, which is in contradiction with the features of good valuation, are presented. The attempt is made to draw attention to the threats arising from modern business valuation methodologies and their challenges in the future. Additionally, this article offers the authors’ proposed hybrid method MDI-R, which draws from existing solutions to improve their functionality and applicability.

Keywords: corporate finance; creating value; valuation of the company; management; financial market (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
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