Business evaluation in the strict sense should be evaluated by a professional evaluation agency or accounting firm. The following article is reproduced for reference.

Scope of enterprise value assessment

(1) General scope of enterprise value assessment The general scope is the scope of the enterprise’s assets. This is to define the scope of assets assessed by the enterprise from a legal perspective. From the perspective of property rights, the scope of enterprise evaluation should be all the assets of the enterprise. (2) The specific scope of enterprise value assessment. Issues that should be paid attention to when defining the specific scope of enterprise value assessment: First, for property rights that are difficult to define at the time of assessment or assets that are temporarily difficult to draw a conclusion due to property rights disputes, they should be classified as "to be determined." Property rights" are not included in the scope of assets assessed by enterprises for the time being. Secondly, within the scope of property rights, if there is obviously idle or wasteful production capacity in the enterprise, and the functions of some local assets are inconsistent with the overall functions of the entire enterprise, and the enterprise can be separated, the client should be reminded to conduct business asset management according to the principle of utility. Reorganize and redefine the specific scope of enterprise evaluation to avoid causing loss of the client's rights and interests. Thirdly, asset reorganization is an important way to form and define the specific scope of enterprise value assessment. The impact of asset reorganization on asset evaluation mainly includes the following situations: 1. Changes in the scope of assets. 2. Changes in the asset-liability structure. 3. Changes in income levels

Comparison of business value assessment models

Business value assessment is a comprehensive asset assessment and a process of judging and estimating the overall economic value of an enterprise. Mainly to obey or serve the enterprise's property rights transfer or property rights transaction. With the deepening of China's economic system reform and the implementation of the modern enterprise system, the emergence and increase of economic transactions such as corporate mergers, acquisitions, equity reorganization, asset reorganization, mergers, spin-offs, stock issuance, and joint ventures have led to the application space of enterprise value assessment. It has been greatly expanded, and the role of enterprise value assessment in the market economy has become more and more prominent. At present, there are four main methods of enterprise value evaluation: asset value evaluation method, cash flow discount method, market comparison method and option value evaluation method. 1. Asset Value Appraisal Method The asset value appraisal method is a static evaluation method that uses the existing financial statement records of the enterprise to evaluate the enterprise's assets item by item and then total them. It mainly includes the book value method and the replacement cost method. 1. Book value method Book value refers to the value or net value of shareholders’ equity in the balance sheet, which is mainly composed of the capital invested by investors plus the company’s operating profits. The calculation formula is: target enterprise value = book net assets of the target company. However, this only measures the existing assets of the enterprise and cannot reflect the profitability, growth ability and industry characteristics of the enterprise. In order to make up for this shortcoming, in practice, an adjustment coefficient is often used to adjust the book value, which becomes: target enterprise value = book net assets of the target company × (1 + adjustment coefficient). 2. Replacement cost method Replacement cost refers to the cost of the acquiring company itself to rebuild a company that is exactly the same as the target company. Of course, the depreciation of equipment in existing businesses must be taken into consideration. The calculation formula is: target enterprise value = current market price of enterprise assets - tangible depreciation amount - intangible depreciation amount. The above two methods are based on the historical cost of the enterprise to evaluate the value of the enterprise. The most important feature is that they adopt the idea of ????separating the stock prices of various assets of the enterprise and then adding them together. The actual operation is simple. Its most fatal shortcoming is that it separates an enterprise organism: an enterprise is not a simple accumulation of various production materials such as land and production equipment. Enterprise value should be a reflection of the overall quality of the enterprise. If an asset is evaluated separately from the whole, its cost price will be far different from the marginal benefit it brings to the whole. The book value of a business's assets has minimal correlation with the business's ability to generate future earnings. Therefore, its evaluation results are not actually enterprise value in the strict sense. At best, they can only be used as a value reference to provide a bottom line for evaluating value. 2. Cash Flow Discount Method The cash flow discount method, also known as the Rabbabot model method, uniformly converts cash flows occurring at different points in time into present values ??at a given discount rate, taking into account the time value of funds and risks. A method of adding up to obtain the value of the target company. 3. Market comparison method The market comparison method is based on the theoretical inference that similar assets should have similar prices, and its theory is based on the "substitution principle."

The essence of the market method is to find one or several reference companies in the market that are the same as or similar to the company being evaluated, and on the basis of analyzing and comparing important indicators between the two, revise and adjust the market value of the company, and finally determine the company being evaluated. The value of the enterprise. The focus of evaluation using the market approach is to select comparable enterprises and determine comparable indicators. First of all, when selecting comparable companies, we usually rely on two standards: one is industry standards, and the other is financial standards. Secondly, when determining comparable indicators of enterprise value, one principle must be followed, that is, the comparable indicators must be directly related to the value of the enterprise. Three financial indicators are usually chosen: EBIDT (earnings before interest, depreciation and tax), debt-free net cash flow and sales revenue. Among them, cash flow and profit are the most important indicators, because they directly reflect the profitability of the company and are directly related to the value of the company. The market comparison method estimates the value of a target company by pricing similar or comparable assets with reference to the market. Since the market value of the enterprise is required as a reference, the market comparison method relies more on discounted cash flow and requires less information. But it is assumed that "the market as a whole will fail to respond to the target company. In actual and transaction cases, the market is not yet perfect, and its use is subject to certain limitations. 4. Option valuation method purchases at a given date or at a fixed price The value of the option comes from the value of the underlying asset. Only when the option is sold will the Scholes model be used. Under the option valuation method, the option value implicit in the merger and acquisition can be determined using the option pricing model, and then added to the value calculated by the traditional method. The static net present value is the value of the target company. The option value evaluation method takes into account the value of various opportunities and operating flexibility of the target company, making up for the shortcomings of the traditional value evaluation method and enabling the acquirer to evaluate risks based on risks. Select opportunities and create operational flexibility. The greater the risk, the higher the value of opportunities and flexibility a company has. However, there are still some problems that need to be solved in the research. For example, when using the option pricing model, the model is not used. The hypothesis conditions must be rigorously tested. In fact, whether the opportunity returns of many economic activities conform to the laws of geometric or logarithmic Brownian motion remains to be studied. In practice, this method is rarely used alone to obtain the final results, and other methods are often used. The valuation method is based on the value of the merger option and is adjusted to obtain the valuation. In short, the enterprise value assessment is based on a certain scientific method and experience level, but it is essentially a highly subjective judgment. In practice, different methods should be used for valuation for different objects. When necessary, multiple methods can be used for simultaneous valuation. Generally speaking, assessing enterprise value requires two skills. The first is analytical ability, which requires both understanding and application of mathematics. model to evaluate the company's value. The second and more important thing is to have good judgment. Many times mathematical models contain assumptions, and many data such as company management capabilities cannot be quantified or there is not enough data to measure, so in The enterprise value obtained by using mathematical models can only be used as a reference. Since the current valuation purpose is very narrow, enterprise value assessment can not only provide a reasonable basic price for property rights transactions, but more importantly, the value comparison before and after reorganization can serve as a basis for corporate management. A decision-making tool for whether to carry out strategic reorganization. Value assessment has achieved great success in Western countries. The correct implementation of value maximization management using value assessment is a necessary condition for Chinese enterprises to get out of trouble. Therefore, both in theory and in theory. In practice, it is of great significance to explore and study enterprise value assessment methods and their rational application.