Business Valuation Management

Business valuation management is one of important subject of  ICWAI exam. Business valuation management means to take the decisions for calculating proper value of business's asset's and liabilities. If you will read business valuation management book, you will find 26 chapter of business valuation management. All these chapters, we can include the valuation of inventory, valuation of investments, valuation of fixed assets, valuation of intangibles, valuation of company, valuation of liabilities, valuation of shares and valuation of brand etc. All these chapter's theory, you can study in your book and we will explain it in future notes. But today, we will show you the sample paper of business valuation management. This is 2010 and we have try to solve it. By reading this, you can get idea what will be asked by examiner in this paper.

PAPER-18

BUSINESS VALUATION MANAGEMENT

REVALIDATION TEST PAPER-RV/18/BVM/2010



PART A


Give Answer of following questions:


Q:- 1. What is  Intellectual Capital?

Ans. : Intellectual capital is the type of capital. In any organisation, you can see two type of capital. One is physical capital and other is intellectual capital. Intellectual capital is the sum of all assets which are intangible form. We can not touch to these assets. There are two main part of intellectual capital. One is human capital and other is intangible capital. In human capital, we can include employees skills, knowledge, expertise and experience. If our employees have these capabilities, we have this intellectual capital. With this capital, we get power to take fast decision and solve our complex problem. In intangible assets, we can include goodwill, copyrights, patents, trademark and licences. These capital will always in intangible asset form and we can calculate its financial value. We can also buy and sell these assets. A company is doing successful business in finance industry. If it will sell its business to B, then B will also pay for its 20 years goodwill.

Q:- 2 What is Brand?

Ans. : Brand is name and design of any company's product. No one can use same name or design because every brand is protected with trademark. It is the part of company's intellectual capital. It will also helpful to increase the price of product. For example, Google's trademark logo is its global brand. People can find Google's all products by seeing just its logo on it. So, its valuation is important when we sell or buy brand.

Q:- 3. What is Dividend Yield?

Ans. : If we divide dividend per share with price per share, we can calculate dividend yield ratio. It is also called dividend price ratio. We can also calculate this ratio with following formula

total dividend/ total market value of share capital



\begin{array}{lcl}
 \mbox{Current Dividend Yield} & = & \frac{\mbox{Most Recent Full-Year Dividend}}{\mbox{Current Share Price}}     \\
        & = & \frac{$1}{$20} \\
        & = & 0.05 \\
        & = & 5% \\
\end{array}


Q:- 4 What is DCF Analysis?

Ans. : DCF analysis is used for valuation of any fixed asset by using the concept of time value of money. More you can read it in our past notes at here.

Q:- 5  What is Energy Conservation?

 Ans. : Energy Conservation is revolution for saving and efficient use of energy. Our energy  resources are limited and due to inefficient use, these resources are decreasing fastly. For example, we are making our food on LPG gas which is made from petrol. Petrol is limited. If we start to create bio-gas plants and bio-gas for cooking of food, we can use petrol more efficiently. Like this, we have to use electricity more efficiently. If we  will close our fans, lights and other machines when there is no use, one side of these resources life will increase and other side our capital expenditure will also decrease.  

Q:- 6. Briefly explain the various steps in the valuation of a Brand. 

Ans. : Brand is name or design of product which is used for attracting the customers. Customers can buy that product just by seeing its logo or image. So, it is the tool to increase the sale. It increase the price of product. So, it has specific value which can be calculated with following ways:

1. # Make a consumer  research in which you have to check how do your band affect buyers' buying behavior. Your brand value will high if  more buyers are willing to pay for your company's products.

2# Use  conjoint analysis. By this analysis, it will tell you total sales due to brand. If that type of brand is on in your hand what you will pay for buying such brand. On these basis, we will calculate the value of brand.

Q:- 7. What is Human Resource Accounting? What are its benefits? Briefly discuss the two
methods of its measurement? 

Ans. :  You can read this question's answer at here.

Q:- 8.  Why do many mergers fail?

Ans. : Many mergers fail because there are many risks of loss in this type of dealing. Following are main reason of failing of mergers.


Ist Reason # Before merging the companies, mergers do not create a clear vision of their desired outcomes.

2nd Reason # Other company may be cheater. That company wants to fail to your company by contract of friendship. Do not believe on me, read the historical merger between Shiva Ji and Afzal Khan.

3rd Reason #  Companies do not think the effect on final consumer before amalgamating. Your business's main aim is to satisfy your consumer. But under the pressure of your friend company,  you can decide to increase the prices. Due to this many mergers fail.

4th Reason # Sometime personnel and other employee may against to your company. You often see when govt. company merges with Private company, employees of govt. company do not work and go for strike. Due to this, your merger may fail.

5th Reason  # Companies fail to develop new approaches to make mergers succeed.


Q:- 9. Why do companies want to measure Intellectual capital?

Ans. : I already told in the answer of first question that intellectual capital means capital in the form of skills, experience and knowledge of employees and other intangible assets. So, to measure intellectual capital means to measure the value of the skills, knowledge and experience of employees and to measure the value of other intangible assets. Following are its main reasons:

1st Reason # For promotion of employees, we need the data of value of their skills, knowledge and experience.

2nd Reason # For fixing the minimum standard of salaries and compensation.

3rd Reason # For calculating the net return of HR capital.

4th Reason # For selling the goodwill and other intangible assets of company.

{ Please wait for reading part B  of answer of the question paper 2010 of Business Valuation Management}

Related : ICWAI Online Education

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