Category: Business valuation
-
Why inventory on the balance sheet affects a company’s value
Inventory is not just a number sitting on the balance sheet.It directly affects future cash flow. When we analyze inventory, we look at days in inventory — because this tells us how long cash is tied up before turning into sales. We also look back at historical inventory levels.If some years are unusually high or…
-
Why we always ask clients to group revenue sources
When we forecast a company’s performance, we don’t just apply “sales grow xx%”. Each revenue stream behaves differently. Different growth drivers.Different cost structures.Different risks. So instead of projecting total revenue as one line, we break it down: …and forecast both revenue and cost for each item, based on: This gives a much more realistic forecast…
-
How to value a project-based company
Some companies don’t sell products every day.They earn money project by project. Think of real estate developers, EPC contractors, infrastructure projects, etc. So valuing them is very different from valuing a normal operating business. When we value a project-based company, we usually focus on 3 key things: 1️⃣ BacklogsBacklogs represent projects already secured but not…
-
Third opinion for an investment 🤔
Business valuation is not only for M&A. Sometimes, we are engaged as an independent third party to review a project investment decision. When a company plans to invest a large amount of money into a new project, management may already have an internal forecast.Our role is to step in and ask the uncomfortable but necessary…
-
Investing in a non-listed company
When a company invests in other companies, the investment itself matters in a business valuation — not just the core operations. In practice, we don’t simply take the initial investment cost and stop there. During valuation, we assess how those invested companies are actually performing. Think of it as a mark-to-market concept: In many cases,…
-
Cash projections that don’t look comfortable.
When we validate a company’s value using the Discounted Cash Flow (DCF) method,we usually forecast cash flows for the next 5 years. Sometimes, the projected cash balance looks… tight. This often happens because of things like: At first glance, it may look like the business “cannot survive”. This is where judgment matters. If: Then reviewing…
-
A company is loss-making and has debt. Does it still have value?
This is a fragile situation.The company is losing money and has obligations to pay interest and loan instalments. But loss ≠ zero value. Here’s what we usually look at beyond the headline loss: If we ignore fixed costs for a moment, is the business profitable at the variable cost level?Fixed expenses don’t automatically increase with…
-
M&A can take years.And sometimes… the deal dies before it starts.
There are many cases whereCompany A wants to buy Company B.Company B also wants to be bought. But the documents are nowhere near audit-ready. More than one set of accounting books.Numbers don’t reconcile.Key information depends on only one person. These are very common issues for small companies. So even if you’re not planning to sell…
-
Legal, Accounting & FA (Financial Advisor): Why you need all 3 in M&A
Because Legal cannot value a business, Accounting cannot review contracts, and FA cannot audit financial statements. That’s why in an M&A (Merger & Acquisition), you need all 3 parties. After due diligence, if there are no hidden skeletons in the closet, the financials are audited, and the FA has completed the valuation, both buyer and…
-
Why we usually need 3–5 years of historical performance in business valuation
Sometimes a company’s performance looks like a wave —up one year, down the next. This doesn’t always mean the business is unstable. It could be: Looking at several years helps us identify patterns, not just numbers. For example: Very often, we see cases where revenue remains strong, but net income drops sharply in certain years.When…
ORNA Company Limited 