Abstract
The paper studies business value indicator as a main criterion of corporation management, reflecting stockholders’ interests in their investment profitability increase. The model of corporation valuation model is represented based on income approach and economic value added (EVA) calculation methods as a sum of predicted values of EVA generated by the corporation discounted to the current period of time. The indicator of economic value added (EVA) was selected as a basic one since it includes factors (NOPAT, WACC, IC) necessary for corporation value management based on process approach. Four levels of variables influencing evaluation outcome are distinguished by means of corporation valuation model factors decomposition. Economic and mathematical models of individual factors impact assessment on corporation cost value are developed based on the method of model differentiation by distinguished factors, that allows defining degree of impact of each factor on the resulting indicator. The paper suggests the mechanism of distinguishing key factors of nonpublic corporation value including the algorithm of factors ranging. Such mechanism is of prime importance to corporation management since it allows distinguishing factors having the greater influence on its value, therefore, requiring for more concentrated management activities (planning, control, etc.).
Highlights
Corporation value is one of main invested assets efficiency criteria for corporation’s shareholders
The model of corporation valuation model is represented based on income approach and economic value added (EVA) calculation methods as a sum of predicted values of EVA generated by the corporation discounted to the current period of time
The indicator of economic value added (EVA) was selected as a basic one since it includes factors (NOPAT, weighted average cost of capital (WACC), Invested capital (IC)) necessary for corporation value management based on process approach
Summary
Corporation value is one of main invested assets efficiency criteria for corporation’s shareholders This indicator forms corporation stock value (equity share), directly influences shareholders’ income. Value-based management of a nonpublic corporation, i.e. its shares aren’t quoted on stock exchange, isn’t subject to direct influence of short-term speculative trends of capital market. Management fundamental factors, such as invested capital value, capital sources value, operational profit value, tax take rate on corporate income, etc. Valuation model of nonpublic corporation value should take into account these factors In their turn, these factors are management efficiency criteria for corporation’s individual processes. In this case the model allows applying process approach to corporation management and defining required measurable values of management efficiency criteria
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