Enterprise Value Associated Analytical Model
The concept of corporate value has become increasingly common in the business world. It is defined as the total value of a company, including its assets, its liabilities, and its shareholder’s equity. As a reflection of its overall financial strength, the enterprise value is closely related to how the organization is perceived in the market by potential buyers, financial institutions and the public.
Analyzing the corporate value associated to different business decisions can help to determine the impact of various investment decisions, risk management strategies and strategic alliances on the total value of the organization. However, due to the complex nature of each decision, the traditional financial models often fail to provide a comprehensive evaluation of corporate value. This paper will introduce a new enterprise value associated analytical model that incorporates both traditional financial models and non-traditional business decision models.
The enterprise value associated analytical model is based on the ABC model of corporate value. This model, developed by Thomas Syngal and Robert Plow, combines economic, financial and non-financial data to estimate the TOTAL enterprise value or Enterprise Value Associated with a particular decision or event.
The ABC model considers all the different factors that affect the corporate value. These factors include the financial aspects of corporate value such as financial performance, liquidity and solvency, as well as non-financial aspects such as employee policies, customer satisfaction and other contextual factors. In addition, the model also considers market expectations of corporate value, the dynamics and trends in the corporate market and the external environment.
The ABC model is an iterative process. The first step of the model is to define the enterprise value associated with a decision. This is done by defining the total expected cash flows of the business decision and the underlying economic assumptions.
The second step of the model is to employ a discount rate which is then used to calculate the present value of the cash flows and the associated enterprise value. The third step of the model involves adjusting the total expected future cash flows and the underlying economic assumptions based on market expectations, industry studies and the external environment.
Finally, the fourth step of the model is to estimate the enterprise value using the adjusted cash flows and economic assumptions. The resulting enterprise value associated with the decision is the final value used to determine the decisions overall value.
Because the model incorporates traditional financial models and non-traditional decision models, it provides a comprehensive evaluation of the enterprise value of a particular decision. This model can be used by decision makers to help them understand the implications of different business decisions on their corporate value. Additionally, the model can help guide companies to optimize their enterprise value and make better informed investment choices.
