Category: Valuation & Appraisal
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How to Value: Packaging & Labeling Services
Industry Description The packaging & labeling services industry in the U.S. comprises contract-based packaging services for client-owned materials, along with related labeling and imprinting capabilities (NAICS 56191). The industry excludes the manufacturing of packaging materials and labeling products. The following are some basic characteristics of the packaging & labeling services industry: Industry Trends The Packaging…
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The Basics of the Market Approach
The market approach remains a cornerstone of business valuation because it reflects real-world pricing behavior between willing buyers and sellers. While valuation professionals often rely heavily on the income approach, integrating market-based evidence strengthens conclusions, improves defensibility, and aligns valuations with observable transaction data. But both are functional, sound methodologies The Role of the Market…
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Management’s Projections in Disputes
Financial projections prepared by management often play a central role in valuation and damages analyses. However, their use in litigation and dispute contexts presents a fundamental tension: while management typically possesses the deepest operational insight into a business, its forecasts may also reflect optimism, bias, or litigation-driven incentives. As a result, professional standards, judicial precedent,…
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The overlap between Lost Profits and Diminution in Value
Economic damages disputes often turn on how loss is defined, measured, and framed. One of the most challenging issues arises when different damage theories appear to quantify the same economic harm from different perspectives. The analysis of lost profits and diminution in value sits at the center of this challenge, requiring careful attention to economic…
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Professional Judgment in Company-Specific Risk Premium
Company-Specific Risk Premium remains a hotly debated and potentially consequential elements in business valuation. Company-Specific Risk Premium frequently represents a significant portion of capitalization rates, in many cases exceeding half of the total rate. Its influence is particularly pronounced in litigation, mergers and acquisitions, private equity, and fair value reporting. Despite its widespread use, Company-Specific…
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A Study About Investor Behavior
Despite the abundance of research on stock prices and investor behavior, surprisingly little is known about how individual investors gather information before making trades. A new study by the National Bureau of Economic Research fills this gap using a rare and detailed dataset: browser history from U.S. households that actively traded stocks online. Most Investors…
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Valuing a Cash Business
Cash-intensive businesses occupy a unique space in the valuation landscape—one marked by financial opacity, undocumented transactions, and a healthy dose of professional skepticism. From corner stores to restaurants to service-based enterprises, these businesses often operate at the margins of formal accounting, leaving valuation professionals to fill in the blanks through a combination of forensic acumen,…
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Common Pitfalls in Discount Rate Selection
In calculating lost profits and economic damages, selecting an appropriate discount rate is crucial. The discount rate affects how much future value is translated to current value. However, forensic accountants and valuation professionals sometimes fall into common traps that compromise the credibility and accuracy of their analyses. Here’s a deeper exploration of these critical mistakes:…
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The Basics of a Monte Carlo Analysis
The Monte Carlo analysis is a useful statistical technique used to forecast potential outcomes from models that simulate complex systems.. It relies on random sampling and probability to generate a range of possible outcomes. Monte Carlo analyses are used to provide valuable insights for decision-making, risk management, and optimization by simulating a wide range of…
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Estate Tax Implications of Connelly vs. IRS
Life insurance proceeds are considered corporate assets, and need to be included when calculating the value of the company, potentially imposing additional estate tax liabilities. There are multiple ways to avoid this, including designating the individual owners as beneficiaries of the life insurance policy rather than the corporation. Background Brothers Michael and Thomas Connelly were…