Financial Valuation: Applications and Models

by James R. Hitchner and James R Hitchner

Book Overview

The appropriate, defensible way to prepare and present business valuations, with a strong emphasis on applications and models Financial Valuation provides an all-encompassing valuation tome that presents the application of financial valuation theory in an easily understood manner. Delivering valuation theory, the consensus view on application, and the tools to make it happen, James Hitchner's all-star cast of contributors offer numerous examples,...

• Format: Hardcover
• Language: English
• ISBN: 0471061387
• ISBN13: 9780471061380
• Release Date: April 2003
• Publisher: Wiley
• Length: 1056 Pages
• Weight: 4.45 lbs.
• Dimensions: 2.1" x 7.6" x 9.7"

Customer Reviews

Financial Valuation by Hitchner

This is a well written hightly technical specialty book. It is recommended reading for any one interested in the Business Valuation industry and is well worth investing in for your personal library. I purchased it to enhance my self study for the AICPA exam for certification in Business Valuation. The other study materials and continuing education courses I took were totally lacking in content and depth. My only concern is that I bought it right before the new edition was published. I think I would prefer to have the later edition but was unaware that a revised copy was eminent.

Financial Valuation Applications and Models (Second Edition): A Titanic Tour de Force

James Hitchner and his 29 well-respected peers from the valuation industry have realized an impressive tour de force in describing and commenting on the proper methods of valuations for a wide variety of public and private business entities such as C corporations, S corporations, and other pass-through entities. Valuations can be needed for a wide variety of purposes such as internal planning, mergers and acquisitions, estate, gift, and income taxes, shareholder disputes, marital dissolution, buy-sell agreements, etc. Whoever believes that financial valuation is an exact science will quickly change his/her mind by reading only the last chapter that focuses on controversial issues that still prevail in the valuation industry (pp. 1261-1304). Hitchner and his peers want their audience to use their book as a guide that cannot be construed as a substitute for professional judgment. Furthermore, financial valuations do not exist in a vacuum. Facts and circumstances underlie well-done financial valuations. The greatest value of the authors' book lies in their in-depth analysis of applications in the valuation industry. Their thorough examination of sample evaluation reports (pp. 469-549; 1261-1304) and their review of case laws (pp. 451-468; 731-777) come top of mind. Although Hitchner and his peers do a great job at cross-referencing their manual, readers are advised to connect additional dots on their own to derive the most value from this guide. In a third edition of "Financial Valuation Applications and Models," Hitchner and his peers could consider the following suggestions: 1) Introduce readers in chapter 1 not only to concepts such as the purpose of valuation, standards of value, premises of value, and approaches to value (pp. 2-8), but also to the different levels of value applicable to a business or a business interest (pp. 376-378; 1156). 2) Move forward chapter 21 (pp. 935-1014) dedicated to the valuation of intangible assets and place it for example after chapter 7 (pp. 317-374) that focuses on the asset approach to valuation. Intangible assets are an increasingly important contributor to value in more and more business entities as the authors themselves note repeatedly. 3) Dedicate a separate chapter for each of the topics of chapter 24 (pp. 1047-1131) such as the valuation of early-stages technology companies and real option valuations. 4) Make chapter 20 (pp. 883-933) about strategic benchmarking for value more practical through the use of real examples. Whoever has already used scorecards in his/her job will derive little value from this chapter. 5) Add a CD-Rom to the book with a sample of evaluation reports for the different purposes mentioned in the introduction to financial valuation (p. 2). Furthermore, the CD-Rom could contain the Excel files that are behind a number of exhibits across the book 6) Use a more flexible jacket that will give the book a longer shelf life to better withstand its regular

Review of "Financial Valuation: Applications and Models"

Jim Hitchner, a name well-known to ABVs and other valuation practitioners, conceived the novel idea of bringing together twenty-five highly visible and well-respected valuation professionals to present the group's collective views and positions on business valuation concepts and applications. Each of the authors is a coauthor of the entire book. The authors, many of whom are ABVs and instructors for the AICPA's national business valuation educational program, include Mel Abraham, Jim Alerding, Terry Allen, Larry Cook, Mike Crain, Bob Duffy, Ed Dupke, Nancy Fannon, John Gilbert, Tom Hilton, Jim Hitchner, Steve Hyden, Greg Koonsman, Eva Lang, Mike Mard, Harold Martin, Mike Mattson, Ray Moran, Charles Phillips, Jim Rigby, Ron Seigneur, Robin Taylor, Linda Trugman, Don Wisehart, and Mark Zyla.The result of this collective effort is "Financial Valuation" - a text that presents a compilation of "best practices" for the business appraiser."Financial Valuation" covers the obligatory fundamentals found in most other introductory texts. What sets this text apart from others is its focus on applications and methods. The text contains numerous practical examples and discusses alternative approaches for tackling those complex issues that are often encountered in the real world of valuation practice. This focus makes "Financial Valuation" an indispensable tool for even the most experienced appraisers. Some of the text's highlights include:Chapter 4, Income Approach to Value, discusses the alternative income valuation methodologies and includes a detailed example of the excess cash flow (earnings) method.Chapter 5, Cost of Capital/Rates of Return, includes a comprehensive presentation on the application of Ibbotson data for determining risk premiums in discount and capitalizationrates.Chapter 6, Market Approach to Value, discusses alternative market valuation methodologies and presents a quantitative method for using and adjusting guideline public company multiples for size and growth differences.Chapter 9, Report Writing, presents a detailed valuation report with numerous comments on why certain items were included or excluded.Chapter 12, Family Limited Partnerships, presents a detailed case study on the valuation of a Family Limited Partnership including the selection of discounts for lack of control andlack of marketability. Chapter 13, Court Case Issues and Review, includes synopses of over 40 tax court cases organized by major valuation areas of dispute.Chapter 16, Valuation in the Divorce Setting, discusses the complexities of valuing ownership interests in closely held businesses for divorce purposes, including a discussion of relevant state case law, standard of value, applicability of discounts and premiums, etc.Chapter 18, Valuation Issues in Professional Practices, provides an overview of the issues involved in valuing professional practices such as medical, law, and accounting practices.Chapter 19, Valuation of Healthcare Entities, includes two deta