Learn how to value a business using different valuation methods, such as multiples, earnings ratios, and discounted cash-flow analysis.
- Hi, I'm Jim Stice, I'm a professor of accounting at Brigham Young University. This is my brother Kay. - I'm also a professor of accounting at Brigham Young University, and I'm a professor of finance and accounting at Nazarbayev University in Kazakhstan. - In this course, we provide an introduction to business valuation. - Business valuation brings together the fields of accounting and finance. - From accounting, we obtain data that are important inputs into many valuation models. These data include net income, sales, and cash flows. - From finance, we draw from the concepts of risk, returns, and the time value of money.
- In this course, we introduce two basic valuation approaches, valuation using multiples and the more challenging valuation, using discounted cash flow analysis. - We will illustrate these models using real examples. So, we will look at the process used in setting the initial price of Microsoft shares when the company did its IPO way back in 1986. - Once we've learned a little about valuation using multiples, we will practice by valuing a Chinese telecommunications company. - In a capstone example, we will use several different models to estimate the value of McDonald's.
- And we will address the question that you are asking yourself right now, can I use my newly found knowledge of business valuation to pick winning and losing stocks in the stock market? I'll give you a hint at the answer, don't get your hopes up. Primarily because the market responds to new information just too fast. - Now, before taking this business valuation course, you might consider taking our Accounting Fundamentals or our Finance Fundamentals courses. Among other things, those courses introduce you to the basics of accounting measures, cash flows, risks, returns, and the time value of money.
- Now, with that said, we have designed this business valuation course to be self-contained, and we carefully explain any terminology that we use. - In short, this is an introductory course with no prior accounting or finance knowledge required. - So, let's learn about business valuation.
Make sure to check out the Stice brothers' other accounting and finance courses to understand the other economic factors that impact your business.
- Using market, cost, and income approaches to business valuation
- Valuing homes
- Valuing companies by multiples
- Using price-to-sales ratios to value companies
- Using discounted cash-flow analysis to estimate value
- Valuing McDonald's as a case study