The core documents of any reputable company are business and financial plans that serve as background documents for other activities in dealing with banks, investors and other institutions.
The business plan includes, in particular, an assessment of the position on relevant market, potential of product or service, competition, etc. The business plan serves management to formulate steps and attitudes in the various operations of the company to which it will be necessary to adopt a suitable attitude and resolve them.
The financial plan is a financial statement of the project, usually extrapolated to 5 or 10-year term. The financial plan clearly describes project's financial performance, profitability, and main investment parameter such as ROI, ROE, and IRR.
Valuation and financial modeling
Typically, corporate valuation is carried out by several methods (such as asset value, balance sheet or brand and market value), but discounted cash flow method and market comparison method is considered as the most reliable and commonly used method combination.
Discounted cash flow method (DCF) is based on calculation of cash flows for a predetermined period of time and an estimate of their development after that period. Subsequently, the fair value of the company is calculated by discounting these cash flows at the valuation date and adjusting for the amount of debt, shortage or surplus of working capital, etc. This method assumes that the client has plans for several years ahead, such as management plans (profit and loss accounts), investment plans, etc. In general, this method is considered to be the most objective method for functioning companies.
Market comparison method is based on the identification of traded companies in a market with a similar focus to the valued company. Subsequently, the value ratios of these companies are calculated and, after appropriate adjustments, are applied to the valued company. We will use this method as a supporting method in determining indicative valuation.