"Determining the value of a business is complicated and intricate process. Valuing a business requires the determination of its future earnings, potential and risk inherent in it." Examine the statement explaining major

Factors Influencing Valuation Determining the-value of a business is a complicated and intricate process. Valuing a business requires determination of its future earnings potential and the risks inherent to those future earnings. The process arriving at this value includes a detailed analysis of its mix of physical and intangible assets, and the economic and industry conditions. Major factors influencing the valuation of a business include: debt equity ratio nature of business and its growth history customer base areas of operations audited financial statements management team and its competency litigation and disputes Related Party Transactions, etc. The other salient factors include: The stock exchange price of the shares of the two companies before the commencement of negotiations or the announcement of the bid. Dividends paid on the shares. Relative growth prospects of the two companies. In case of equity shares, the relative gearing of the shares of the two companies. Voting strength in the merged (amalgamated) enterprise of the shareholders of the two companies Past history of the prices of shares of the two companies. Merger and amalgamation deals can take a number of months to complete during which time valuations can fluctuate substantially. Hence provisions must be made to protect against swings.