Curtis A. Farrow, CPA, ASA, MBA

The value of a security is determined by both internal factors (such as operating history and the use of leverage), which are subject to the control of management, and external factors (such as economic and industry conditions), which are entirely out of the control of management. Regardless of the business or asset being valued, current valuation theory includes consideration of three commonly accepted approaches: a market approach, an income approach, and an asset approach. The choice of… Show more

The value of a security is determined by both internal factors (such as operating history and the use of leverage), which are subject to the control of management, and external factors (such as economic and industry conditions), which are entirely out of the control of management. Regardless of the business or asset being valued, current valuation theory includes consideration of three commonly accepted approaches: a market approach, an income approach, and an asset approach. The choice of which approaches and methodologies to utilize depends on the specific facts and circumstances of the valuation. An overview of each approach is discussed is this article. Show less

In an effort to retain the key personnel in a sale of a business, an acquiring firm will often include non-competition provisions within an employment agreement and/or as a separate non-competition agreement. In absence of an agreement, an employee would be free to engage in a competing business resulting in potential reduced cash flows for the acquiring company. Therefore, the value of a non-competition agreement is derived from the protection provided to the new owners from the loss of… Show more

In an effort to retain the key personnel in a sale of a business, an acquiring firm will often include non-competition provisions within an employment agreement and/or as a separate non-competition agreement. In absence of an agreement, an employee would be free to engage in a competing business resulting in potential reduced cash flows for the acquiring company. Therefore, the value of a non-competition agreement is derived from the protection provided to the new owners from the loss of expected cash flows of the business due to the potential for future competition. Show less