Day 4 – Normalizing Financial Statements in Business Valuation: An Attorney’s Guide To Understanding Business Valuation
In this episode of the Forensic Perspectives podcast, host Mark S. Gottlieb gives insight into one of the most important parts of your business valuation: financial statements. Which issues should you pay close attention to and what are some real life examples you should be aware of? Listen to find out!
Episode Highlights:
Mark explains one of the most important parts of your business valuation approach. (0:25)
What are appraisers trying to determine when they review five years worth of financial statements? (0:33)
What issues do you have to consider when fine tuning your financial statements? (0:50)
Mark gives an overview of five types of adjustments. (1:00)
Mark gives a few examples of circumstances that could alter unusual & nonrecurring adjustments. (1:15)
Mark lists non-operating assets that are commonly used. (1:35)
What is a specific example of a non-operating asset? (1:50)
Mark gives an overview of types of related party transactions. (2:15)
Which types of accounting norms should be considered? (2:40)
Key Quotes:
“Valuation by itself is a difficult exercise. And, one of the most important parts of the approach is to normalize the financial statements that you’re provided.” – Mark Gottlieb
“We also have to consider non-operating assets. These non-operating assets commonly include items such as real property, investments, or other types of excess assets.” – Mark Gottlieb
“An example of an non-operating asset may be excess inventory, or it may be a piece of real estate, or a plane or some other type of asset that is on the books of the business, but has no functioning or operating value to the business.”
