While business owners and entrepreneurs place great focus on the performance of their enterprise, putting considerable attention on operations to ensure its successful development, even they can take their eye off the ball after years of growth.
With it having become established after a period of sustained growth, they can be inattentive as to their company’s true worth in the current market.
But there are many reasons for even the most successful business owner to be aware of the true value of their company.
These include understanding the status of the company, allowing them to fully recognise its position in the current market, as well as its potential.
Knowing the true value of the company gives a business owner the opportunity to buy competitors and expand in the market, or to sell it to potential/institutional investors, allowing them to retire.
First of all, they will need to determine an accurate valuation of the company’s worth.
A company valuation, also known as a business valuation, is the process of assessing the total economic worth of a business and its assets.
Finding a company’s value
There are many ways to evaluate a company, such as the book value method.
One of the simplest techniques, the book value method assesses a company by using information from the balance sheets of financial reports for its calculation.
Another method is with discounted cash flows, a technique often used by industry experts.
Discounted cash flow analysis is the process of estimating the value of a company or investment based on the money or cash flows expected to be generated in the future.
Discounted cash flow analysis calculates the present value of future cash flows based on the discount rate and time period of the analysis.
The market capitalisation method is one of the easiest ways of measuring the value of a company once it is listed on the stock market.
This technique calculates a valuation by multiplying the total number of shares with the current share price.
Each method has its advantages and disadvantages in calculating a fair price to a business owner’s satisfaction.
Benefits of CSX
Business owners or entrepreneurs can request assistance from experts to calculate the value of their company or to choose the best method to get the best price.
Respected professional companies have received licences from the Securities and Exchange Regulator of Cambodia (SERC) to operate as underwriters in the Kingdom, with seven underwriting companies holding membership of the Cambodia Securities Exchange (CSX).
Once a company has been evaluated, with the price per share and total number of voting shares known, it can raise funds from the public through the CSX.
Companies listed on the CSX gain from a range of benefits.
With listed companies recognised as transparent and accountable, a firm can increase its value after listing on the stock exchange.
Shares are valued to suit the market, allowing business owners to easily sell to the public and potential/institutional investors.
And having gained public attention via the media through going public, a company will be able to attract new strategic partners with the recognition from domestic and foreign investors.
So whatever the goal, it is essential for even the most successful business owner and entrepreneur to understand the true worth of their business, with such knowledge bringing a raft of benefits.
Prepared by: Cambodia Securities Exchange (CSX), Listing and Disclosure Department.
Email: [email protected].
Tel: 023 95 88 88 / 023 95 88 85.