[Official] | SCHOOL OF MANAGEMENT – WUD | MBA Batch 2021 – 2023

MBA
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Evaluating the worth of a company

It is said that most crucial part in wealth creation is buying and selling at the right price. When it comes to buying and selling a company, then it becomes further trickier. To know the right price of a product is easy, which just requires browsing and collecting information, but for companies, such data are not available. Secondly, it requires a higher level of business acumen to value accompany.

In short, the valuation of an enterprise may be termed as the method of knowing the economic worth of the enterprise at a particular point of time. The process of enterprise valuation   is carried out to know the monetary worth of the company for ownership transfer.

There are many ways to do the valuation of company. A few of the most widely used method by financial experts are Book value, public traded comparables, discounted cash flow etc.

Book Value-Valuing a company on the basis of its book value is one of the most commonly and simplest ways of determining the worth of accompany. Actually, people using any other method of valuing the worth of accompany will also invariably calculate and recalculate the book value of the company in all the cases. It is easy to understand and the required data is also available in the books. It simply requires knowing the differences between assets and liabilities in the balance sheet.

Public Traded Comparables -As always prevalent in business dealings, buyers and sellers look for the prices of companies in the similar products. In business valuation also peer group analysis or public market multiples are highly quoted figures. Under this method, we look at the relative valuation of other companies with the help of figures like PE ratios, EV, EBITDA, or other ratios. Among them EBITDA is most common. It summarises the financial health of the companies.

DCF-Another popular yardstick is Discounted Cash Flow (DCF) analysis. It is the method based on intrinsic strength, which is calculated by forecasting the cash flows in the future. The future cash flows are discounted back to today at the firm’s Weighted Average Cost of Capital (WACC).This is one of the widely used calculations done with the help of financial modelling. It has various assumptions about the external and internal factors, and also considers various probable scenarios to adjust the figures and arrive at the most reasonable one.

There are other many other methods as well and with the growth in M & A activities, lot of new practices are emerging globally.

Contributor: Manoj Kumar,

Professor, World University of Design


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Systems Practice & when should it be used ?

Systems practice is a methodology used for Problem solving. Many times a method is used in conjuncture with other methods to come up with an array of solutions that may be used and scaled up. It is important that the problem needs to be understood well enough before looking for solutions though.

There are wicked problems that cannot be solved by one entity of individuals and hence requires a combination of various methodologies to work together. These methodologies need to be employed by various stakeholders affecting & effected by the problem. The stakeholders effected may or may not be a part of the team working towards the solutions. Though it is essential that the problem needs to be empathised with. Actual empathy should be a result of a good design research process. The Sustainable Development Goals (SDG’s) are a set of goals that may be worked on with teams like that.

In the interest of keeping the scope of this article limited to Systems practice, let’s understand what Systems Practice means. It is a problem solving method with defined steps so that there is a better exploration of the various facets of the problem. These facets then can be assigned to break in further by relevant teams to come up with solutions. The solutions are then collated to result into a cohesive strategy of iterative solutions for any given wicked problem.

 A wicked problem is generally a result of a system with flaws or a system that does not work anymore. A system that is no more relevant.

A very good example for this is the locomotive movement. Automobiles replaced the movement done via animals but introduced the problem of pollution. It may happen that one solution may come with its own set of problems that may arise later to become another system flaw to understand & resolve.

 A systems practice methodology helps us understand the environment that the situation / problem/ phenomena are happening. It results in exploring possibilities to come up with a strategy that may be leveraged & most effective to solve the problem. This process is always ongoing & there is a continuous adaption & learning so that the simultaneous undesirable effects of the system are minimised.

It is a detailed study and can be covered in the coming issues as a series. How about you identifying a wicked problem that you may start to solve?

For more Information please visit www.wud.ac.in

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