Company value evaluation

All items used to calculate the company's value are priced at market value rather than book value. This is to reflect the opportunity cost contained in the company value itself. Some people think that the valuation of bonds should consider the characteristics of their fixed principal and interest, and the book value of bonds should be used to calculate the value of companies. Especially in the liquidity analysis of companies, bonds have absolute priority in the bankruptcy liquidation of enterprises and can be repaid before all other types of securities. In addition, considering that the liquidity of corporate bonds is not as good as that of corporate stocks, the market value of bonds at the time of issuance is affected by factors such as trading time, market atmosphere and subscription flexibility, and there are often great differences.

Cash is not included in the calculation of company value, because cash can be paid to shareholders as dividends, so for those who intend to buy stocks, part of their cost of buying stocks will be offset by cash dividends. Therefore, when calculating the company value, the value of cash should be subtracted from the company value. Similarly, when cash is used to repay debts, the amount of cash used to repay debts should also be subtracted.

Although the rights and interests of minority shareholders may be limited in the management authority of the company because of the existence of large shareholders, it is an owner's right and has the right to claim the company's own assets. Therefore, according to the valuation method of general owner's equity, the market value under this account is added when calculating the company's value.

The market value of the equity of affiliated companies should be extracted when calculating the company value, because the underlying assets of this part of equity claims are other companies.

When calculating the value of a company, some special accounting subjects such as unpaid pension liabilities, employee stock options and other terms related to securities valuation, because they also reflect the right to claim the company's own assets.

In some cases, the company value may be negative. If the total cash held by the company exceeds the sum of the company values calculated by other subjects.