BV News and Trends May 2024
A monthly roundup of key developments of interest to business valuation experts.
New issue of ASA’s BV Review added to BVResearch Pro
Among many other resources, the BVResearch Pro platform contains the full archive of the Business Valuation Review going back to 1982.
On Improving Estimation of Co-Movements in Stochastically Correlated Inputs in Monte Carlo Simulations
This article introduces the use of the Gerber statistic when performing a Monte Carlo simulation for cases when two or more random inputs are correlated. When interdependent random variables violate certain standard assumptions required for use of the traditional historical Pearson correlation matrix, the Gerber statistic can provide a better estimate of correlation and, consequently, of the value of the subject asset. This article examines the strengths and weakness of the Gerber method relative to ...
BVU News and Trends April 2023
A monthly roundup of key developments of interest to business valuation experts.
Report drills down on dental practice financials
PKF O’Connor Davies has released its 2022 edition of “Dental Practices by the Numbers,” which provides key financial benchmarks.
Recap of the New Jersey CPA Society FVS Conference
Some excellent speakers covered litigation tips, malpractice, estate tax audits, statistics for lost profits, cryptocurrency, and divorce matters at the Forensic and Valuation Services Conference hosted by the New Jersey Society of Certified Public Accountants (NJCPA ...
Statistical Methodologies for Analyzing Active and Passive Appreciation
A rundown of the existing quantitative models that have been developed that separates the active and passive appreciation of a closely held business involved in a marital dissolution case. The models seek to statistically identify market forces that reasonably cause changes in the value of assets.
When Averaging Multiples, the Arithmetic Mean Is Inferior to the Harmonic Mean
This article posits that using the arithmetic mean to average multiples is mathematically inferior. A multiple is an inverted ratio with price in the numerator. The harmonic mean is a statistically sound method for averaging inverted ratios. It should be used as a measure of central tendency for multiples, along with the median. Empirically, the harmonic mean and the median of a set of multiples are usually similar. Because the harmonic mean can be overly ...
Premier ASA Complex Securities Conference Breaks Attendance Record
Summaries and takeaways from the American Society of Appraisers’ first ASA Complex Securities Virtual Conference.
Eliminating Outliers in Financial Data Without Cherry-Picking
The author discusses one method for determining outliers that is defensible from the allegation of cherry-picking—that is, bias in selecting data to either suit the client’s wishes or to generate a specific result for the client.
Letter to the Editor: The Use of the Arithmetic Mean to Average Multiples
The author takes issue with an article that concludes that the harmonic mean should be used as the appropriate measure of central tendency for a sample of market multiples.
Debut of complex securities conference is tomorrow, May 20
Want to move from standard business appraisals to more difficult-to-value assets? Attend the Complex Securities Virtual Conference on May 20, presented by the American Society of Appraisers (ASA).
Letter to the Editor: Comments on Using Jensen’s Alpha for Active and Passive Appreciation
This is a Letter to the Editor from Ashok B. Abbott, Ph.D. (West Virginia University), in response to a prior article on segregating passive from active increases in the value of an asset in the context of marital dissolution.
Letter to the Editor: Response to Dr. Abbott’s Comments on Using Jensen’s Alpha for Separating Active and Passive Appreciation
This is a Letter to the Editor from Mark Filler that responds to comments from Dr. Ashok Abbott about Mr. Filler’s prior article on the use of Jensen’s alpha. Dr. Abbott’s comments can be found elsewhere in this issue.
Do Not Use the Arithmetic Mean to Average Multiples
Valuation professionals should not use the arithmetic mean of multiples. It is mathematically incorrect because it gives excessive weight to high multiples. A multiple is an inverted ratio with price in the numerator. Therefore, the harmonic mean should be used as the appropriate measure of central tendency.
Forecasting: Removing Rose Colored Glasses
Projections are commonly relied on for business valuations, lost profits analyses, reorganization plans, and a host of other projects within litigation. Using forensic accounting analysis, the speaker will address “rose-colored” projections and how to work with them. Expert Josh Shilts will discuss how to increase confidence levels of projections using macro and micro market data along with statistical analysis.
The Valuation of Convertible Notes Using a Binomial Model
The authors’ research reveals that there are numerous articles, chapters, and models with bad math, bad equations, notational errors, or undisclosed rounding in some equations. They present a version of the Goldman Sachs binomial model and suggest that valuators provide fully functional binomial models when requested so that reviewers can “look under the valuator’s hood.”
Take advantage of lockdown time to hone your Excel skills for business valuation
BVR’s Excel for Valuation E-Learning Course offers the following.
Healthcare Valuation in the Corona Virus Era: That Was Then, This Is Now
COVID-19 has impacted perhaps no industry in such a complex way as healthcare. Join Mark Dietrich in this discussion of items to consider before you forecast the likely impact on the healthcare industry of the current crisis. First, it is necessary to understand where the industry was before COVID-19 and then to understand what the crisis revealed about the allocation of resources. Second, you need to consider where future spending will be directed and how ...
BVU News and Trends March 2020
A monthly roundup of key developments of interest to business valuation experts.
Brush up on your Excel skills for BV
There is a live online valuation class coming up that includes a good dose of Excel training for valuers of all skill levels.
Discover the magical functions of Excel for BV
Spreadsheets can be a valuation analyst’s best friend, or a worst enemy, according to Shawn Hyde (Canyon Valuations), a valuation practitioner and Excel enthusiast.
Tales From the Trenches: How to Successfully Use Statistics—Without Being a Data Guru
Mark Twain said there are “lies, damned lies and statistics.” Some valuation experts may be uncomfortable using statistics in an engagement. But you don’t have to be a statistics guru to successfully use them when the engagement calls for it. For instance, many damages litigations include the use of regression analyses and/or statistical sampling. Both are statistical methods of determining the amount of damages in a dispute.
Deriving the Black Scholes Option Pricing Equation
In the valuation profession, the Black-Scholes option pricing model (BSOPM) is one of the most often used, yet least understood, valuation models. In this session, Gary Schurman will derive the BSOPM equation in an intuitive, albeit unconventional, way. Gain confidence in finding and eliminating arbitrage, understanding risk-neutral probabilities, and working in continuous or discrete time. Attend for advanced and technical training on one of valuation’s most popular models.
Tales From the Trenches: How to Successfully Use Statistics—Without Being a Data Guru
Even though you may not be a statistics expert, you can effectively use statistical sampling and regression when the engagement calls for it. Here are some “in the trenches” examples that demonstrate that.