Businesses or fractional interests in businesses may be valued for various purposes such as cost reduction, corporate restructure, mergers and acquisitions, sale of securities, and taxable events. An accurate valuation of privately owned companies largely depends on the reliability of the firm's historic financial information. Public company financial statements are audited and overseen by a government regulatory body. Alternatively, private firms do not have government oversight—unless operating in a regulated industry—and are usually not required having their financial statements audited. Moreover, managers of private firms often prepare their financial statements to minimize profits and, therefore, taxes. Alternatively, managers of public firms tend to want higher profits to increase their stock price. Therefore, a firm's historic financial information may not be accurate and can lead to over- and undervaluation. In an acquisition, a buyer often performs due diligence to verify the seller's information.
There are three common pillars to valuing business entities: comparable company analyses, discounted cash flow analysis, and precedent transaction analysis. At Truvestor Wealth Management, Anuj H. Patel, CFA is an experienced analyst who can assist in SG&A variance analysis, cost analysis, cash flow statements, producing and analyzing pro-forma financial statements, capital budgeting, and analyzing various financial ratios.